Do you remember when you got your life insurance plan? A life insurance policy is not something you purchase once and forget about it. It should be periodically evaluated and reviewed to meet the needs of the future. The policy must be such that the value of benefits increases at specific periods to keep up with the inflation. Inflation protection is the desirable feature of the policy that can be added to the insurance policy. One should review their life insurance policy to keep up with the inflation. In order to that you must know how to reevaluate your life insurance plan.
How to Reevaluate your Life Insurance Policy?
There are a lot of advantages of buying life insurance plan at an early age. However, periodically reviewing the plan will help you increase your life coverage according to the risks and evolving life needs. If there's a need to reevaluate your life insurance policy, then you can make some changes in your policy by doing the following:
1. Buying More Coverage
You can buy more coverage to cover the expenses of your children through life insurance. And now you can afford more coverage than earlier. You can secure life insurance for your family by buying another policy that adds to the existing coverage.
A term life insurance plan is a good option if your needs are limited to few years. The guaranteed insurability rider lets you add coverage at certain life-changing events like having a child, etc. This rider may help you add coverage without going through a new application process.
2. Change Beneficiary
The beneficiary change is mostly related to marital status. Many people prefer to keep their spouse as the beneficiary, and if you just got married or got divorced, you may need to change the beneficiary of the life insurance policy and reevaluate it according to your marital status.
However, you should avoid naming a minor or your estate as your beneficiary. The policyholder has the right to change the beneficiary at any time. The insurance company provides the procedure for doing so.
3. Change Policy
You may need a different type of life insurance policy that satisfies your current and future goals. Perhaps because the term life insurance plan expired and you feel the need to go for a permanent life insurance plan.
Insurance companies have different types of permanent life policies available. One can check the policy for details regarding the deadline for conversion, which is likely to occur before the policy expires.
4. Cash-out a Permanent Life Policy
You can surrender your permanent life policy for the cash value if you do not need it. Cashing out implies that the beneficiary will no longer avail to the life insurance claim when you die. The permanent life policy can be cashed out if you don't need life insurance coverage, or there is a good amount of cash value built up, etc.
5. Sell Life Insurance Policy
Selling your life insurance policy to a third party who buys the policy at a rate more than the cash value and less than the death benefits can be done to reevaluate your policy. The new buyer then makes the rest premium payments and eventually receives the death benefit when you die. It is advisory to contact a financial advisor before selling out your policy.
4 Reasons to Reevaluate your Life Insurance Plan
Buying an insurance policy and keeping it on track to keep up with the needs of the future goals is important. You should review your financial plans at least annually. Review your life insurance policy to align it as per your financial plan. It is evident that there are going to be changes in your plans at any point, and thus, your insurance needs are going to alter. Here are four reasons why you should reevaluate your life insurance plan-
1. Change in Income
The coverage of life insurance depends on the income you are earning and the percentage you are contributing to your life insurance policy from your income. It may happen that within a year, a person lands a great job after graduating from college or receives a promotion at the job. In contrast, maybe the person has lost the job and need to reevaluate his/her insurance policy. A change in income is a perfect opportunity to review the insurance plan.
Learn how to increase cover after buying a life insurance policy.
2. Change in Health Conditions
A change in health may be due to your healthy eating. Proper care will affect not only your health insurance rates but also the life insurance rates too. Many companies usually reward the person if there is a significant amount of increase in health by providing discounts on premiums. However, in not-so-good cases, when the health starts to decline suddenly, and the current policy may not be able to cover up for it, you should review the policy and evaluate it as per the health conditions.
3. Change in Family Status
A change in family status is the main reason why most people reevaluate their life insurance policy. The major change in family status maybe because you got married and/or you are expecting a child. Saving up for the future of your children and providing your family with a good life even after you are no longer with them is the perfect reason why you should periodically review your policy.
4. Change in Housing Status
A change in housing status means that you might have paid off your mortgage or just bought a new house. That means you either need to decrease or increase your policy coverage. Reviewing if the current housing status and insurance plan suffice the need of the future is important. You may need more or less life insurance when there's a change in housing status.
One must review their plan periodically and evaluate their life insurance policy as per their changing needs. There are times when the old insurance plan doesn't satisfy the need of the future anymore, and you may need to evaluate your policy. Adopt a few financial management hacks to stay on the right track of sorting out your personal finance. You should do a thorough analysis of your income, health, and future needs before reevaluating your plan.