When was the last time you reviewed your life insurance coverage?
Too often the answer to that question is “Never.” Many people either don’t know that their life insurance coverage should be reviewed on a regular basis, or they simply put off the task altogether.
The truth is that it’s important to review your coverage on a regular basis. The National Association of Insurance Commissioners (NAIC)—a national insurance standard-setting and regulatory support organization—advises everyone to review their life insurance coverage frequently; it’s often recommended that a life insurance review be conducted every 12-18 months.
Regular life insurance reviews are great, but if a significant life event occurs, you may need to review your coverage immediately. If you experience one of the following three milestones, I recommend reviewing your coverage right away.
Marriage or Divorce
If you’re currently single, you may want to make your new spouse the beneficiary of any life insurance policies you have (or purchase a new one with the spouse as the beneficiary). Conversely, if your ex-spouse is the beneficiary on a life insurance policy, consider whether you still want that person named. Remember: Your beneficiary designations will supersede what’s written in your will, so it’s critical they’re accurate.
Birth of a Child
If there’s a new baby in your family, your living expenses will increase. If you purchased your life insurance policy as a means to provide income in the event you suddenly pass away, you may want to investigate whether you should increase the death benefit of the policy. If this is your first child and either you or your spouse will be staying home with the child, it’s generally a good idea to purchase life insurance for the stay-at-home parent, as well. Recent estimates have found the effective “salary” of a stay-at-home parent to exceed $100,000.
Becoming a Caregiver
If you’ve assumed the role of caregiver for an ailing loved one, you know that it’s both a time-consuming and financially demanding role. Not only is your spouse and children reliant on your income, the person you’re caring for may be reliant on your income too. Take a look to see whether the person being cared for should be named as a beneficiary or if you need to increase the amount of death benefits on a policy.
An insurance review should go beyond just evaluating your life insurance—all of your policies should be reviewed to ensure that your family and your property are protected in the event that the unexpected occurs. Working with an insurance specialist or a financial advisor can help address any questions you have and make sure your coverage is still right for you.
This article originally appeared on October 18, 2015 in the Des Moines Register. You may view the article here.
CFP®, MBA, Series 7 Securities Registration,1 Series 66 Advisory Registration, † Life & Health Insurance License As a CERTIFIED FINANCIAL PLANNER™ professional, Jim brings an extensive retirement income planning background to the team. He regularly writes a personal finance column for The Des Moines Register’s Business...Read More