Dust Off Life Insurance Policies

When was the last time you reviewed your life insurance policies? If you’re like most people, you’ve probably stashed your policies in a drawer, filing cabinet, or safe deposit box where they’ve been gathering dust. But you should review your policies periodically to see whether they still meet your needs. Depending on the outcome, you might adjust your coverage.

In particular, you should examine your policy if you’ve experienced one or more major “life events” during the past year. What sort of events are we talking about?

• There may have been a birth, death, or disability in the family.
• You got married, divorced, or separated.
• You bought or sold a principal residence, vacation home, or other real estate property.
• Your child completed college or graduate school.
• You acquired property as a joint tenant.
• You have switched jobs, retired, or started up a new business.
• There was a significant economic change affecting your business operation.
• You need to revise the beneficiaries of your insurance policies due to a change in circumstances.

Note that other changes that might trigger a life insurance review could be less obvious. For instance, you may need additional coverage if you’re now taking on financial responsibilities for an elderly or disabled relative. Conversely, your financial responsibilities may decrease somewhat if you have finished paying off a home.

Furthermore, you should try to view your family’s needs as if you were buying life insurance for the first time. It’s your current and future circumstances that are the critical factors—not how things were last year or several years before. And don’t forget to review all of your life insurance policies, including any group coverage that your employer (and your spouse’s employer) might be providing.

Needless to say, this is an on-going process. A main function of life insurance is to replace lost income that your family relies on if you should die prematurely. When your financial obligations are small, the amount of life insurance coverage you require is also small. However, as those obligations grow, so does your need to acquire more coverage.

Typically, your life insurance needs will be at their greatest when your children are relatively young and you’re in the midst of your career. Once your children have flown the coop, or you have retired, your insurance needs will likely not be as great.

Best approach: Assess your life insurance needs at regular intervals. You may want to do so at the start of a new year or on some other “anniversary” date. In any event, don’t let too much time go by without a regular check-up.