Can You Buy Life Insurance and Forget It?

Most people buy life insurance and seldom review it later. Here are 7 compelling reasons why a life insurance review is a great idea.

  1. Price:  If you own term insurance, you may want to check to see if you can buy a new policy for a lower overall cost.
  2. Length: If you purchased a level premium term life insurance policy, it may expire before you are willing to go without the coverage. Let’s say you purchased a 15 level premium term policy 10 years ago, and you still will need the protection when it expires or the premium increases substantially in 5 years. You might want to buy a new policy now, with a longer term than 5 years–one the matches the time period of your need. Also a new one will cost more in 5 years because you will be older and your insurability may change. If your insurablity changes because you develop some kind of health problem, you may be rated up or declined.
  3. Benefits:  Some policies have riders that cover their dependents, or they may offer some disability insurance–to mention a couple. However many people forget they have riders and you might be eligible for some cash benefits.
  4. Need:  If you have taken on more debt or your family size has increased, you might need more coverage. Conversely, if you have saved more money, eliminated debt and have fewer dependents, you might need less. Talk to a financial planner or insurance professional for a needs analysis. A good rule of thumb for the family’s breadwinner is 10 times income. Do you have that much now?  If not, it is a good idea to review your needs.
  5. Company. Are you sure your present life insurance company is financially strong? Most are, but as a consequence of the global economy your company might not be as strong today. A good agent can check that out for you, or you can research it online through AM Best, Duff and Phelps, Moody’s and others.
  6. Universal Life:  If you have one of these life insurance policies, it has a cash value that earns interest. With interest rates at the lowest in decades your policy may be under-performing. If this is the case, it may lapse or require a substantial increase in premium to keep it from lapsing. It is a good idea to examine it now, and to explore your alternatives before it is too late.
  7. Beneficiaries:  Your life insurance policy pays a benefit to the beneficiaries indicated in your policy. There are primary, secondary and tertiary beneficiaries; meaning primary’s get the money if they are still alive or, if they are deceased, the money goes to the secondary, and so on. Beneficiary arrangements can be quite complicated, and they may not be up-to-date as to how you want your death benefit to flow. Also, if you have written or changed your will or trust, it is usually good to change beneficiary arrangements to be consistent with all of your plans.

In summary, there are a lot of other reasons, just as important as these. It is always wise to review your coverage every year to two.