Have You Reviewed Your Life Insurance Lately?

Don McIntosh | February 4th, 2013

You’re used to discussing your financial assets with your CPA. You talk to your accountant about your income, your business and your estate plan. But there’s one financial asset that doesn’t always come up in discussions of your financial situation: your life insurance policy. Insurance might seem more like a safeguard than an asset, but it’s an important part of your financial portfolio. And, it’s important to review it regularly with the same diligence that you devote to your income, your business and your estate.

Why review your life insurance? Three reasons: to save money, reduce risk and ensure policy suitability.

Save Money

If you’re like most people, you think of life insurance payments as a regular expense. You send in the same check every month and consider it part of the cost of doing business, like taxes or utilities. But, you shop around for the best deals on utilities and work with your CPA to limit your tax exposure. Why wouldn’t you take this same approach to insurance?

The insurance market has changed significantly in recent years. There might be better options and deals available now than when you initially purchased your policy. Additionally, without action, monthly premiums may go up over time. A review could result in you getting the same – or more – coverage than you currently enjoy for a lower monthly payment.

Additionally, you might have made some life changes that could result in significant savings? Have you stopped smoking? Lost enough weight to win the “The Biggest Loser?” Given up your skydiving hobby? If your policy was written before you adopted these changes, you might still be paying the rates for a high-risk group to which you no longer belong.

Reduce Risk

Insurance is about risk pooling and reduction. The reason that you purchased life insurance in the first place was to reduce risk and protect your family’s future. But, depending on your policy and life circumstances, you might be carrying more risk than you know.

Over time, insurance policies can develop hidden risks. What kind of risks? Here’s a great example. Acting as tax-deferred savings vehicles, universal life insurance policies rely on interest rates to keep premiums down and benefits up. But, the historically low interest rates that have accompanied the recession mean that many universal life policies are underfunded. If you’re the owner of one of these policies, you might be at risk of seeing a premium increase, a benefit decrease or even a default. This article from the Wall Street Journal does a great job of explaining insurance risk in plain English.

If your policy is at risk, your family’s future might not be as secure as you’d hoped. An insurance review can uncover the risks of your current policy and helps you to determine if it provides enough coverage to secure your family and your future.

Policy Suitability

When you talk tax planning with your CPA each year, you review your current financial situation and also your life situation. You talk about your changing income, but also about your growing family. Like tax planning, insurance planning needs to consider these ever-changing people factors.

When you purchase insurance, you ask yourself, “What would my family members need to take care of themselves if I weren’t here tomorrow?” It’s a smart thing to ask, but it doesn’t take into account your family’s changing needs. For example, the policy that you purchased to provide for your family when you had two young kids at home might not cut it now that you’re running a $3 million business with two partners, while trying to fund college for your 10 grandkids. Times change. Life changes. And so do your family’s needs.

Free Life Insurance Review

If you’re concerned about cost, risk or suitability, a life insurance review could put your mind at ease. So, how do you get a life insurance review? It’s simple: Rea’s affiliate, Investment Partners, is offering them – for free! To learn more about this simple process that could have stunning results, visit www.ReaCPA.com/Life-Insurance-Review. Have questions about the life insurance review process? Contact Rea & Associates.

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