You Should Review Your Life Insurance Policy Annually - Here's Why
If you’re like most people, you probably stopped thinking about your life insurance coverage right after you made your first payment.
The good news is, you’ve already gotten the hardest part out of the way, but to a lot of people's surprise, it’s still important to review your policy at least once a year.
Here are 6 questions you should ask yourself when you annually review your life insurance coverage.
Here’s what we'll cover in this post:
Quick Article Guide
Here’s what we'll cover in this post:
Do You Still Need the Same Amount of Coverage?
Generally, our need for life insurance coverage decreases as we get older. Our mortgage lessens as we pay it over the years, our children move out and become self-sufficient, and we have fewer years of income that need to be replaced until we reach our planned retirement age.
However - if you’ve had another child, purchased a second home, or incurred any new debt, you may need additional coverage. Regardless of your situation, we can help you assess your current need for life insurance.
If you’re over insured, we’ll explore your options to see if your policy allows you to decrease your coverage and your premiums. If you need more coverage, we’ll compare quotes from more than 45 top-rated companies to make sure you get the best rates available.
Has Your Health Changed?
If your health has changed for the better, or the worse, we recommend reviewing your policy. Common health ailments like diabetes or high blood pressure can impact your cost of coverage, but once your condition has been well-controlled for more than a year, you may be able save money by qualifying for a lower rate class.
If you have a serious health issue that could prevent you from qualifying for a new policy, you’ll also want to review your policy to evaluate its conversion options. Surprisingly, most term life insurance policies will allow you to convert your term policy into a permanent coverage without answering any health-related questions or reproving your insurability.
Every policy has some conversion restrictions, which it is why is so important to annually review your coverage. All term policies have a conversion cut-off age (typically around 65 or 70), and your policy must be converted into permanent coverage before your term ends.
Is Your Policy Performing the Way You Hoped?
Perhaps Forbes said it best in their recent article, “Retirement Disaster Looms for Universal Life Policyholders” - universal life insurance policies rarely work out for the consumer, but they pay a higher commission than other policies, so there is never a shortage of agents who are willing to sell them. While it isn't exactly fair, people have to make a living, right?
Here’s what you need to know - every universal life insurance policy contains two ledgers: a speculative rate of return, and a guaranteed rate of return. The speculative rate of return requires ideal market conditions, which are rarely achieved.
However, many agents base their sales pitch on these forecasts, often promising that your coverage will be funded for the rest of your life. Don't listen to them!
Earning any interest on your life insurance policy sounds promising, but unlike whole life, term insurance, or guaranteed universal life, the cost of a traditional universal life insurance policy is not guaranteed. If your cash value is not keeping up with your speculative forecast, you’ll eventually be forced to pay increasing premiums to prevent your policy from being underfunded earlier than you had planned.
If your policy is not earning a high enough rate of return, or if your cash value is shrinking, you’ll want to start exploring other options. Most of our client’s withdrawal their cash and purchase a guaranteed universal life insurance policy instead. These policies are very affordable because they do not require an investment and offer fixed rates that are guaranteed to age 90, 95, 100, 110 or even 121!
Have You Quit Smoking?
It’s no secret that cigarette smokers pay a lot more for their life insurance than nonsmokers. If you quit smoking cigarettes more than a year ago, you’ll be able to qualify for a non-smoking rate, which should save you at least 50% or more on the annual cost of your life insurance policy (hip-hip, hooray!).
There are also a handful or highly-rated life insurance companies that specialize in working with applicants who use other forms of tobacco, but don’t smoke cigarettes.
If you currently use e-cigarettes, chewing tobacco, a pipe, or smoke cigars, or even marijuana, make sure you review your policy to ensure you are not paying the same rates as a smoker.
If you are paying tobacco rates, but don’t smoke cigarettes, give us a call. We’ve been able to save our clients as much as 70% by switching them to a company that offers more leniency for tobacco use.
Does Your Employer Still Offer Life Insurance?
In recent years, some employers have stopped offering life insurance to their employees to help offset the rising cost of health insurance. If you purchased your life insurance through your employer, we recommend reviewing your policy to ensure that your coverage is still in place and has not changed.
Employer-provided life insurance is based on group rates, which means that the insurance provider will evaluate the health of your entire group and charge an average rate to all plan participants. If you are a heavy smoker or if you have some serious health issues, this may work to your advantage.
On the flip side, however, if you are in average or better health, purchasing your own policy outside of work could save you a considerable amount of money. In addition, if you decide to change jobs in the future, or if your employer stops offering coverage, you won’t have to worry about finding a new policy when your health might not be as good as it is today.
In short, we'd only recommend using employer-provided life insurance if your current health is not very good, or if you are a frequent smoker.
Has Your Personal Information Changed?
Change is inevitable, which is another reason to annually review your life insurance policy.
If you have moved to a new address, changed banks, or have a new phone number, you’ll want to update your life insurance agent and your insurance provider.
If you forget to make a payment, or if your policy is nearing its expiration, your agent will be able to contact you before your policy expires or lapses (not knowing about either of those is a good thing, trust us).
We also recommend annually reviewing the beneficiaries listed on your policy. If your children are adults now, you can remove the trustee/guardian you appointed, and list them as your contingent beneficiaries. Or, if you’ve divorced or remarried, you can change your primary beneficiary, or divide your policy’s death benefit as you see fit.
The bottom line is, your life isn't going to stay the same forever, so it's wise to check in every year to ensure your policy is still set up the way you'd like.
We’re Here to Help
As you can see, there are a bunch of different reasons why you should review your life insurance policy annually.
If you're unsure of how to do so, or want to speak with an independent agent to make sure your policy is the right fit for you, give us a call!
At JRC Insurance Group, we have helped thousands of families and businesses with their life insurance needs, and we can help you too! Our agency is licensed in all 50 states and we’re independently owned and operated.
As a non-partial, no-fee brokerage, our goal is match our clients with the best life insurance options available by shopping and comparing rates from 63 highly-rated insurers. By having access to dozens of companies and their guidelines, we’re able to save our client’s time and money.
Most importantly, our services as completely free, and there is no cost to apply for coverage. Give us a call toll-free today at 855-247-9555, or you can request a free quote online to compare rates and options from dozens of insurance companies in less than a minute.
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