Top 5 Reasons to Review Your Life Insurance Annually

Life insurance is a critical component of financial planning, offering peace of mind and security for your loved ones in the event of your untimely passing. However, purchasing a life insurance policy is not a "set it and forget it" decision. Circumstances change, and so do your insurance needs. Every year, we meet with people who have purchased their insurance years before and still need to update critical information. Not only could it postpone the disbursement to our loved ones in the event of an unforeseen tragedy, but it might also lead to the life insurance policy undergoing probate, further delaying the transfer of benefits to our beneficiaries. So, here are top 5 reasons to review your life insurance annually:

Life Changes

Life is a series of evolving events – marriage, the birth of a child, buying a home, and significant career advancements, etc. These milestones can significantly impact your financial responsibilities and, consequently, your life insurance needs. An annual review ensures that your coverage reflects your current life stage, offering adequate protection for your dependents.

For example, let's say you and your spouse recently welcomed a new addition to the family. With this joyful event comes added financial responsibility. During your annual life insurance review, you realize that your current coverage may not be sufficient to provide for your child's future needs, such as education expenses or childcare costs. By increasing your coverage, you ensure that your child and your spouse are adequately protected in case of any unforeseen circumstances.

Financial Growth or Constraints

Your financial landscape can shift dramatically within a year, affecting your ability to pay premiums or altering the need for additional coverage. A promotion or new job might mean you're in a better position to afford increased coverage, providing extra security for your family.

Imagine you started a new job last year and received a significant salary increase. While reviewing your finances during your annual review, you realize that you now have more disposable income available. However, you also notice that your current life insurance coverage hasn't been adjusted to reflect your increased earning capacity. By revisiting your policy and updating your coverage, you not only provide greater financial security for your loved ones but also ensure that your newfound wealth is properly protected.

Conversely, during times of financial hardship, you may need to adjust your policy to better align with your budget.

Policy Performance

For those with cash-value life insurance policies, such as whole life or universal life, the policy's performance can vary with the market conditions. An annual review allows you to assess the policy's cash value growth, adjust your investment strategy if needed, and ensure it's on track to meet your long-term financial goals. The insurer that holds your life insurance policy should be capable of providing an "in-force illustration." This detailed projection can assist in evaluating how well you are progressing toward the initial cash value or coverage objectives set when the policy was established. If your coverage includes whole life, universal life, or variable life insurance, obtaining periodic in-force illustrations is crucial for annual policy reviews. Should your agent have failed to connect for years, seeking a second opinion from another expert could be wise to assess your policy's performance. We provide a no-commitment evaluation of your existing policy and compare it against any potential alternatives.

Beneficiary Updates

Life's changes often affect the policyholder and their circle of loved ones. It's crucial to keep your beneficiary designations up to date to reflect your current wishes. Consider a scenario where you named your older brother as the sole beneficiary of your life insurance policy when you first purchased it. However, over the years, your family dynamics have changed, and you now have a spouse and children who rely on you for financial support. During your annual review, you realize the importance of updating your beneficiaries to include your spouse and children. This ensures that they are the ones who receive the death benefit and can use it to maintain their standard of living in your absence.

Every year, we meet with many individuals who had purchased life insurance years ago but still need to update their beneficiary information. We've seen anywhere from ex-wives to deceased cousins on the beneficiary list. Again, this could result in a delayed disbursement to beneficiaries who may urgently require the funds to cover immediate expenses. Moreover, it may also lead to the account entering probate, a process that could prolong the distribution for several months or even years, incurring additional costs that may significantly deplete the proceeds from the death benefit. An annual check-in is crucial to prevent potential disputes and ensuring that the death benefit goes to the intended individuals or entities without complication.

Comparing the Market

The insurance market is dynamic, with new products and competitive rates emerging regularly. An annual review is an excellent opportunity to compare your current policy against what's available in the market.

Let's say you've had the same term life insurance policy for the past five years. During your annual review, you decide to explore other options available in the market. To your surprise, you discover that there are newer policies with more favorable terms and lower premiums. By comparing your current policy with these alternatives, you find one that not only offers better coverage but also saves you money in the long run. This highlights the importance of regularly assessing your life insurance needs and staying informed about the latest offerings in the market.

Conclusion

Regularly reviewing your life insurance is more than just a prudent financial move; it's an act of love and responsibility towards those who matter most. Life is unpredictable, but by ensuring your life insurance policy is aligned with your current circumstances and goals, you can offer your loved ones a measure of certainty in uncertain times. Regularly sit down with your financial consultant or insurance agent annually to review your life insurance policy. It's a small effort that can significantly impact your family's financial future.

Obtaining periodic in-force illustrations is crucial for annual policy reviews if your coverage includes whole life, universal life, or variable life insurance. Should your agent have failed to chat for years, seeking a second opinion from another expert could be wise to assess your policy's performance.

We provide a no-commitment evaluation of your existing policy and compare it against potential alternatives. Take advantage of the opportunity to ensure your plan aligns with your needs and goals. Please book an appointment with one of our knowledgeable agents today. They'll assist in reviewing your plan comprehensively and help determine if you currently have the best option for your unique situation.