Life does not remain the same, and your life insurance policy should not either. Big life events like marriage, children or buying a home will have an impact on your finances, and therefore, should be reflected in your life insurance policy.
Life does not remain the same, and your life insurance policy should not either. Big life events like marriage, children or buying a home will have an impact on your finances, and therefore, should be reflected in your life insurance policy. This is why it is important to sit down and review your life insurance from time to time. Regular reviews will ensure that your beneficiaries receive adequate coverage to tide them over if something were to happen to you.
Life Insurance reviews: How frequent should they be?
Is there a magic number that determines how frequently you must review your life insurance requirements? Financial advisors recommend looking through your life insurance plan at least once a year. If there have been no big life changing events over the past 12 months, chances are that your current policy will largely remain the same. Nevertheless, changes will have to be made every few years anyway. By conducting a yearly review of your life insurance policy requirements, you can not only modify your current coverage but also examine it in the context of your future plans and prepare for necessary changes in the coming years.
Assess coverage requirements after life changing events:
A number of factors could affect your life insurance needs. The birth of a grandchild, sending your kids to college and taking care of an ailing parent are all events that could eat into your savings. On the other hand, Lady Luck could shine down on you: you could come into an inheritance or your business could take off in a big way. Regardless of whether the events in your life generate less or more income, so long as the events occur, your life coverage needs would change. You may even want to consider whether to buy higher life coverage or divert your money into profitable investments.
Whatever the life-changing event might be, you must work it into your present life insurance policy as soon as possible. Talk to your insurance agent or financial advisor immediately to inform him/her about the major life change and figure out how best to modify your current life insurance plan to suit your changed financial needs.
Factors to consider while reviewing your Life Insurance Plan:
- Debts – A young, single person usually has few big expenses. However, as time goes on, you may take on a mortgage to buy a house or borrow capital to set up a business. It is advisable, therefore, to upgrade your life insurance plan to include debt cover when your borrowings increase. On the other hand, you could decrease your life cover as and when you pay off existing loans.
- Financial Responsibilities – As the years wear on, your financial burdens will increase. You may have to foot the bills for the children's schooling, the family's healthcare costs, business expenditure and more. Hence, it makes sense to increase your life coverage to cover these additional costs.
- Add-ons – Critical illness cover and waiver of premium are add-ons that you could consider. While the former pays out a lump sum if the policyholder develops a critical ailment, the waiver ensures that your premiums continue to be paid if you are unable to work due to injury or illness.
Regular reviewing of your life insurance plan can help you ensure adequate life coverage over the long term. It is your money; use it wisely.
The author is CEO of MyInsuranceClub.com and can be reach at firstname.lastname@example.org