Your life insurance policy can offer assurance and stability for your family should you pass away. But that policy needs to be revised and updated from time to time, especially when a life-changing experience occurs. Review your policy if one of the following events occurs.
A new baby is likely a signal that it’s time to review your life insurance policy. Likely, this bundle of joy means a new dependent and your life insurance policy may need updating to account for this.
If you’ve recently tied the knot or gone through a divorce, it’s probably a safe bet that you need to review your policy. Marriage means you could be sharing finances. If you pool your money together and start sharing accounts, it’s good to make sure your policy adequately covers your husband or wife, should you pass away. Similarly, a divorce probably means you’ll be going through a number of financial changes.
Here are some important insurance actions to consider:
A beneficiary is the person, business, or trust that receives the death benefit proceeds from your life insurance coverage when you’re gone. It’s likely that the person you’ll want to be listed as your beneficiary, depending on your life insurance policy, is your spouse. If you have life insurance coverage through work, remember to update your beneficiary on that policy as well.
Retirement accounts like IRAs and Roth IRAs, workplace retirement plans such as your Pension, 401(k) or 403(b), and FSA and HSA Flexible spending accounts allow you to designate a beneficiary who will inherit the account should you die.
If you’re planning to purchase a home and take out a mortgage you may want to take a look at your life insurance policy. Buying a home may be one of your biggest financial obligations. A life insurance policy can be smart financial protection for homeowners. A mortgage can be a substantial debt, and many mortgage lenders will want to ensure it gets paid even if you pass. If you die before paying off the mortgage, the debt will pass on to your family, and your spouse may not be able to afford to pay for the house on one income. With all of these factors to consider, it may be time to make an update or change to your life insurance policy. Options include:
Term life insurance pays a death benefit if you die while the policy is in effect. You choose the coverage amount and how many years the policy should last. Most life insurance companies sell term life. New homeowners can buy a term life insurance policy timed to match the duration of their mortgage.
A permanent life insurance policy can last until you die if premium requirements are met. It can also build cash value over time and is generally is more expensive than term life insurance.
Talk to a financial professional about how buying a home could affect your life insurance needs.
If you are approaching retirement age but think you don’t have enough saved, you may be exploring your options. One consideration is how life insurance can play a role in your retirement plan. This, as you’ve probably guessed, means you should consider contacting your life insurance agent to talk about a current policy you may have.
A life insurance policy’s primary objective is to pay a death benefit to your beneficiaries upon your death. You may be able to use the cash value in the life insurance plan to supplement income in retirement.
Often, life insurance can fall into the category of out of sight, out of mind; you purchase a policy and call it good. Resist the urge – review your life insurance policy should you experience any of these life events.
Want to learn more about reviewing your policy? Watch this video below.
Having a change in employment, whether a new job or promotion, is also an opportunity to revisit your policy and possibly update your life insurance plan. Whether an increase or decrease in household income, the change can affect living standards.
If you function as a primary caregiver to a loved one, review your life insurance to make changes for their benefit. If you leave a young child behind, your spouse may need to work full-time to pay the bills. This often means paying for child care. Other costs might include cleaning the house regularly or shopping for groceries. Additionally, if you are a caregiver for an elder relative you should consider the financial value of the support you are providing.
Caregivers often have a significant amount of out-of-pocket expenses. According to the AARP, a majority of family caregivers report that they spend an average of over $7,000 annually in out-of-pocket costs related to caregiving needs.1 Should something happen to you, those expenses may still need to be covered. Life insurance can help provide for those costs.
To provide for others, it’s vital that you care for yourself emotionally and physically. But in case something does happen to you, a life insurance death benefit can help the beneficiary financially.
If you’ve become healthier through exercise or changed your habits in a way that significantly impacts your health, you could qualify for new life insurance rates. Lowering your blood pressure, giving up tobacco, or having surgery to reduce weight or rectify medical issues are examples of changes that might alter your health. Should you experience any of these changes, you may want to explore your policy options.
If you’ve experienced a change like this, or aren’t sure if it’s time to review your policy, contact your agent. He or she can help you better understand how your changes in life might mean a change in your policy.
The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.
Neither North American nor its agents give legal or tax advice. Please consult with and rely on a qualified legal or tax advisor before entering into or paying additional premiums with respect to such arrangements.
1 Source: AARP, 2021