Life Insurance Policy Review: How Often and What to Check

Once a year there’s an email that goes out to every client on their policy anniversary, asking whether it’s time to review. It doesn’t mean you have to book a call every year. It’s there because otherwise these things just go by the wayside.

Your review, in order

1. 01How often to review
2. 02What to check
3. 03Life events that trigger a review
4. 04Retiring or leaving a job
5. 05Updating your policy
6. 06Keep, add or replace
7. 07How a broker review works
8. 08Questions people ask

How Often Should You Review Your Life Insurance Policy?

Look at your policy once a year, around the anniversary, and again any time something big changes in your life. It’s good to always look at what you have in place, and it doesn’t mean you have to make changes.

Insurance is not that transformative, to be honest. Things don’t change often, and plenty of years the check-in ends with nothing worth switching to.

What I’d be doing is not waiting until the ten year mark. By then you’re older, the renewal price is built to protect the insurer, and if your health has changed, so have your options.

What to Check in a Life Insurance Policy Review

The first question is always the same: things have changed since the policy was set up, so have your needs changed? From there, a review checks five things against your life today: the amount, the years left, the premium, who gets paid, and your health and smoking status.

Most people can’t fill in the left side from memory, and that’s normal. One client was sure their critical illness policy was $50,000. It was $100,000. Others find out they have more coverage than they thought.

So send me the statement for each policy. If you can’t find it, just tell me which insurer it’s with and we’ll work from there.

Beneficiaries and Trustees: What Drifts Without Anyone Noticing

In most cases, the beneficiary named on each policy decides who gets the money, not your will. The will usually only comes into it when the estate is the beneficiary, or when the will names the policy specifically and changes the designation, which provincial law can allow. Either way, designations don’t update themselves when you marry, separate or have another child.

What reviews have turned up

Universal Life: Ask for an In-Force Illustration, Not a Statement

If you own universal life, what you need from the insurer is a current in-force illustration, rather than another statement. The statement shows last year. The illustration projects whether the policy lasts.

Your premium might be the same as what you originally paid, but the underlying cost, that’s changing. When the cost of insurance is set to rise every year with age, the gap between what you pay and what it costs comes out of the cash value.

It’s okay to have it designed where it’s increasing. That’s not the problem. The problem is that you have to fund it correctly, and it doesn’t show up now. It shows up at 50 or 60.

If the cash value runs out, the policy can lapse. We don’t touch the existing plan until a new one is approved and in force. Before any surrender, ask the insurer for the adjusted cost basis, roughly what the tax rules count as your cost in the policy, because a gain above it can be taxable. Have your accountant confirm that part.

Life Events That Should Trigger a Life Insurance Review

Marriage is one life stage, buying a place is another, and every child is another. Those are the events that should trigger a review, along with separation, a new will and changes in a business you own. A job change and retirement count too, and they have their own section below.

You don’t need to go from zero to ten million at the first one. But every step up is a new application at your age and health at that point, so it’s worth getting the amount roughly right when the big ones land.

If one of these just happened, run the new numbers: compare term life quotes for the amount and years you need now, then we’ll line them up against what you already have before anything gets changed.

What Happens to Your Life Insurance When You Retire or Leave a Job

Companies come and go, and benefits change. Life insurance through work usually ends when you leave the job, and often when you retire, while a policy you own yourself keeps going as long as the premiums are paid.

Changing Jobs or Losing Group Coverage

Group life is useful, but it’s tied to the job. These are the questions that come up when the job changes, and how I answer them.

Retiring: Less Coverage for Longer, at a Similar Cost

At retirement, the answer is often less coverage, not none. It’s tough after 20 years to go cold turkey with nothing left, so it’s nice to have a bit of a runway.

With the kids older and the house nearly paid, you don’t need the same amount. But because we’re all 10 years older, it’s much more expensive, and nobody wants to pay an insane premium in retirement either.

Two different insurers ended up on that file, because the lower price at 64 and at 59 wasn’t at the same company. The old policies stay in force until the new ones are in force.

