Do you have a life insurance policy? If you do, when was the last time you checked in on it? Life insurance is often seen as a set-it-and-forget-it financial product, but your personal situation may have changed throughout the years, requiring more or less coverage or even a different type of life insurance product to meet your needs.
September is Life Insurance Awareness Month, making it an ideal time to revisit the reasons why a life insurance review, while not exactly the most exciting of tasks, is important for your financial security. Here are four questions to ask yourself to determine if you would benefit from a life insurance review.
1. Does Your Policy Have An Expiration Date?
What would happen if you outlived your life insurance policy? Poor performance, loans, incorrect ownership, or beneficiary choices could lead to a mess for your loved ones when your policy is needed most. There’s a chance your current policy may have an expiration date of which you aren’t aware. Many policies are set to endow at age 95 or 100, and while that may seem like a long time to live, in the past 30 years alone, the U.S. centenarian population has grown 65.8%. (1)
If you outlive your policy, the repercussions could be disastrous. Make sure you understand and plan for this situation, especially if you purchased your life insurance policy at a young age.
2. Do You Know The Tax Status Of Your Policy?
Life insurance is often thought of as being income tax-free at your death, but some policies are inadvertently set up to be taxable at death. If your policy was created this way, would that cause issues for your family? If it would, or if you aren’t sure if it would, an advisor may be able to help you rectify this problem and create a strategy to ensure your family isn’t caught off guard.
3. Is Your Policy Performing Well?
How do you know if your life insurance policy is performing as expected? When you purchased the policy, you were most likely provided a projection of values, but have you seen an updated estimate since then? How would it compare to what you were originally shown?
It’s possible that your policy is outperforming its original projection, but considering the direction of the economy over the past few years, it’s more likely that the policy has underperformed. If so, what might that mean for you and your plans for your loved ones?
Now may be a good time to update your projections and ensure they are on track. Most often, it’s easier to adjust a policy before it goes too far off course. Your advisor can help you evaluate how the policy has performed since you purchased it and how it is projected to perform in the future.
4. Is Your Policy Outdated?
Throughout the last few decades, life insurance has evolved into a more valuable and robust risk management tool. Today’s policies can cover more than just premature death. There are options to cover chronic illness and long-term care, and some policies have the ability to direct policy cash values among multiple options—not just the insurer’s general account.
If it’s been a few years or decades since you first purchased your policy, you may need to add additional coverage, such as long-term care, with a rider, which can be more cost-effective than buying a separate policy.
Even if you don’t need to add features, you may still need to verify that your beneficiaries are up to date and check if you have the correct amount and type of coverage.
Time For A Life Insurance Review
Life insurance can be confusing, and it is often difficult to know if your policy is doing what it’s supposed to do. At 1on1 Financial, we work hard to take care of all of your financial needs in one place. One of our specialties involves working with you to develop a life insurance plan that will fit your lifestyle and your financial goals. Through an insurance update, we help you examine your policies in depth so that you can have increased confidence that your plans are on track. If you are concerned about your life insurance policy or would like to schedule a review, schedule a free 15-minute introductory phone call now!
Philip A. Board MSFS, CFS, is a retirement planning specialist and the founder of 1on1financial, an independent comprehensive investment firm serving individuals and businesses throughout the United States. He is also the owner and CEO of Medi-cal Benefits.