Cartoon characters and celebrities all tell you to get it – life insurance that is. Now that you have it (or are at least considering purchasing it), is that it? Do you just sit back and pay your monthly life insurance fee until your policy expires? No way!
If you have a life insurance policy, you should continuously review it to ensure that you either have enough coverage, or aren’t paying for coverage that you don’t need.
“One common item that people tend to get hung up on is what type of life insurance policy they have and whether or not to switch to a different type of plan,” said Chris Hensel, MBA, AIF®, principal and financial advisor, Investment Partners. “When reviewing your life insurance coverage, what someone really needs to focus on is how much money the people they leave behind will really need. The answer to that question might surprise most people.”
Six Life Changes That Warrant A Life Insurance Review
That said, there are a variety of major life changes that can occur that will cause individuals to review their policies. Here are some common ones:
- Purchasing a new home.
When you take on any amount of new debt, especially something like a new home, it’s important for you to review your life insurance policy. This can help you ensure that your family is adequately covered financially if something were to happen to you.
- Starting a family.
There are several considerations to make when starting a new family, but whether or not you should increase your life insurance policy should be a priority. If you’re a two-income family accustomed to a certain lifestyle and something happened to you or your spouse, would your family be able to live off one income, plus whatever you may have for life insurance?
- Receiving money through an inheritance.
If you were recently given a large sum of money from an inheritance, you may not need as much money as you’re paying for life insurance currently. Again, this would be a time to consider reviewing your policy.
- Accepting a new job or receiving a pay raise.
Got a new job recently? Or did you recently receive a pay raise? If either of these scenarios ring true for you, you may be paying for life insurance that you don’t need or you may be paying for too much life insurance. On the other hand, you may need to consider whether or not your life insurance needs to increase in order to cover the potential that your lifestyle bumps up a bit.
- Being involved with business ownership.
If you’re a business owner and have a partner or partners, you often have a buy/sell agreement to sort over what happens to the ownership of that business should something happen to any of the owners. Life insurance is often used to fund the buyout in case this happens. The value of a business can often change over time, necessitating the life insurance coverage be reevaluated from time to time.
- Finalizing finances after the death of your spouse or other family member.
If your spouse or another close family member recently passed away, this may be a time for you to reevaluate whether you need life insurance moving forward.
“The common misperception with life insurance policies is that these policies are for older individuals,” said Doug Bambeck, AIF®, principal and financial advisor, Investment Partners. “The reality is that life insurance policies are not age-driven, they’re life-driven.”
Life Insurance Review Help
If it’s been awhile since you last reviewed your policy or if you’ve encountered one of the examples above, contact Rea & Associates. Our professionals can connect you with qualified financial advisors who can do a thorough review of your life insurance policy to see if you need to make any adjustments. Don’t wait to do this important review, contact us today.
Author: Lee Beall, CPA (Columbus office)
To learn more about the importance of reviewing your life insurance policy, check out these other blog posts: