Life Insurance Reviews: When & Why to Do Them
Talk to one of our experienced advisors, today!
12 Minute read
Originally published: October 16, 2023
Life Insurance Reviews: When & Why to Do Them
Talk to one of our experienced advisors today!
12 Minute read
Originally published: October 16, 2023
Life insurance provides financial safeguards for our loved ones. It’s a commitment, a protective shield against life’s unpredictable nature, ensuring that our families remain financially stable even in our absence. However, as with many aspects of life, change is inevitable. Our careers evolve, families expand, health conditions vary, and even laws and regulations undergo revisions. In this constantly shifting landscape, life insurance reviews become crucial. Ensuring that our coverage aligns with our present realities not only amplifies its effectiveness but also bolsters the security it offers.
As we dive deeper into the significance of reviewing your life insurance policy, we’ll uncover the key moments that require a reevaluation and the peace of mind that arises from being proactive.
In this article:
Why Do Life Insurance Reviews?
Life insurance is not a one-size-fits-all solution, and as our lives evolve, so do our financial needs. Over time, events like marriage, childbirth, buying a home, or career advancements can dramatically change our financial needs. Even subtle shifts, like changes in health or in estate planning goals, can influence the needs of our existing coverage.
By periodically reviewing your life insurance policy, you ensure that your chosen coverage continues to align with your current circumstances and provides protection for your loved ones. Failing to reassess can lead to gaps in coverage, leaving your family vulnerable to unforeseen financial burdens, or may result in overpaying for unnecessary protection. When deciding why you should review your coverage consider the following:
Changing Financial Obligations
As we journey through life, milestones like marriage, the birth of a child, or the purchase of a home can profoundly alter our financial obligations. Such transformative events often mean that the financial responsibility resting upon our shoulders becomes greater and more multifaceted. For instance, getting married may introduce shared financial goals or debts, while starting a family demands planning for future expenses like education. Similarly, securing a new mortgage or diving into a business venture brings its own set of financial commitments.
Given these evolving responsibilities, it’s important to periodically reflect on questions such as:
- Have my marital status or significant relationships changed recently?
- Have I undertaken new, considerable financial commitments or loans?
- Has there been a substantial shift in my overall financial picture?
Addressing these questions ensures that your life insurance remains relevant and adequate.
Family Changes
Navigating the ebb and flow of family dynamics often brings joy, challenges, and notably, evolving financial responsibilities. As families grow, whether through the birth of a child, adoption, or blending of families, the need for financial protection typically expands in tandem.
The addition of a new family member means another individual depending on the family’s income and resources. This responsibility doesn’t only pertain to immediate needs but extends to future obligations as well. As children grow, their needs evolve, from childcare costs to education fees, extracurricular activities, and even support as they transition into adulthood.
Moreover, life’s unpredictable events, such as health challenges or accidents, can further strain a family’s financial stability. Therefore, it becomes essential for policyholders to periodically evaluate their life insurance policies in light of these family changes. Staying proactive in this ensures that their loved ones remain sufficiently protected, providing peace of mind in knowing that they are safeguarded against future uncertainties.
Career and Income Changes
Throughout one’s professional journey, fluctuations in career paths and income levels are almost a given. From landing that first job, receiving promotions, or even making a bold move into entrepreneurship, each stage presents unique financial implications. A significant salary increase, for instance, might lead to an upgraded lifestyle, larger investments, or new commitments, all of which necessitate a corresponding uptick in life insurance coverage to ensure that loved ones can maintain the same standard of living in the event of unforeseen circumstances.
Conversely, a dip in income or a career setback might prompt a reassessment of one’s financial obligations and the subsequent life insurance needs. Beyond mere income, additional perks or benefits associated with a job, such as employer-provided life insurance, can also impact overall coverage decisions. It’s crucial for individuals to align their insurance coverage with their evolving professional landscape and income brackets. By doing so, they position themselves to offer robust financial protection to their dependents, reflecting their current earnings and future growth potential.
Policy Maturity & Terms
The intricate details of a life insurance policy are often more dynamic than one might initially presume. Beyond the basic coverage amount, the policy’s terms and conditions play a pivotal role in dictating its utility and relevance over time. As policies approach their maturity dates, certain benefits or options might emerge, offering opportunities for the policyholder. For instance, a term life policy nearing its expiration could present a conversion option to transition into a whole or universal life policy. Similarly, universal or whole life policies might accrue cash values over time, potentially serving as a financial resource or affecting premium payments.
Riders attached to the policy, like critical illness or accidental death benefits, might have specific conditions or time frames that necessitate attention. Regularly conducting life insurance reviews and comprehending these terms ensures that the policyholder maximizes the benefits, stays informed about any impending changes, and makes timely decisions to ensure continuous and adequate protection. In essence, a thorough understanding of policy maturity and terms not only guarantees uninterrupted coverage but also capitalizes on the policy’s full potential.
Health Changes
Health is a dynamic aspect of life, undergoing shifts and evolutions as we age, adopt new habits, or face medical challenges. Notably, in the realm of life insurance, one’s health profile plays a significant role in determining premium rates and coverage eligibility.
Positive transformations, such as weight loss, quitting smoking, or achieving control over a chronic condition, can reflect favorably on one’s insurability. Such improvements could potentially qualify an individual for more favorable premium rates or better policy terms. Conversely, a new medical diagnosis or the onset of a health condition might warrant a reassessment of existing coverage to ensure that it’s both adequate and aligned with current needs.
Insurers value and reward good health, and it’s essential for policyholders to recognize the potential benefits of sharing positive health updates with their insurance providers. By staying proactive and informed about how health changes intersect with life insurance, individuals can optimize their coverage and, in many cases, reduce associated costs, all while ensuring that their health milestones are acknowledged and rewarded.
