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Outgrown Your Old Policy? Reassess Your Life Insurance Needs

Life throws curveballs. Maybe you just celebrated a big anniversary, welcomed a new child, or landed a promotion. These exciting milestones are a cause for celebration, but they might also signal a need to revisit your life insurance policy.

Why Reassess Your Life Insurance?

Life Events and Increasing Responsibilities:

Getting married, for example, might introduce shared financial goals or debts you need to consider when planning your coverage. Starting a family brings immense joy, but it also requires planning for future expenses like education. Similarly, securing a new mortgage or starting a business can add new financial commitments to your plate. A life insurance review ensures your policy reflects these changes and provides enough support for your loved ones to meet their needs in your absence.

Optimizing Your Coverage Costs:

As your circumstances change, your coverage needs might too. A promotion with a higher income might mean you need to adjust your coverage amount to reflect your new financial goals. Perhaps you’ve diligently paid down a mortgage or built a substantial savings nest egg. In that case, you might not require the same level of coverage you did when you were starting out. A review allows you to adjust your policy to suit your needs better and potentially save money on premiums.

Life Changes Prompting a Review

Let’s explore some key life moments that call for a life insurance review:

Marriage: Tying the knot creates a financial unit. A review ensures your spouse is the beneficiary and considers if additional coverage is needed for their financial security.
Children: Parenthood brings immense joy, but also financial responsibility. A review ensures your children are listed as beneficiaries and considers increasing coverage to provide for their future if needed.
Job Change with Increased Income: A promotion often means a higher income. A review helps determine if your current coverage reflects your new financial goals and may allow you to increase coverage if desired.
Empty Nest: If your children have grown up and moved out, your financial responsibilities might decrease. A review can help determine if you can adjust your coverage amount downwards or explore options for converting your policy into a different type that provides benefits while you’re still alive.
Approaching Retirement: As you approach retirement, your income may decrease. A review can help assess if your current coverage will be enough to meet your loved ones’ needs alongside your retirement income. You may also explore options for using your life insurance policy to supplement your retirement income.

Beyond Life Events

Life changes aren’t limited to big milestones. Here are some additional reasons to reassess your policy:

Debt Payoff: Paying off a significant debt, like a mortgage, frees up financial resources. A review allows you to explore options for a less expensive policy or consider if you still need the same level of coverage.
Accumulated Savings: Building a substantial savings nest egg provides more financial security. A review can help determine if you still need the same level of life insurance coverage you did when you were starting out.

Common Mistakes to Avoid During a Review

Skipping Beneficiary Updates: Life changes can impact who you want to receive the payout from your policy. Review and update your beneficiaries after any life changes like marriage, divorce, the birth of a child, or the passing of a previously named beneficiary.

Forgetting Critical Illness and Disability Coverage: Critical illness riders and disability income riders are optional add-ons to life insurance policies. These riders provide financial support if you are diagnosed with a critical illness, such as cancer or heart disease, or if you become disabled and unable to work. While not essential, these riders can be helpful for managing the financial burden of such situations. Discuss critical illness and disability coverage with your advisor during your review to determine if they’re a good fit for your needs.

Not Considering Inflation: Inflation erodes the value of money over time. The payout from your life insurance policy today might not be enough to cover your loved ones’ needs years down the line. During your review, discuss options for adjusting your coverage amount to account for inflation or explore policies with features that automatically adjust coverage for inflation.

A life insurance review is an important process. Don’t feel pressured to make any immediate decisions. Take some time after your review to consider the advisor’s recommendations and research your options. Feel free to ask your advisor clarifying questions and get a second opinion if needed.

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