By: Cory Carlton, CEO & Co-Founder
For most of your adult life, you may have had the protection of life insurance to help safe-guard you and your family. But as your life changed, so did your family’s needs and financial goals. With every transition and milestone, you should take the time to reexamine your life insurance policy to make sure you have the proper coverage.
Here are 5 reasons to take a second look at your policy:
1. It’s time for your annual review.
Each year, you should get an annual health checkup with your doctor to make sure you’re in good shape. The same thinking applies to your life insurance policies. Generally, it’s a good habit to review your policy every 12 months.
This will help you identify where you are today versus what you may need in the future. You can also ensure that nothing has changed in the market to affect your coverage. You may find that you have adequate coverage and do not need to change any details, or that you need to make more adjustments than you initially anticipated. You’ll only know what strategy to pursue if you complete an annual policy review with your financial advisor.
By performing an annual review, you may be able to put yourself in a better situation. Recently, one of our clients reviewed her term life insurance policy that was five years old. A few things had changed since then. Life insurance rates have gone down, there are better options, and her health has improved. She was able to save money on her premium, add five years back to her policy, and add living benefits to her policy which means she can use the death benefit while she is alive.
Some people have had life insurance policies that were not performing well, for a number of reasons, and we were able to move them to a policy that would best suit their current needs and be there when they need it most.
2. You no longer have financial dependents.
Retirees often revisit their life insurance because they no longer financially provide for their children. When your children or grandchildren are young and depend on you financially, protecting your family with life insurance makes sense should anything happen to you or your spouse.
Once children move out and begin managing their own financial lives, they will no longer be as financially affected when one of you dies. As a result, you may want to review your policy to help ensure you have the proper coverage.
That may be a reduction in coverage or even diverting money that was paying for the now unnecessary life insurance and allocate it toward health care costs or retirement savings.
3. Your family has changed.
When there is a change in your family, that is an ideal time to review your life insurance. If you recently married, you have someone else that you need to account for and protect.
Maybe you recently got divorced which means lots of things are changing. Your life insurance will need to be adjusted to provide appropriate protection to your family and in some situations your former spouse.
More and more people are getting remarried later in life. If you currently have life insurance, you will want to make sure your new spouse is the beneficiary of your life insurance. More on that in a moment. You will also want to review the various benefits of each other’s policies to make sure the policies provide the benefits that are needed for your new family’s financial plan.
Having a child is one of the greatest experiences this life has to offer. We are supposed to protect our children and that means making sure that the right amount of life insurance and the right kind of life insurance is there if needed.
Life insurance is the greatest love letter you could ever write.
4. You and your spouse are no longer employed.
While you were working, you may have had life insurance coverage through your employer. Once you left your employment, your policy may have lapsed, requiring you to consider other insurance.
Some group policies also have coverage that increases every five years as does the premium. So, the policy you have through work may not be the right policy for you and your future.
5. Your beneficiaries changed.
Whether you want to remove someone who has passed, or you have remarried, revisiting your life insurance to ensure your beneficiaries are up to date is essential.
Most beneficiaries are set up incorrectly. For example, minor children should not be set up as a beneficiary.
It is a simple thing to overlook but the ramifications of not updating your beneficiaries can result in your life insurance being paid to someone you no longer want to.
A policy we recently reviewed for a new client has his ex-wife, from 20 years ago (who had also passed away) listed as the beneficiary to his life insurance policy. Needless to say, his current wife was not happy. Your situation may not have changed so drastically, but reviewing your beneficiaries is important.
6. Income replacement, even if you are retired.
Most people, and agents for that matter, believe that you only need income protection during your working years. The fact is even in retirement you have an income tied to yourself with Social Security. You may even have a pension from work.
At the time of your death, the current Social Security benefit you and your spouse has been receiving will be reduced. The same is possible for your pension depending on the type of payout you selected.
So even when you are retired you are still earning an income for your family and you need to make sure that income is protected.
Overall, your unique financial needs will drive what strategies make sense for you. A variety of considerations will affect whether you need to revise your life insurance policy beyond what we’ve shared here.
To learn what strategy is right for you, feel free to contact us. We’re happy to discuss the options available to you as you pursue your financial goals.
ABOUT THE AUTHOR: Cory Carlton is the CEO & Co-Founder of Both Hands Financial Group. When he began his insurance career shortly after returning from a mission trip to Moldova, he found a verse that gave what he began doing meaning: James 1:27 - Religion that God our Father accepts as pure and faultless is this: to look after orphans and widows in their distress and to keep oneself from being polluted by the world. Little did he know that this would be the foundation of Both Hands Financial Group. His mission trip took him to help orphans and his passion is to protect families with life insurance. Cory is married to Emily and have two young daughters, Harper and Scarlett.