Does your life insurance still fit your life?
The only constant in life is change. Have you considered how your life insurance policy should change along with it?
When there are people you are responsible for, you’ll want to ensure that the provisions you’ve made for them change as all of your lives do. Your own personal needs may even be different now than they once were. As a general rule of thumb, it’s a good idea to review your life insurance policy every three to five years. Your coverage needs and options might have changed more than you realize.
Reasons to review your policy
Life insurance, because of its long-term nature, can require the occasional “refresh.” What seemed like a perfect fit when it was first purchased may no longer meet your needs today. And, as financial services advance, there may be new, improved options that were not available to you previously.
A variety of factors can play into whether a change in life insurance makes sense for you and your beneficiaries. Here are some issues that a policy review can bring to light:
- Your need for life insurance has increased or decreased.
- Your health has improved, qualifying you for a better rating.
- Your family or business situation has changed.
- Loans, withdrawals or other policy changes have affected the policy’s performance.
- Premiums have not been paid as planned.
When should I review my policy?
Major life events are always a good reminder that it’s time to review your life insurance policy. A change in marital status, the birth of a child or grandchild, the purchase of a home or caring for an aging parent can all affect what you—and your loved ones—may need from your policy, and potentially lead to beneficiary changes. Ongoing responsibilities, such as a grown child or a special-needs dependent, can also call for a review as they evolve.
How much life insurance do you need?
Your career can impact your outlook on life insurance as well, so it’s a matter worth revisiting if your employment situation changes. And, if you’re a business owner, you’ll want to make sure that what you’ve worked so hard for is sufficiently protected.
Individual factors can also trigger the need for a review of your life insurance. If your health has improved, you may qualify for lower premiums or even plans that you could not access before. You may have a term policy nearing its expiration or conversion date. Or you could require more living benefits than your current policy offers.
Circumstances around a policy change
Reviewing your life insurance policy doesn’t necessarily mean changing it—it just means reevaluating it, based on what’s best for you and those you care for. Depending on the outcome, you may decide to keep it as is, make some adjustments or switch to a different policy altogether.
At the very least, your policy ought to cover your family’s basic needs and outstanding debt, protecting their standard of living should something happen to you. It can also help you and your loved ones with more immediate needs, such as paying for college tuition or providing you with additional liquidity. And it can help support you in your long-term goals, like increasing your retirement income or planning for long-term care coverage. Are you currently getting what you need from your life insurance, in terms of protecting, building and accessing wealth?
If you’re considering making a change, you’ll want to keep in mind factors like accrued cash value and your access to it. Any alterations you make should come as part of a greater life insurance review—it’s not as simple as tacking on a rider to your existing policy. Your financial advisor can help you navigate the nuances and decisions to be made when purchasing or updating coverage.
Have the people who you are responsible for changed in the past three to five years? It may be time to talk to your financial advisor about how to update your life insurance policy to best care for those you love most.