Why Review a Life Insurance Policy?
A life insurance policy is an asset that must be managed on a consistent basis. We have outlined the top 6 reasons of why a life insurance policy should be reviewed.
(1) Have Your Goals and Objectives Changed?
As your needs change over time, is the life insurance policy(ies) still applicable given your current financial and future goals? Generally, the need for life insurance changes.
- Your business has grown significantly and there may be an additional need for key person life insurance or to fund a buy sell arrangement.
- You may have sold your business and no longer have the need for buy sell life insurance policies.
- You may need life insurance to offset your future estate taxes as a result of an untimely death.
(2) Has Your Health or Lifestyle Changed?
- In the event you have refrained from smoking, your premiums may be reduced.
- If your health has declined, you may consider converting a term life insurance policy to a permanent product which does not require additional underwriting.
(3) Is Your Coverage Competitively Priced?
- Insurance companies have reduced policy expenses.
- Individuals are living longer which has impacted life insurance companies to price products more competitively.
(4) Is the Amount of Coverage Aligned with Your Goals and Objectives?
- As your net worth increases, it is not unusual to increase coverage to meet your family’s needs. In contrast, your needs may change which causing a reduction in coverage.
(5) Are the beneficiary designations correct?
- Typically, beneficiaries are not updated once a policy is purchased. Given your current goals, would you change your existing beneficiaries?
- What tax implications may arise as a result of changing your beneficiary designations?
(6) Is Your Life Insurance Policy Performing as Originally Designed?
- Given the changes in the interest rates, has the performance of your policy been impacted?
- Has your policy lapsed or is a higher premium now required?
A life insurance policy review reflects the current state of your policy and determines whether your coverage is cost effective. Changes to an existing policy should be considered given your current goals and objectives. If your policy is not reviewed nor managed on a consistent basis, it could result in a lapsed policy or may cause an unforeseen tax consequence that would have been avoided.