If you’re like most consumers, you probably consider your life insurance to be a “one and done” event. But, when you consider why you purchased your term insurance in the first place, maybe to cover debts, replace income if you die, provide for your beneficiaries, or pay off a mortgage; things change, events happen, and it’s time to review your coverage and make any necessary changes.
Remember Why You Purchased Term
Most people purchase term insurance because it is the most affordable way to obtain a lot of coverage for a low monthly premium. For young adults working to build a family and obtain all of the assets needed for housing and transportation, term insurance works perfectly to cover the debt. When you’re young and healthy you can insure your entire family for less than $100 per month. Knowing that youth and health will eventually fade, it makes great sense to review your coverage every year and arrange to adjust your coverage to accommodate the events that may have transpired during the year.
Events Require Change
The events in our lives that require us to adjust our insurance coverage are typical for just about all of us:
• Increased debt because of a major purchase
• Getting married
• Having a baby
• Substantial increase in income
• Expected increase in tuition expenses
• Substantial increase in living expenses
• Death of a family member
When any of these events have taken place, it’s time to call your agent and have your insurance needs analysis revised. More than likely, you and your agent will agree that you need to increase your death benefit or make other changes to your life insurance portfolio.
Changes to Consider
Increase the Death Benefit: Since term insurers typically will not allow you to increase the death benefit of your policy, you’ll need to apply for an additional policy to increase the total benefit you require. If you are still in your early adult years and healthy, this should not be a problem for you. If you are increasing coverage because of increased debt, go ahead and purchase a higher amount than you actually need to accommodate future debt increases.
Beneficiaries: The perfect time to consider a beneficiary change is when your policy is under review. Maybe a beneficiary has passed away or no longer in your life, or maybe you want to divide the death benefit among different surviving loved ones; this can all be accomplished while you’re reviewing your policy each year.
Conversion to Permanent Insurance: Many insurers have a conversion privilege in their term policies. This privilege allows you to convert part or all of your term insurance to a permanent insurance product, such as whole life or universal life, without providing proof that you are still healthy. You will, however, be charged the rates for the new policy on the amount you’ve converted, and the rates will be based on your age at that time.
Conversion should be considered if you have no permanent life insurance and you are nearing the expiration of your term insurance. Converting all or a part of your term insurance is the most affordable way to purchase permanent insurance when you are closing in on retirement and you want to make certain that final expenses will be taken care of by your policy, rather than by your surviving loved ones
Term Life insurance is considered the most affordable way to make sure your surviving loved ones have the finances to continue on with their lives absent your income. Although this insurance is considered temporary, the need to review your coverage every year remains.