Top 5 Reasons to Review Your Life Insurance Annually
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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.
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Here are some additional reasons why it is critical to review your life insurance policy regularly and ideally on an annual basis.
1. Life Changes
Life is a series of evolving events – marriage, the birth of a child, buying a home, and significant career advancements. 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.
2. 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. Conversely, during times of financial hardship, you may need to adjust your policy to better align with your budget.
3. 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.
4. 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. This annual check-in can prevent potential disputes and ensure that the death benefit goes to the intended individuals or entities without complication. Every year, we meet with many individuals who had purchased life insurance years ago but still need to update their beneficiary information.Â
For example, we've seen anywhere from ex-wives to deceased cousins on the beneficiary list. 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.
5. 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. You might find a policy that offers better coverage, more suitable terms, or lower premiums, allowing you to optimize your life insurance.
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.
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