When Should I Review My Life Insurance Policy?

You spent hours doing your research to find the right policy for you, and now have your life insurance sorted. You’ve set up your regular payments and are confident that when the time comes, your life insurance will take care of everything. However, there are still things that need to be done. That’s because certain changes to your personal circumstances will impact your life insurance. These changes mean you will need to review:

  • Who are your beneficiaries for your life insurance policy? Do new additions to the family need adding to your cover?
  • If your premiums are set to increase over time, does this cost still seem appropriate for your budget? Will you be paying too much, or will a change in your finances mean you’d to pay more?
  • Is the cash value of your policy still adequate to cover everything you’d like it to cover? Or is it turning into an oversized nest egg, and you’d benefit from lowering your payments?

Because the answers to the above questions may change over time, it’s important to make sure your life insurance policy also evolves to suit your circumstances.
So, what are the factors that will affect your life insurance?

1. Marriage
After getting married or entering into a civil partnership, you may decide to create a joint life insurance policy. This is especially important if your spouse depends on your income. You can adjust your policy to help cover outstanding debts that your partner wouldn’t be able to manage alone. Other factors that might impact the amount of cover you need include

Likewise, separation from a partner can be a reason to review your life insurance policy. This can be an alteration of what your cover gives the other person, or mean completely removing them from your policy.   

2. Children
Your children will most likely have the biggest impact on your life insurance policy. It is important to review your life insurance policy when you have children, to ensure they are taken care of, should you pass away prematurely. This may mean changing your life insurance to mirror an annual income, rather than providing a lump sum. It’s also imperative that you think about the future costs you may want your policy to finance, such as university fees.

Once your kids are old enough to support themselves financially, you may want to review your life insurance policy again. Now that their needs are different, consider leaving them a different part of your estate, rather than a cash lump sum. As your children grow up and begin creating families of their own, this again may be a reason to review your life insurance policy. You’ll need to consider their spouses and any prospective grandchildren.

3. Retirement
Once you reach retirement age, it may be that your loved ones are in a different position with their finances than they were when you originally took out life insurance. They may no longer be reliant on your help to survive. However, that doesn’t mean you should just go ahead and cancel your life insurance policy! There are still plenty of reasons to have life insurance for people over 70. For example, you could amend your policy to instead cover the costs of your funeral expenses. Estate taxes are also something to think about, especially if you have a particularly sizeable estate.   

4. Moving House
For many people, mortgages have a large impact on their life insurance. They want to make sure that their loved ones aren’t left with a crippling debt, should they prematurely pass away. Over time, you’ll pay off your mortgage. As you do so, you may lower your life insurance premiums to match the remaining debt against your property. But if you decide to move home, then you’ll need to review your life insurance cover, to ensure it is appropriate for your new property.
There are other changes to your mortgage that will impact your life insurance policy. This includes mortgaging your home to release equity, or extending your mortgage term.

5. Changing Jobs
Just received a promotion? Congratulations! By changing jobs, you may find yourself in a better financial position. With a larger disposable income, it’s worthwhile reviewing your life insurance policy to see whether you’d like to pay higher premiums and therefore insure more.
Alternatively, you may be taking a small break from work. This could be for any number of reasons, from having kids to being made redundant. With less money available, you might consider lowering the sum assured as well as lowering your monthly premiums.

How to change your policy

If you decide that your cover isn’t appropriate for your circumstances, then you can either amend your current policy or even cancel it and find a new one. Depending on the cover you initially purchased, it may not be possible to make some of the changes that you would like. In this situation, it isn’t necessary to just go ahead and cancel your existing policy. Instead, shop around and consider taking out a second policy that will top-up your current insurance and cover any of its shortfalls. Life insurance premiums are normally lower, the younger you are when you take out the policy. Therefore, it may be much more cost effective to hang onto your current life insurance. This is especially true if you’ve had any health problems since first signing up for a policy.

All in all, there are plenty of reasons why you should consider reviewing your life insurance policy. It’s understandable if you’re unsure about whether a changing circumstance will have an effect, or if you can’t decide on how to proceed with making an amendment to your cover. In these situations, it’s best to consult a life insurance agency to find the best avenue for you. Many individuals will even meet with an advisor on a yearly basis, just to keep on top of things and make sure they’re getting the most out of their policy.