Review Your Insurance Coverage Regularly
Regularly reviewing your insurance coverage is critical. Just as your computer’s antivirus software needs to be updated to account for evolving cyberthreats and vulnerabilities, your insurance policies need to be regularly updated and adjusted to take into account your changing life needs and financial situation.
For example, if you bought your homeowner’s insurance 20 years ago when the only furniture you could afford was a secondhand couch and that dinette set you bought at a thrift store in college, it’s time to update your policy to include the value of more recent purchases and the appreciated value of your home.
There’s no hard-and-fast rule on how often you should review your policy but, at minimum, you should do it every time you or a family member undergoes a significant life change.
For example, a partial or complete insurance review may be appropriate at the following times:
- Immediately before a marriage or adoption,
- When a teenager becomes a new driver,
- When a family member or other household member moves in or out,
- When you start a business,
- When you buy or sell property,
- When you make large any purchase (such as a house, car or boat),
- When you get a large pay raise or promotion,
- When you inherit or otherwise come into property of significant value,
- When you want or need more insurance and you have some discretionary income to pay for it,
- When you seriously begin to engage in estate planning,
- When you start a new career, and
- When you want to pay less in premiums (for example, when you’re in a position to increase your deductible on medical or car insurance to lower your premium costs).
Even if you haven’t undergone a significant life-changing event, such as the birth of a child, you may want to buy insurance to protect yourself against future threats. For instance, though you’re in good health now and may be untouched by major life events, you might decide to buy additional disability insurance to protect yourself and your family from the unexpected loss of income because of injury or illness. You may also want to buy long-term care insurance to ensure this type of care is available and afforded if it’s needed later in life.
Regularly review your beneficiaries, too. Are they still appropriate? Look at both your primary and secondary beneficiaries. Are they all still alive? Do you need to replace any?
Other activities may include a life insurance review. Does your policy still meet your needs? Do you have cash value policies in danger of lapsing? It’s often true that older life insurance policies no longer make sense. In this case, you may want to discuss converting your policy into an income-generating annuity, tax-free, using a Section 1035 exchange. This move is particularly popular among empty-nesters — sometimes the insurance policy has served its purpose, and the financial resources are better utilized elsewhere.
The best way to do an insurance review is to work closely with an experienced professional and look carefully at each policy as well as at your overall financial situation.
This article appeared in Walz Group’s January 30, 2023 issue of The Bottom Line e-newsletter, produced by Checkpoint Marketing.
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