In this space, I previously have listed the reasons I believe everyone needs life insurance. This time, I want to remain on the life insurance theme and talk to those of you who already have life insurance, of any kind, about why you should review and update your policy and coverage.
Many people who tell me they have life insurance don’t know the basic facts about their policy, who their insurance company or agent are, how much coverage they have, what type of policy they have, under what circumstances death benefits would be paid, or whether the policy has any benefits besides basic coverage paid upon death. Here’s an example of why I am so passionate about life insurance policy reviews.
I was answering questions after a recent talk, and I had questions about a policy on which the company had declined to pay the death benefit; it was only willing to return the premium that had been paid in. This story broke my heart. Unfortunately, those types of policies are out there, and they are typically written online and with no local agent. These are the ones advertised in mailbox fliers that boldly promise to cover almost anyone, but the fine print tells you that’s only if you live for two years after you purchase the policy. This is a great example of why it’s unwise to purchase a policy online or from someone you don’t know, like, or trust.
HERE ARE SOME THINGS I RECOMMEND YOU DO ABOUT YOUR CURRENT LIFE INSURANCE POLICY.
First, find your policy, and make sure your loved ones know you have it and where it is. If you can’t find your policy but know who your agent is, call him or her and request a copy. If you don’t know who your agent is but know the name of the insurance company, look it up online and call to request a copy. You will need to take certain steps to verify your identity before someone will speak to you about your coverage.
Once you have your policy in hand, read at least the first few pages, which should contain information about when the policy was purchased, along with basic information about the policy.
Next, you need to make an appointment with your agent or another local life insurance professional to review your policy and coverage with you. I often conduct no-cost policy reviews for people who don’t have a local agent or aren’t comfortable with their agent.
Before your appointment, I encourage you to visit https://lifehappens.org/life-insurance-needs-calculator. This nonprofit’s mission is to provide unbiased information to help you make smart choices about life insurance. The calculator will walk you through inputting information about your current policies, asking questions about debt and what you desire to provide financially in the event of your death and calculate how much additional life insurance you should have. Your information doesn’t go to anyone, and it won’t generate phone calls from people trying to sell you something.
Armed with this information, you are ready for your review. Keep in mind that for your insurance professional to properly advise you, you must be transparent about your current financial, family, and health situation. Here are some key questions I encourage you to ask:
- What kind of policy do you have? Is it term or permanent (explain those terms)?
- Do you own the policy, or is it simply something you purchased through your employer that you could not keep should you lose or change jobs?
- Does it contain a rider that provides coverage for your spouse or children?
- How much are your premiums? Do they ever end?
- Does your policy have any cash value? If so, could you access it should you need to? How would that work, and what would it cost?
- Do the needs still exist that caused you to purchase the policy in the first place? Have they changed, increased, or decreased?
- Do you have enough coverage? Is your coverage enough to cover debt and still provide for those you leave behind?
- Do you have coverage on your spouse, partner, or children?
- Who are the owner and beneficiaries of your policy? Is your and their contact information up to date?
- Does your policy have any benefits besides just payment at death? Should you experience chronic, critical, or terminal illness, would your policy let you access part of your death benefits while living? If so, which ones, and how would it work?
These are just a few of the things I cover with my clients at policy review time. Keeping your policies up to date ensures that the money you leave behind is paid based on your life today – not your past circumstances.