Life insurance is one of the most valuable financial products you can buy to protect your family and loved ones. It can provide a lump sum or regular income to your beneficiaries if you die during the policy term, helping them cover funeral costs, debts, living expenses, education, and other financial needs.
However, life insurance is not a one-time purchase that you can set and forget. Your life insurance needs may change over time, depending on your personal and financial circumstances. That’s why it’s important to review your life insurance policy regularly, at least every three to five years, or when significant life changes have occurred¹.
What Is a Life Insurance Policy Review?
A life insurance policy review is a way to check if the existing coverage meets the current needs and financial objectives of the policyholder and the beneficiaries. It is recommended to do it regularly, at least every three to five years, or when significant life changes have occurred¹.
A policy review can help identify gaps in coverage, evaluate the performance of the policy, and find new opportunities to protect and reassure the clients. It can be done by financial advisors or industry experts who provide tools and analysis to conduct a comprehensive review².
You can also review your life insurance by checking the hard copy of your policy, logging into your online account with the insurer, or talking directly with an agent. Check to see how much coverage you have, if those limits are still adequate based on your current situation, and if you want to change your beneficiaries³.
Why Is It Important to Review Your Life Insurance Policy?
Reviewing your life insurance policy is important for several reasons:
- To keep up with life changes: Your life insurance needs may change as you go through different stages of life, such as getting married, having children, buying a home, starting a business, retiring, etc. For example, you may need more coverage when you have young children who depend on your income, or less coverage when you pay off your mortgage or retire. Reviewing your policy can help you adjust your coverage amount and term length accordingly¹².
- To evaluate the performance of your policy: If you have a permanent life insurance policy that has a cash value component, such as whole life or universal life, you may want to review how well your policy is performing. Depending on the type of policy and the market conditions, your cash value may grow faster or slower than expected. Reviewing your policy can help you monitor the growth rate, fees, dividends, interest rates, and other factors that affect your cash value. You may also want to compare your policy with other investment options to see if you are getting a good return¹².
- To take advantage of new features and benefits: The life insurance industry is constantly evolving and offering new products and features that may benefit you. For example, some policies now offer living benefits that allow you to access some or all of your death benefits if you are diagnosed with a terminal or chronic illness. Some policies also offer riders that enhance or modify your coverage, such as long-term care rider, disability income rider, or accelerated death benefit rider. Reviewing your policy can help you discover new features and benefits that may suit your needs better than your current policy¹².
- To save money: Reviewing your life insurance policy can also help you save money on premiums or fees. For example, if you have improved your health or lifestyle since you bought your policy, such as quitting smoking or losing weight, you may qualify for lower rates. You may also find that you are paying for unnecessary coverage or riders that you no longer need. Reviewing your policy can help you shop around for better deals or negotiate with your insurer for lower premiums or fees¹².
How to Review Your Life Insurance Policy
If you want to review your life insurance policy, here are some steps you can take:
- Gather information: Collect all the relevant information about your current policy, such as the type of policy, coverage amount, term length, premium amount and frequency, cash value amount and growth rate (if applicable), beneficiaries, riders, etc. You can find this information on your policy document, online account, or by contacting your insurer³.
- Assess your needs: Evaluate your current financial situation and goals, and estimate how much life insurance coverage you need to protect your family and loved ones. You can use online calculators or formulas to help you with this step. Consider factors such as your income, expenses, debts, assets, dependents’ needs, inflation rate, etc¹².
- Compare options: Compare your current policy with other policies that are available in the market, and see if there are any better options that meet your needs and budget. You can use online tools or consult with an agent or broker to help you with this step. Look for policies that offer lower premiums, higher coverage, better features, or more flexibility¹².
- Make changes: If you decide to make changes to your policy, such as increasing or decreasing your coverage, changing your beneficiaries, adding or removing riders, etc., contact your insurer and follow their instructions. You may need to fill out some forms, provide some documents, or undergo a medical exam. You may also need to pay some fees or charges for making changes³.
- Cancel or replace your policy: If you decide to cancel or replace your policy with a new one, make sure you understand the consequences and costs of doing so. For example, if you cancel a permanent life insurance policy, you may lose some or all of your cash value, and you may have to pay taxes or surrender charges. If you replace a policy with a new one, you may have to pay higher premiums, go through a new contestability period, or lose some benefits. Make sure you have a new policy in place before you cancel or replace your old one¹².
Life insurance is a valuable financial product that can protect your family and loved ones after your death. However, it is not a one-time purchase that you can set and forget. Your life insurance needs may change over time, depending on your personal and financial circumstances. That’s why it’s important to review your life insurance policy regularly, at least every three to five years, or when significant life changes have occurred.
A life insurance policy review can help you identify gaps in coverage, evaluate the performance of the policy, and find new opportunities to protect and reassure the clients. It can also help you save money on premiums or fees, or take advantage of new features and benefits.
You can review your life insurance policy by checking the hard copy of your policy, logging into your online account with the insurer, or talking directly with an agent. You can also consult with a financial advisor or industry expert who can provide tools and analysis to conduct a comprehensive review.
Reviewing your life insurance policy can help you ensure that you have the best coverage for your needs and budget and that you are getting the most value from your policy.
(1) Life Insurance Policy Review – lfg. https://www.lfg.com/wcs-static/pdf/MultiGen%20PDF%20Four.pdf
(2) How to Review an Insurance Policy – The Balance. https://www.thebalancemoney.com/how-to-review-an-insurance-policy-2388605
(3) Life Insurance Review Methodology – Investopedia. https://www.investopedia.com/life-insurance-review-methodology-5071427
(4) What Is a Life Insurance Review? | Progressive. https://www.progressive.com/answers/when-to-review-life-insurance/
Meet Krishnaprasath Krishnamoorthy, a finance content writer with a wealth of knowledge and experience in the insurance, mortgage, taxation, law, and real estate industries.