Estate Planning & Legal Changes
Estate planning is a meticulous process that involves harmonizing an individual’s financial assets, liabilities, and intentions to ensure that beneficiaries and loved ones are provided for in the most efficient manner. Life insurance plays a pivotal role in this context.
Beyond the primary function of providing beneficiaries with a death benefit, a life insurance policy can serve as an effective tool to offset potential tax liabilities upon death, such as capital gains on appreciated assets or taxes due on the remaining balance of registered accounts like RRSPs. Furthermore, with the ever-evolving Canadian legal landscape, changes in estate and tax laws can directly impact the efficacy of an existing estate plan. For instance, updates to probate fees or the introduction of new tax credits and exemptions can influence the structuring of one’s estate.
Regularly reviewing life insurance policies in the context of overall estate planning ensures that individuals maximize the benefits of their coverage, align with the most recent legal stipulations, and provide a seamless transition of assets that upholds their wishes and minimizes tax implications.
When Should You Do Life Insurance Reviews?
The need for life insurance is constant, but the specifics of your coverage should be anything but static. It’s important to review your policy at regular intervals and especially after significant life milestones.
At a minimum, a thorough policy assessment every two to three years is advisable to ensure that your coverage remains relevant to your financial situation. However, more immediate reviews are essential after major life events such as marriages, births, home purchases, or career advancements, as these can drastically alter your financial landscape and obligations. Additionally, changes in long-term financial goals, shifts in your health status, or modifications in estate planning strategies should trigger a fresh look at your policy. External factors like significant updates in tax laws can also impact the effectiveness of your life insurance as an estate planning tool.
In essence, as life’s journey unfolds and evolves, regularly revisiting and potentially adjusting your life insurance policy ensures that you continue to offer robust financial protection to your loved ones, reflecting your current realities and future aspirations. When deciding when you should review your coverage consider the following:
Periodic Check-ins
It’s easy to set aside documents like life insurance policies once they’ve been secured, thinking the job is done. However, life’s uncertainties and constant change necessitate regular check-ins. By conducting a review every 2-3 years, policyholders ensure that their coverage remains aligned with their current financial landscape and familial responsibilities. These routine assessments serve as proactive measures to identify and address any discrepancies or inadequacies before they can become significant issues.
After Major Life Events
Life’s momentous occasions, such as marriages, the birth of children, or the purchase of a new home, are often accompanied by shifts in financial responsibilities and priorities. For instance, marriage might entail the addition of a spouse as a beneficiary, while a new child increases the number of dependents relying on the policyholder’s financial support. Similarly, buying a home introduces new liabilities like mortgages. Each of these events necessitates a reevaluation of one’s life insurance policy to ensure that coverage remains sufficient and beneficiaries are up-to-date.
Changes in Financial Goals
Over time, as we progress in our careers, build wealth, or reassess our priorities, our financial objectives naturally evolve. Perhaps early in life, the primary concern was providing basic financial support to dependents, but later stages might focus on legacy planning, charitable giving, or ensuring a comfortable retirement for a spouse. As these long-term goals shift, it’s crucial to conduct life insurance reviews. A change in objectives might mean increasing coverage, adding riders, or even transitioning to a different type of policy better suited to new goals.
Upon Recommendations
Financial strategies are multifaceted, often involving the expertise of various professionals. Financial advisors, attorneys, or accountants have a comprehensive view of an individual’s financial picture. Their insights can identify potential vulnerabilities or opportunities related to life insurance coverage. If one of these professionals suggests a review of your life insurance policy, it’s likely rooted in a holistic understanding of your financial strategy, ensuring that your policy complements your broader financial goals and estate plans effectively.
Conclusion
By proactively reviewing and adjusting our coverage in line with our evolving circumstances, we provide ourselves and our families with the invaluable gift of peace of mind. This tranquility stems from the confidence that, no matter what tomorrow holds, our loved ones are adequately protected from financial uncertainties. If it’s been a while since you last evaluated your life insurance, or if recent events have reshaped your financial landscape, don’t hesitate. Reach out to your insurance advisor or agent for a comprehensive policy review. In doing so, you fortify the protective shield around your family, ensuring it remains as robust and resilient as your love for them.
Frequently Asked Questions (FAQs) about Life Insurance Reviews
Regular reviews ensure that your policy remains aligned with your current financial situation, needs, and life circumstances.
As life evolves, events like marriage, having children, or career changes impact your financial responsibilities. Periodic assessments guarantee that your coverage is sufficient, beneficiaries are updated, and you’re making the most of any policy benefits or riders.
Major life events such as getting married or divorced, having or adopting a child, purchasing a home, changing careers or experiencing significant salary changes, starting a business, and even major health changes should all trigger a policy review. These events can significantly impact your financial obligations and the needs of your dependents.
Improvements in your health, like quitting smoking, losing weight, or gaining control over a chronic illness, might qualify you for better premium rates. Conversely, the onset of new health conditions might necessitate a coverage reevaluation to ensure your family’s needs are adequately met in the event of your passing.
It’s always a good idea to consult with your insurance advisor or agent, as they have the expertise to guide you through the review process. Additionally, involving financial planners, attorneys, or accountants can provide a holistic perspective, especially when considering the policy’s role in broader financial strategies and estate planning.
Find a solution for what you’re looking for
In the ever-evolving journey of life, regularly reviewing and adjusting your life insurance policy ensures that the protective safety net you’ve established remains both relevant and robust, guaranteeing the lasting peace of mind that comes from knowing your loved ones are always safeguarded. At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, term life insurance, and permanent life insurance to build the best package to give you the protection you need.
Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia, and Alberta including areas such as Kingston, Edmonton, and Kelowna
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