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7 Reasons Your Life Insurance Needs a Periodic Checkup
1. Your Life Insurance Policy: 7 Reasons It Needs A
Periodic Checkup
16 Sep, 2013 Life Insurance Blog
Your life insurance is not a one and done purchase. Your circumstances and commitments change as your journey
through life evolves. These changes could lead to gaps in your coverage – and most policyholders fail to realize
how these changes alter their insurance needs.
The policy you purchased years ago may have been the best solution at that point in time, but purchasing a home
and increasing the size of your family could affect that policy.
You’re putting your family at risk when you fail to do a policy checkup. Here are seven life events where you need to
reevaluate your insurance needs to protect your dependents.
Securing a mortgage
Buying a house will be your biggest life investment. You need to make provisions to have the mortgage paid off if
you die early – especially if you’re the primary income earner in the home. Coping with death is a challenge by
itself. Your spouse and dependents shouldn’t have to cope with financial burdens on top of the emotional burden of
your passing.
Your banker may suggest life insurance when you purchase the property, but it’s always wise to shop around and
compare quotes in order to get the best price for your coverage.
Getting married
Marriage involves a lot of new responsibilities. Your spouse won’t be able to keep up with all the financial
commitments you’ve taken on if you’re not around.
Some couples purchase a joint life insurance policy. But according to some financial advisers, they may better off
purchasing individual policies.
Joint policies pay out once – after the first death. This leaves the bereaved survivor without coverage, and it might
be difficult to secure affordable coverage at this stage in life. Find out if the joint policy will pay out after the second
death and determine whether you’ll be able to afford the payments if your partner is not around to help out.
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2. Having children
Raising children is a very expensive undertaking. The costs have increased by more than 50 percent in the last
decade. Education accounts for almost 48 percent of the cost of raising children.
Without life insurance, your dependents may not be able to afford the costs of college if you’re not there to provide.
Review your policy after your first child arrives especially if you’re only insured for a small amount. Purchase
sufficient coverage to cover the costs of child care, schooling, holidays, and whatever else your dependents might
need.
Moving
A bigger home means a bigger mortgage. Increase your life insurance coverage to pay off the new loan if needed.
A term life insurance policy lasts for a specific period. Extend the coverage to match the life of your mortgage and
ensure that it provides sufficient cover for the amount of the loan.
Inheritance planning
Life insurance is not limited to paying off your sizable debts if you die. It will also help your family with day-to-day
expenses when you’re not there to bring in a salary.
When you have life insurance, your beneficiaries will receive the money quickly without having to wait until a
probate is granted. If you have a large estate, placing the policy within a trust will also remove the policy amount
from the rest of your estate, which will be subject to inheritance tax.
Changing employers
If you’re employed, your beneficiaries will receive a generous pay-out if you’re covered under the employer’s ‘death
in service’ benefit. The lump sum payment is usually one to four times your annual salary and will remain in effect
as long as you’re employed.
If you change jobs, you might need to get your own life insurance policy. Always check the terms of your old and
new employment before you request a quote.
Improved health
Life insurers consider several factors when calculating the cost of your policy. Your occupation, age, and state of
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3. your health are all taken into account.
Smokers pay more than non-smokers. But if you give up smoking, you should tell your insurer to reduce the cost of
your coverage. You’ll have to wait at least 12 months after quitting before your request is considered, but the
savings are worth the effort.
Shop around
Whatever your life insurance needs, make sure you comparison shop to get the best coverage for your needs at an
affordable price.
By: Liran Hirschkorn
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