9 Key Issues To Consider When Reviewing Your Life Insurance Policy
Life insurance is a complex topic, and it is often confusing to many about what they should do with their existing policy. Below are nine key issues to consider when reviewing your different types of life insurance policy(s);
Is the death benefit the right amount?
Evaluate if the coverage is enough to support your beneficiaries financially if you pass away. Consider your outstanding debts, mortgage, education fees, future wedding costs, other significant expenses, and income replacement needs.
Does your policy cover your life insurance needs?
Know the type of life insurance policy you have. There are generally two main categories: term life insurance, which covers you for a specific period, and permanent life insurance, which covers your entire life. You should assess whether the type of policy matches your present and future needs.
Will the premiums be affordable both currently and in the long term?
What premium payments are necessary to maintain your policy? Evaluate whether they are affordable and can be sustained over a long period. Also, consider any potential changes in your financial situation that may impact your ability to make these payments.
Have you updated your beneficiaries recently?
Ensure that the people you have listed as beneficiaries on your policy are current and genuinely reflect your desires. Any significant life changes, getting married, divorced, having children, or experiencing a loss, may require updates to your beneficiary designations.
Do the riders on your life insurance policy pertain to your particular situation?
Do you have any riders or extra benefits like disability income, critical illness, or long-term care coverage? Evaluate if they are still necessary and if they continue to meet your needs.
Have you experienced any improvements in your health?
Consider whether any changes in your health or lifestyle could affect your policy. For instance, updating your policy may make you eligible for better rates if you've recently stopped smoking or adopted other healthy habits.
What are some reasons why insurance companies may deny your claim?
It is essential to know the exclusions and limitations of your insurance policy, including suicide clauses, contestability periods, or restrictions on hazardous activities. Ensure you understand any circumstances that could invalidate or limit your coverage.
Is your policy still aligned with your financial plan?
What is your financial plan? Retirement savings, investments, and estate planning are included in the discussion when evaluating your life insurance policy. This way, you can ensure that your life insurance aligns with your overall objectives.
What are your current options?
Review your policy's cash value accumulation and death benefit, and explore the pros and cons of replacing, surrendering, or selling it. Consider any potential tax consequences that may arise.
It's important to review your life insurance policies when you reach milestones in life or plan for future ones. You should also check your life insurance policies and estate plans every three years.
From experience, life insurance policies can get complicated, making it difficult to understand precisely how you are covered. Having an independent agent or financial planner review your policies may be helpful.