Reasons To Tweak Or Change Your Life Insurance Policy

Things in life change quickly and we rarely know how our circumstances will change over time.  If you first purchase life insurance when you are young you may need to change and rearrange your policy over time.  There are several reasons to consider making changes in your policy type, your coverage amount, and the way your beneficiaries are aligned.  Some of the factors you may want to evaluate are marriage or divorce, the birth of children, impending retirement, or the purchase of a new home.  Each of these situations will require more yearly expenses and should be a reason to increase your coverage. 

As with any insurance, it is very important to keep paperwork and/or company name available to your beneficiaries when the time arises. It is as simple as registering on a life insurance database to guarantee this information will never get lost and become a lost life insurance policy.

When insurance is initially purchased most people choose a term policy because the premium payments are more affordable than those of whole-life policies.  As you grow and begin to earn more in your profession you may want to consider converting your term policy into a whole life policy.  Most companies will allow you to do this in segments so that you don’t have to put a huge outlay of cash at once on increased premiums.  If you aren’t ready to convert to whole-life you might research current term prices and consider switching policies if you can find the same coverage with a lower premium.

While getting married often means the combination of two incomes it usually comes with a step up in lifestyle.  This means that you have to make provisions for your spouse in case of your death.  Whether you need to increase your coverage or not depends on the changes in your lifestyle but make sure that you change your beneficiary information.  The birth of a child should also mandate an increase in coverage.  You want your child to be provided for into adulthood and ensure the funding for a college education.  With each child your insurance coverage can be increased.

The change of beneficiary information is very important in case of divorce.  You may need to make arrangements for a trust to be created for your children to care for their insurance benefits.

Make sure you plan for changes in your policy if your circumstances are going to change drastically.  If you buy a new house and your monthly output for a mortgage doubles your insurance benefits need to reflect that.  If retirement will bring the loss of insurance to your spouse with your death then you should plan to include enough money to cover that and any loss of retirement benefits that your spouse may face.

Another change of circumstances that many people overlook is improved health.  When purchasing your initial policy you are most often required to take a physical.  Your premiums will increase if you are overweight, have high blood pressure or have other health risks.  If you lose weight and maintain that loss or are able to control your high blood pressure long term without medication you may see about purchasing a new policy that will not have rate increases accounted for by these health risks.

Before buying your first policy you might consider the possibility of shopping around for a convertible term policy so that you can easily change your coverage over time.  You could also consider purchasing a term policy that covers your immediate needs in addition to a small permanent policy that allows you to upgrade benefit amounts over time.

The most important thing to remember is that with any financial change of circumstances you need to consider reevaluating your coverage. 

Until next time,
Michael Hartmann
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