If you’d rather have some coverage that lasts for life, price permanent coverage next to the term options before deciding. Our guide to life insurance for seniors covers how that works, and if you’re already past 70, here’s what’s still available.

How to Update a Life Insurance Policy (and What Needs a New Medical)

Lowering coverage is usually just paperwork: no new medical, and you keep the age you qualified at. Increasing it does require qualification, almost like a mortgage, where for every extra dollar they want to requalify you. Moving to a better rate when your health improves sits in between: the insurer will look again, but only through underwriting.

If money gets tight, cut the amount before you cancel. You keep your policy active at the original age we secured it, which is valuable since costs only go up as time passes.

Quit Smoking or Health Improved: Getting a Better Rate

On recent files, the non-smoker price came in at less than half the smoker price, but getting there is never automatic. I’m not aware of any insurer that moves you to non-smoker rates without some level of qualification.

When someone is quitting, I weigh two risks. A 20-year term starts at smoker rates, and while some insurers will move it to non-smoker later, that goes through underwriting and may stop short of their best non-smoker rates. A shorter term now, then a fresh application at 12 months, can save more, but only if your health still qualifies by then. So I look for a short term with an exchange or conversion privilege, which can keep you covered without a new medical if your health changes, though usually still at smoker rates, priced at your age then, and only within the policy’s deadlines and conditions. If future insurability is the bigger worry, the longer term from day one can be the right call. Either way, the old policy stays until the new one is in force.

And if your health has gone the other way, the policy you already have doesn’t change. A new diagnosis only affects new applications, which is where differences between insurers on medical conditions start to matter.

Keep, Add or Replace? When a New Policy Costs Less Than Your Old One

First we’d look at just adding another policy, because in theory it should be cheaper to add than to replace. But sometimes, funny enough, it’s cheaper to replace. Term rates have come down the last few years, and a policy done eight to ten years ago is often more expensive than a replacement.

Compare what’s left, not what you bought. Six years into a 20-year policy, you really own a 14-year term, so the apples-to-apples comparison is what a 15-year term looks like.

Replacing a Policy Without a Gap in Coverage

Replacing does two things, really. It can be cheaper, and you’re resetting the clock: a new 20-year term starts from now, not from a few years ago. The cost is that it also restarts the two-year period when an insurer can contest a claim over the application and won’t pay the death benefit for suicide.

Rules depend on the insurer and on when your policy was issued, so check your own contract.

Every insurance company deems risk differently, and premiums are different, just like home and car insurance. The company that sold you the policy can’t tell you whether another one would now charge less. That takes pricing the market, and a broker does that at no cost to you.

How a Broker Reviews Your Life Insurance Policy, Step by Step

A broker review lines up every policy you own, checks any health history with underwriters anonymously, prices your options across insurers, and changes nothing until you’ve decided. It works the same whether we sold you the policy or someone else did. Just let me know which insurer it’s with, no pressure either way.

What an Anonymous Underwriting Check Looks Like

Before anything is submitted, I describe your situation to the insurers’ underwriters, the people who assess risk, without your name attached. We get their feedback first, and no formal application, decline or postponement is attached to your name.

Insurance companies like certainty. They like definitive black and white. So if tests are pending, I’d rather wait for the results than have you submit just for the sake of submitting.

That’s the job of an independent broker: one review, many insurers, and the same answer whether that means changing something or leaving it alone. Here’s more on how we work as a life insurance broker in Canada.

Life Insurance Policy Review: Questions People Ask

Short answers to the questions that come up most when clients review a policy.

Book a Life Insurance Policy Review

To book a review, send your policy statement or give us a call. We’ll go through the amount, the years left, the beneficiaries, and whether anything in the market now does the same job for less, and if nothing needs to change, we’ll tell you that too.

Do your own research. Be in control of your own destiny. Look at reviews, check our licensing with your provincial regulator, and you be the one to reach out, not the other way around. We’ve never cold-called anyone.