It is common for people to purchase life insurance policies and then to place them in a file and subsequently forget to review them ever again. However, as life and circumstances constantly change, insurance, like other aspects of your financial plan, should be reviewed periodically to make sure everything is in order as you intend. Following are questions to consider when determining whether or not your life insurance needs changes:
Does Your Insurance Policy Meet your Current Goals?
When you initially purchased life insurance it was most likely for a specific purpose. Perhaps you wanted to ensure that your family has a financial cushion to replace your wages, payment for final medical and funeral expenses, providing for a mortgage or to cover estate taxes, among others. It is important to evaluate your policies to determine if your existing coverage is sufficient to accomplish your current objectives.
Is the Insurer on Solid Financial Ground?
You may want to review your insurer’s financial reports and credit rating to assure that the company is not experiencing financial difficulties. A.M. Best and Fitch are major credit rating agencies that can provide up-to-date financial information.
Is a Life Insurance Trust Appropriate?
Upon your death, the life insurance proceeds payable to your beneficiaries are included in your gross estate for federal and state estate tax purposes. In the event that your estate exceeds the current federal or state estate tax thresholds, establishing an irrevocable life insurance trust may be appropriate. Due to the complexity of an irrevocable life insurance trust and its stringent requirements, a consultation with an estate planning attorney is recommended.
Are Lower Premiums Available?
In the event that your health has improved or you have quit using tobacco since you purchased the policy, you may qualify for reduced premiums due to an upgraded health rating.
Are Your Beneficiary Designations Up to Date?
Since family dynamics change, like births, deaths and divorce, your beneficiary designations may have become outdated. This may result in the necessity to have the life insurance proceeds go through the probate process, or even worse, having the proceeds distributed to an unintended beneficiary, such as an ex-spouse. It is simple to request a change of beneficiary designation form from your insurance company to update your beneficiary information.
Todd C. Ratner, Esq.
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