Life insurance is a vital component of your financial safety net, ensuring that your loved ones are protected in case the unexpected happens. However, once you have a life insurance policy in place, it’s easy to set it and forget it. Life, on the other hand, doesn’t remain static, and neither should your life insurance coverage. Regularly reviewing and updating your policy ensures that it continues to meet your needs and provides the right amount of protection.
Why It’s Important to Review Your Life Insurance Policy
Changes in Life Circumstances
Significant life events like getting married, having children, or buying a home are major reasons to review your life insurance policy. These milestones often increase your financial obligations, meaning you may need more coverage to ensure your family is fully protected. Conversely, if your kids are grown or you’ve paid off large debts, you may find that you don’t need as much coverage anymore.
Adjusting for Income Changes
Your life insurance should adequately replace your income in the event of your passing. If you’ve received a raise or changed jobs with higher pay, you may need to increase your coverage. On the other hand, if your financial obligations have decreased, you may want to reduce the size of your policy to save on premiums.
Reviewing Policy Terms
Life insurance policies come in various forms—term life, whole life, universal life, etc. As your needs evolve, so too might your policy type. For example, you might start with term life insurance when you’re younger to keep costs down, but later, it might make sense to transition to whole life insurance to take advantage of its cash value component.
Beneficiary Updates
Over time, relationships change. You may need to update the beneficiaries on your policy to reflect changes in your family structure or relationships. This ensures that your death benefit is directed to the right person, whether that’s a spouse, child, or charitable organization.
Health and Lifestyle Changes
Improvements in your health or lifestyle, such as quitting smoking or significant weight loss, could potentially qualify you for lower premiums. If you’ve made positive changes, it’s worth contacting your insurance provider to see if you can save money by requalifying for a better rate.
How to Review and Update Your Life Insurance Policy
Schedule a Policy Review
Set a reminder to review your policy annually or after any major life event. Our agents are happy to sit down with you and discuss your current policy, your needs, and whether adjustments are necessary.
Assess Coverage Needs
Start by asking yourself whether your existing policy offers enough coverage. A common rule of thumb is that your life insurance benefit should be at least 10 times your annual income, but your unique situation may require more or less.
Update Beneficiaries
If you need to change your beneficiary due to marriage, divorce, or the birth of a child, notify your insurance company. It’s important to make sure your designated beneficiary is up to date so your benefit goes where you intend.
Consider New Riders or Features
Many policies offer additional riders, such as critical illness coverage or accelerated death benefits, that could enhance your protection. Ask your agent if any new riders are available that might benefit you.
Check for Policy Conversion Options
If you currently have a term life policy, see if you can convert it to a permanent policy before the term expires. Some policies allow for conversions, which can be beneficial if your needs have shifted to wanting lifelong coverage.
Reassess Your Premiums
If your premiums have increased over time or you’ve had a positive change in your health, ask your insurer to reassess your risk profile. You may qualify for more affordable premiums, especially if your overall health has improved.
Life insurance is not a “set it and forget it” investment. Regular reviews help ensure that your policy continues to protect your family as your life circumstances change. By updating your coverage, beneficiaries, and policy type as needed, you’ll have peace of mind knowing that your loved ones will be financially secure, no matter what life brings.
At Compass Insurance, we’re here to help you navigate these changes and make sure your life insurance policy keeps pace with your evolving needs. Reach out to us today to schedule a review and ensure your coverage is up to date.
