If you have life insurance coverage, you probably had good reasons for determining the type and amount of coverage you originally chose. Life insurance needs can and do change over time, however, so it is important to adjust your coverage as your personal and financial situation changes.
Here are five of the most common reasons you should reassess whether your current life insurance policies are still doing what you want them to do:
Your family has grown or changed.
Whether due to the birth or adoption of a child, a child leaving home as a young adult, a recent marriage or a recent divorce, changes in your family may trigger a need to re-evaluate your life insurance. You may have more dependents who are reliant on your income, or you may have fewer dependents and thus less need for coverage.
Also, a new spouse, new child or a recent divorce often means it is good time to look at your beneficiary designations for your life insurance policies. Make sure your policies are set to pay the correct individuals upon your death.
Your address has changed.
When you buy a new home, you’ll want to make sure your life insurance death benefits would be sufficient to pay the mortgage if you died prematurely. By having coverage that would allow your loved ones to continue making mortgage payments, or to pay off your mortgage entirely at your death, you provide a measure of stability so those loved ones can stay in the family home. Additional life insurance may be needed to help them achieve that goal.
Your employment has changed.
If your job changed, your income probably changed with it. Failing to have insurance coverage that reflects your current income could make it harder for your family to continue their standard of living if you die prematurely.
Similarly, if you started a new business, you’ll want to make sure your coverage levels are adequate to handle any business debt and still provide funds for your loved ones to pay things like final expenses, valid debts and provide for living expenses until they could get back on their feet financially.
And, if you’ve retired from the workforce for good, it may be a good idea to re-assess your life insurance needs. Although you may no longer need coverage to replace current income, you may instead want to provide legacy gifts to loved ones or charitable organizations.
Changes in employment can also mean you lose group life insurance coverage provided by a former employer.
Your health or lifestyle has changed for the better.
If you used to be a smoker and have quit for good, or if you lost a significant amount of weight and have kept it off, you may be eligible for more inexpensive life insurance coverage. Your existing policy may also have been “rated” for other lifestyle reasons that no longer apply. Your financial advisor can help you evaluate if you qualify for more attractive premium payments.
Your assets could trigger tax obligations at your death.
Talk to your financial advisor, life insurance professional and an estate tax attorney to determine whether you need to do some advanced planning to provide liquidity for estate taxes after your death.
Life insurance is frequently used in irrevocable life insurance trusts to provide a source of funds to pay taxes that could otherwise put a dent in an estate at death.
Talk to your financial and insurance professional
Even if none of these common triggers applies, your goals may have changed since you initially took out life insurance. Meeting with your advisor for a coverage checkup periodically is a great way to make sure your life insurance is keeping up with your lifestyle.
Is it time to reassess your coverage? Contact us here at Integrated Financial Network. We welcome the opportunity to help you find the right life insurance strategy for you and your family.