When Should I Change My Life Insurance Policy?
Like other aspects of your financial well-being, you don’t want to take a “set it and forget it” approach to your life insurance policy.
As a rule of thumb, it’s a good idea to review your life insurance with your life insurance agent at least once a year. The life insurance review is a way to make sure that you have the right kind and level of coverage to protect your loved ones. And if you have permanent life insurance, it’s a good opportunity to make sure it’s helping you meet your overall financial goals.
A life insurance review is also the perfect time to learn about any new coverage options your insurer recently announced; to discuss any concerns you have about the rate you’re paying; and to act before a policy expires.
Times to Review Your Life Insurance
Your life insurance often needs to change as your life changes. That’s why you’ll want to schedule a life insurance review after a major life event. Life events that should trigger a review of life insurance include:
- Getting married
- Getting divorced
- Buying a house
- Having or adopting a baby
- Accepting a new job
- Receiving a substantial raise or promotion
- Taking out a mortgage or other loan
- Refinancing your home
- Paying off your mortgage
- Buying a business
- Selling a business
- Receiving an inheritance
- Having a loved one require long-term care
- Becoming disabled
- Becoming an empty nester
- Experiencing a death in the family
- Retiring
An often-overlooked reason for scheduling a life insurance review is experiencing a change in health. A turn for the worse is often a reason to increase your coverage or to examine additional coverage opportunities. On the flip side, an improved health outlook from losing weight, exercising more, quitting smoking and getting control over an issue like high blood pressure might help you get a better rate. The same applies if you recently quit a dangerous hobby like mountain climbing or left a risky job like being a roofer.
What Components should change?
When your financial responsibilities shift over the course of various life events, it’s worth looking at the specifics of your life insurance policy to make sure it can still accomplish your coverage goals. If your family circumstances or needs are different than they used to be, consider adjusting one or more of these components of your life insurance policy.
Beneficiary. The beneficiary, the person who will receive the life insurance benefit in the event of your death, may need to be altered along with your current family situation. For instance, if you’re getting married, you may want to add your new spouse as beneficiary. On the other hand, if you’re getting divorced, you may want to remove your ex-spouse as beneficiary.
Type of coverage. If you have term life insurance, which lasts only for a specific amount of time, such as 20 years, you may begin to see that you’ll still need life insurance after that term is complete. For instance, if your term was set to end when you’re 50 but you’ve remarried and now have young stepchildren in your forties, you may consider switching to a longer- term policy or to a permanent life insurance policy.
Benefit. Family dynamics progress over the course of time, so there may be cases where you’ll want to update the benefit amount of your life insurance policy. For example, if you support a non-working spouse and three children, you likely need a larger benefit than if you and your spouse are both working, and you have no children.
As life happens and your circumstances change, your life insurance policy can change right along with it. Take the time to honestly assess your needs and the needs of those you love and talk with your life insurance provider to update your policy to fit your situation.
About CMR | PolicySmart®
PolicySmart’s risk management consultants provide independent group benefit, retirement and commercial insurance advice by reviewing your current portfolio of policies to improve coverage and reduce cost. By using our proprietary database – The CMR Database® (comprising some 13,000 brokers and specialists globally), we maximize access to the insurance and retirement industry providing greater options that will translate to better coverage and lower cost.
Please email croche@policysmart.app or call 888-873-1982 or 212-447-4300 for more information. www.policysmart.app
