When considering everything on your task list, a life insurance review isn’t usually the top priority for most people. Most of us purchase a policy, then forget about it, thinking we have done our due diligence and crossed that off the financial responsibility to-do list.
But a life insurance review, as unexciting as it sounds, may be necessary and beneficial. Like changing the oil in your car, if you put it off for too long it could lead to bigger problems. Here are a few of the reasons you might want to pursue a life insurance review:
1. You May Outlive Your Policy
What would happen if you lived longer than your life insurance policy? Poor performance, loans, incorrect ownership, or beneficiary choices could lead to a mess for your loved ones when your policy is needed most. There’s a chance your current policy may have an expiration date that you aren’t aware of. Many policies are set to endow at age 95 or 100. That may seem like a long time to live, but in the past 30 years alone, the U.S. centenarian population has grown 65.8%. (1)
If you outlive your policy, the repercussions could be disastrous. Make sure you understand and plan for this situation, especially if you purchased your life insurance policy at a young age.
2. You Could Run Into Tax Problems
Life insurance is often thought of as being income tax-free at your death, but some policies are inadvertently set up to be taxable at death. If your policy was created this way, would that cause issues for your family? If it would, or if you aren’t sure if it would, an advisor may be able to help you rectify this problem and create a strategy to ensure your family isn’t caught off guard.
3. Your Policy Could Be Performing Better
How do you know if your life insurance policy is performing as expected? When you purchased the policy you were most likely provided a projection of values, but have you seen an updated estimate since then? How would it compare to what you were originally shown?
It’s possible that your policy is outperforming its original projection, but considering the direction of the economy over the past few years, it’s more likely that the policy has underperformed. If so, what might that mean for you and your plans for your loved ones?
Now may be a good time to update your projections and ensure they are on track. Most often, it’s easier to adjust a policy before it goes too far off course. Your advisor can help you evaluate how the policy has performed since you purchased it and how it is projected to perform in the future.
4. Your Policy May Be Outdated
Throughout the last few decades, life insurance has evolved into a more valuable and robust risk management tool. Today’s policies can cover more than just premature death. There are options to cover chronic illness and long-term care, and they have the ability to direct policy cash values among multiple options — not just the insurer’s general account.
If it’s been a few years or decades since you first purchased your policy, you may need to add additional coverage, such as long-term care, with a rider, which can be more cost-effective than buying a separate policy.
Even if you don’t need to add features, you may still need to verify that your beneficiaries are up-to-date and check if you have the correct amount and type of coverage.
Reviewing Your Policy
Life insurance can be confusing, and it is often difficult to know if your policy is doing what it’s supposed to do. Through an insurance update, we can help you examine your policies in-depth so that you can have increased confidence that your plans are on track. If you are concerned about your life insurance policy or would like to schedule a review, email me at email@example.com, call 404-704-2966, or click here to book your free introductory meeting.
Morgan Marlin is the director of financial planning at ATL Global Advisors, an independent financial services firm serving transportation and logistics employees in the greater Atlanta area. Along with nearly 10 years of industry experience, she holds a B.S. in International Trade. She focuses on helping her clients plan for the next stages in life like retirement planning, managing risk, and defining financial objectives that integrate their family values. Learn more by connecting with Morgan on LinkedIn.