Do you have a life insurance policy? That’s great! Life insurance policies are the perfect way to ensure that your family and loved ones are taken care of in the event of your death.
However, the policy you signed up for years ago may not be suitable for your current life situation.
There are certain life events and milestones that warrant a review of your policy and possible changes. Keep reading to find out when you should make changes to your life insurance:
5 Reasons to Change Your Life Insurance Policy
1. Separation/Divorce
One of the main reasons for individuals to make changes to their life insurance policies is marriage. Likewise, it’s important to review your policy should you get separated or divorced.
This is especially true if you get remarried. You don’t want to find yourself in a situation where your policy pays out to your ex when a new spouse is involved.
If you find yourself divorced or separated, be sure to update your policy – especially when it comes to your beneficiary (the person who receives the money after you die).
2. Birth of a Child
For many people who don’t have a life insurance policy, having a child usually prompts them to get one right away to ensure their child is financially protected should anything happen.
However, it’s important to make updates to your life insurance when subsequent children come along.
You should also consider purchasing life insurance for your child as well. These are typically inexpensive policies and can easily be converted to an adult life insurance policy when your child reaches adulthood.
3. Starting a Business
New business ventures can create a significant amount of debt and require a cut-back on income. During the early stages of a business, your family can be left in a vulnerable position if you die.
If you do start a new business, you’ll want to make sure that you have a life insurance policy that sufficiently covers your beneficiaries should you leave behind business-related debts.
4. Death of a Beneficiary
If your beneficiary passes away, it’s important to designate a new beneficiary as soon as possible. Otherwise, your assets could end up in limbo if no one is named to receive them.
At the end of this article, we will explain how you can easily change the beneficiary on your life insurance policy.
5. Buying a House
When you buy a new house, it’s likely that you are taking on a mortgage. Having a mortgage under your name can create complications if you die before it is paid off.
If you pass away, a significant portion of the family income passes as well. You don’t want your family to get stuck with unpayable mortgage payments so it’s important to increase the size of your life insurance policy when you buy a new home.
In this instance, you should also consider who you’ve named your beneficiary. You want to make sure that your life insurance payout goes to the individual who will be responsible for the mortgage payments.
Frequently Asked Questions About Life Insurance Policies
How often should I update my insurance policy?
Although how often you update your insurance policy depends entirely on your circumstances, most insurance advisors will suggest that you review the terms of the policy every 12 months.
However, if you haven’t experienced any major life changes, there is likely no need to make any changes to your life insurance policy.
If changes do happen, speak to an insurance broker about any updates you should make in order to ensure that your loved ones are protected and taken care of.
How do I change the beneficiary on my life insurance policy?
There are many reasons why you may want to change the beneficiary on your life insurance policy such as a falling out or divorce. To change the beneficiary, simply contact an insurance broker to request a “change of beneficiary” form.
There’s some paperwork involved in having this change done but an insurance broker will help you fill out the forms properly. These updates can be made within 24 hours.
However, there are some exceptions you need to keep in mind. Sometimes the beneficiary of your life insurance policy can be “irrecoverable”, meaning that you cannot change the policy without the beneficiary’s written consent.
You should also be cautious when changing your beneficiary if your policy has been placed in trust. Trusts are often used to avoid paying inheritance tax on lump sums but, if you change the beneficiary, the money could be taxed if you pass away within seven years of updating your life insurance policy.
How do I make changes to my life insurance policy?
Making changes to your life insurance policy is as easy as contacting your current provider. They can add additional life insurance on top of your existing coverage. You can also switch your policy to a new provider by cancelling your insurance and finding a policy that better suits your needs.
Not all providers will allow you to change the terms of your life insurance policy once you’ve purchased it but many will. To find out if you can make changes to your current policy, take a look at your documentation or contact your insurer.
While it’s recommended that you make changes with your current provider, there may be a better deal out there for you. If you need to make changes, shop around for the best rates.
Need to Make Changes to Your Life Insurance Policy?
Capital Insurance is here to help!
Our team of expert brokers can take a look at your current life insurance policy as well as any life events and milestones that could necessitate a change to your policy.
We are dedicated to finding insurance policies that work with your unique and individual needs. To have your life insurance policy reviewed, get in touch with us today!
