Why Reviewing Life Insurance Coverage Regularly is Essential

Life doesn’t stand still and neither should your life insurance coverage. That’s why it’s important to review your policy annually or after significant changes to your life circumstances, financial goals or insurance market conditions.

For instance, if you’ve recently welcomed a child, you might want to increase your coverage to ensure your child’s future tuition and expenses are covered if you die. It’s also important to ensure your coverage will pay off any debt that survives you, such as remaining mortgage or credit card balances.

Finally, as insurance products and pricing are always in play, reviews are important to make sure your coverage remains both comprehensive and affordable.

Key aspects to consider:

1. Coverage amount: Ensure the death benefit is adequate to cover your current and future financial obligations. This includes outstanding debts, living expenses for dependents, and future costs like college tuition. A rule of thumb is to have coverage that is 10-15 times your annual income, but individual needs can vary.
2. Policy type: Different life insurance policies serve different needs. Term life insurance offers coverage for a specific period and is generally more affordable, making it suitable for covering temporary needs such as a mortgage or children’s education. Whole life or universal life insurance, on the other hand, provides lifelong coverage and includes a savings component, which can be beneficial for estate planning.
3. Beneficiary designations: Life events such as marriage, divorce, or the birth of a child may necessitate changes in your coverage amounts and beneficiary designations. Ensure that the named beneficiaries on your policy reflect your current wishes and that their information is up-to-date.
4. Policy performance: For policies with a cash value component, like whole or universal life insurance, reviewing the policy’s performance is essential. Check the growth of the cash value and compare it with projections. Poor performance might indicate a need to adjust the policy or consider other investment options.
5. Affordability: Evaluate the premiums you’re paying. Ensure they’re still affordable by comparing them with competing carriers for the same coverage. If premiums have increased or your financial situation has changed, you might need to adjust your coverage.
6. Riders and Additional Benefits: Review any riders attached to your policy, such as disability income, long-term care, or critical illness riders. These riders can provide valuable additional coverage but may also increase your premiums. Ensure they are still relevant to your needs.

Your Stock Yards Bank & Trust Financial Advisor can help you optimize your life insurance strategy when significant events happen or to set a policy review timetable that makes sense for your circumstances. If you have additional questions, please check in.
 

We provide the information in this newsletter for general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, investment, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.

Investment and Insurance Products are:
Not Bank Guaranteed | Not a Deposit | May Lose Value
Not FDIC Insured | Not Insured By Any Federal Government Agency