Life insurance reviews aren’t exactly the most exciting of tasks nor are they top of mind for most people. But it is an important conversation to have with your financial advisor, and a regular review is essential.
If it’s been a few years since you’ve last reviewed your life insurance policy, it may be time to pull it out of the drawer. Here are four reasons why you may benefit from a life insurance review.
1. You May Need to Adjust the Time Frame
What would happen if you lived longer than your life insurance policy? Poor performance, loans, incorrect ownership, or beneficiary choices could result in a mess when your policy is needed most. There’s a chance your current policy may have an expiration date on which you haven’t counted. For example, many policies are set to endow at age 95 or 100. But when people are living longer than ever, you could enjoy life long past that age. Just in the last 30 years, the U.S. centenarian population has grown 65.8%.
You may live years longer than anticipated and outliving your policy may result in disastrous repercussions. Make sure you understand and plan for this condition. If you purchased your life insurance policy at a young age, it could be time to reconsider for how long you may potentially live.
2. You May Need to Reconsider Taxes
Life insurance is often discussed as being income tax-free at your death, but some policies are inadvertently arranged to be taxable at death. If your policy was set up this way, would that cause issues for your family? If it would, or if you aren’t sure if it would, an advisor may be able to help you rectify this problem and create a strategy to ensure your family isn’t caught off guard.
3. You May Be Able to Improve the Performance of Your Policy
How do you know if your life insurance policy is performing as expected? When you purchased the policy, you were most likely provided a projection of values, but have you since seen an updated estimate? How would it compare to what you were originally shown?
It’s possible that your policy is outperforming its original projection, but considering the direction of the economy over the past few years, it’s more likely that the policy has underperformed. If so, what might that mean for you and your plans for your loved ones?
Now may be a good time to update your projections and ensure it’s on track. Most often, it’s easier to adjust a policy before it falls too far off track. Working with your advisor, you can evaluate how the policy has performed since you purchased and how it is projected to perform in the future.
4. Your Policy May Not Be Up-to-Date
Life insurance has transformed these last few decades into a more valuable and robust risk management tool. Today’s policies can cover more than just premature death; they can also cover chronic illness and long-term care, and they can direct policy cash values among multiple options — not just the insurer’s general account.
If it’s been a few years or decades since you first purchased your policy, you may need to add additional coverage, such as long-term care. You can add long-term care as a rider, which can be more cost-effective than a separate policy.
Even if you don’t need to add features, you may still need to check if your beneficiaries are up-to-date and if you have the right amount and type of coverage.
Reviewing Your Policy
Life insurance can be confusing, and it’s difficult to know if your policy is doing what it’s intended. Through an insurance review, I can help you examine your policies in-depth so that you can feel more confident knowing your plans are on track and that you know what you’re paying for. If you are concerned about your life insurance policy or would like to schedule a review, contact me by calling (949) 631-3840 or emailing jpeters@cfiemail.com.
About Jim Peters
Jim Peters is an independent financial advisor and the founder of Grace Wealth Management Group, Inc., a full-service financial firm committed to helping people pursue their financial goals. With more than 24 years of experience in the industry, Jim combines his extensive knowledge with his genuine interest in helping people pursue financial independence. Beyond his experience, he is certified as both a Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®), meaning he has advanced training and knowledge in financial planning and insurance. Based in Irvine, California, Jim specializes in working with individuals, families, and businesses throughout Orange County. To learn more, connect with Jim on LinkedIn or visit www.financialadvisorirvine.com.