21 January 2014 0 Comments

The Life Insurance Review

review your insurance plan optionsHow often should you review your life insurance program?  If you liken a meeting with your life insurance agent to a trip to the dentist, you will probably approve of my answer:  Once every 5 years is enough unless you have a change in your financial picture.

Here are changes in the financial picture of a typical family that would trigger a more recent visit with your agent

  • A significant increase in income:     More income might suggest a change in the amount of insurance carried to accommodate an increased cost of life-style.  It might also call for an increase in the duration of coverage that was not affordable at a lower income.
  • A change in the source of family income:     Assume that both spouses were working at the time the current insurance was purchased, but now one spouse has quite working, or moved from full-time to part time.  This might call for a reduction of the amount of insurance carried on the spouse whose income has diminished and an increase on the one who is now the sole support of the of family.
  • The disability of a family member:     A disabled family member may have increased needs in the event of the death of  an income producer.  And…if the disabled person is the primary income provider, the other spouse may have a need for an enhanced amount of insurance.
  • Addition of a family member or change in family responsibility:     A new child is most certainly a reason to revisit the amount of insurance needed.  Likewise, a determination that an incapacitated sibling or aging parent might need your financial support calls for a re-evaluation of the correct amount and type of insurance.
  • An inheritance:     If you inherit a substantial sum, you may want to decrease your insurance amount.  On the other had if the amount inherited is significant enough to produce estate taxes you will want to explore the correct amount and type of insurance to be considered for estate conservation.

There may be other circumstances I have missed, but notice that I have not included the increase in a mortgage as a need for an automatic recalculation.  If you had the correct amount of insurance before, you’re probably fine after the increased mortgage (I’ll share my logic for this if you’d care to hear it).  Definitely do not snap up the offer of “mortgage insurance” from your lender until you see if it makes sense for your entire program.

If none of these events take place in the next 5 years, you will still want to visit with your insurance agent at that time to make sure all policies are still meeting your needs in the most cost effective manner possible.  And, if visiting your own agent is as painful as having a tooth extracted, it’s time to consider a new agent,

Coming up, I’ll be discussing the need for the review of business life insurance.

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