Many parts of your estate plans, such as your will and trust, generally require updates to remain compliant with your wishes. Your life insurance should not be an exception. While your life insurance policy provides financial protection, your needs may change over time.
Reviewing your policy ensures that it aligns with your current situation. Also, you should look at specific provisions in your policy that could have significant impacts on your plans for the future.
Reviews after life changes
If you experience a major life event, including marriage, divorce, birth of a child, a home purchase or a change in income, review your policy. Your new circumstances likely impact the amount of coverage you need or who you list as beneficiaries. Examining your policy at these milestone moments allows you to modify your coverage according to your present needs.
Conduct regular reviews
You do not have to wait for something significant to happen in your life to review your policy. Looking over your life insurance every 2 to 3 years should cover a variety of modest yet still important changes. Children grow older, mortgages pay down and incomes fluctuate. A recurring review gives you the chance to adjust your coverage for your evolving finances and family structure.
Tips for reviewing your policy
When looking over your insurance, check if you have the right type of policy. It should match your intended purpose, such as covering income replacement, paying off a mortgage or funding college savings. Term life insurance covers a set period while permanent policies extend lifelong protection.
Also confirm your death benefit aligns with obligations like mortgages, loans, college savings goals and the living expenses of your family. Furthermore, verify beneficiaries. Divorce, deaths, newly born children and estranged relatives all warrant beneficiary changes. Failing to update means assets go to unintended recipients.
According to Forbes, a survey on life insurance, three in four American adults possess some type of life insurance, so many adults can benefit from a life insurance review. This may help ensure your loved ones receive the maximum financial support.