Is it time to re-evaluate your life insurance policy?
Sept. 19, 2017 at 9:02 a.m.
Updated Sept. 19, 2017 at 9:02 a.m.
Having the right life insurance policy is a bit more complicated than simply buying one and then forgetting about it. Recent surveys have indicated that many people are unaware of specific policy payouts or don’t understand how their policy compares to current income, mortgage, or debt levels. One of the problems is that even as our lives change, our policies tend to remain constant unless we actually make changes. While it may be tempting to just purchase a policy and pack it away (life insurance is a morbid subject for many people), there are times when it’s imperative to examine your policy and make changes to ensure it still reflects what might be required in a worst case scenario.
Here are some instances:
You have a career change or retire: If you find yourself changing careers or getting a promotion, you may find that your monthly expenses and standard of income change. As such, you’ll want to re-evaluate how much payout there will be for your family. If you're retiring, then the nest-egg you've built-up will help you decide whether you need less insurance, or whether your family might need a bigger payout.
The number of family members (or their needs) change: When you get married or start a family, you have more people depending on you. Your policy should, therefore, grow with your family. For example, if you have more children, you’ll want to expand your policy to cover added dependents. It may be cheaper to buy a separate policy than to add to your initial one. Moreover, the needs of your dependents sometimes change. If a child graduates college or gets a job, their needs may diminish. Conversely, if circumstances change and a child becomes disabled, you’ll need to radically change your payout to accommodate this child's lifetime needs.
Your debt situation has changed: Your debt can also end up being a substantial burden to dependents, and you should keep in mind how your debt levels change your life insurance needs. If you’ve taken out a recent mortgage or some other additional debts such as student loans, you’ll need your life insurance to cover those extra expenses. On the other hand, if you’ve managed to pay off your debt, then you’ll probably want to reassess the insurance you already have.
Experts suggest you may want to consult a financial planner or other professional to consider your insurance needs. A planner can assess difference scenarios and analyze how your (or your spouse’s) death would financially impact your dependents long term. A professional is also able to best assess how family expenses are likely to change over time.
Most importantly, you should make sure your life insurance is always up to date, and that you are covered by an established, multi-billion dollar insurance company with a long history and solid financial rating. Knowing that your family will be well-protected in the event of the unforeseeable provides very precious peace of mind to everyone involved. Don't delay!