Life insurance policies are often put on the back burner as a safety net we hope to never use. And something we don’t consider when big life events occur is making changes to our life insurance plan.
Reevaluating your life insurance is not just a task – it's a responsibility. It protects your family’s future, so it’s important to ensure your coverage keeps pace with life’s changes. In this blog, we explore what changes may require you to revisit your policy.
Assessing Your Current Coverage
Before making any changes, it’s important to assess your current life insurance coverage. Note the amount of coverage you have, beneficiaries listed, etc. Compare your current coverage against your present financial situation, such as outstanding debts, education costs for children, and any potential healthcare expenses.
The key question is what expenses would my family incur immediately following my death or my spouse's death? Consider the following: Would your family struggle significantly if your income simply disappeared? How will your mortgage be paid? Would your spouse still be able to afford childcare? Would the vesting change on any of your retirement accounts if you were to pass away? If you had a plan to fund your children's college education, where would that money now come from?
These are all questions you ideally thought about before purchasing a life insurance policy, but if you haven’t, take the time to tally this figure. Emotional hardship upon the passing of a loved one is unavoidable, but with proper planning, you can help your family avoid financial hardship altogether.
Identifying Changes in Your Financial Situation
Even if you did an amazing job assessing your need for life insurance, when you initially purchased your policy, many changes in your financial situation should also trigger a re-evaluation of coverage. Our financial landscape is always changing, and these changes impact our life insurance needs. A substantial increase in income or buying a new home may require a review of your coverage. Let’s look at other circumstances to consider.
Any Changes to Your Family?
Whether it be marriage, divorce, birth or adoption, or children moving on with their lives, families evolve. If one of these events occurs, you will want to ensure your coverage fits your current life.
Have You Purchased or Sold a Home?
If you’ve recently bought a new home, you should consider increasing your life insurance to help cover mortgage payments. On the other hand, if you’ve recently sold your home or paid off your mortgage, you should consider adjusting your insurance and decreasing it.
Has Your Health Changed?
You may be eligible for lower premiums if your health has improved in any way over the past year. An example of this would be quitting tobacco use since you took out your life insurance policy. This could mean you qualify for non-tobacco-user rates, which not only saves your health, but will save you money.
Has Your Job or Salary Changed?
When you accept a new job or your salary significantly changes, that’s the perfect time to reevaluate your life insurance. Experts recommend having a life insurance policy worth 10 times your annual salary. Calculating this is easy. Just take your annual salary and multiply it by 10. So, if you make $40,000 multiplied by 10, your life insurance should be at least $400,000. But this method should be used only as a starting point. You should adjust it based on other factors, such as children, debts, age, etc.
Taking Action for a Secure Future
Life is priceless, so while we can’t put a value on someone’s passing, ensuring that you have the proper level of life insurance coverage can grant your family peace of mind. Reevaluating your life insurance policy is an important, proactive step toward your family’s future. It’s a commitment to protecting your loved ones’ financial well-being. Explore policy options, seek expert advice, and make informed decisions to take charge of your financial future.
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