Whether you have a term or permanent policy, it doesn’t seem as high maintenance as say, shares of a new tech startup. But that’s only partly correct. No element of your financial life is truly “set it and forget it” — and that includes your life insurance policy.
A check-in on your insurance policies could help to identify potential problems, as well as opportunities to take advantage of, before a situation becomes irreversible.
Too little coverage and listing the wrong beneficiaries may be the insurance issues that immediately come to mind.
They’re important to check, but a complete insurance review could reveal a permanent policy’s instability, or even uncover a way to reduce premiums while increasing your legacy benefit.
A good practice for policyholders would be to ask these questions at least every couple of years to keep their insurance on sound footing:
Typically, a term life insurance policy is best-suited to answering temporary needs, such as coverage that would help survivors pay off a mortgage or fund children’s higher education.
After those conditions change, however, it may make sense to consider a permanent policy with cash value to answer much longer-term needs, such as your estate’s taxes and requirement for liquidity.
This may seem like an odd question at first; if you’re paying your policy’s premiums on time, it won’t lapse, right?
Not quite. A lot of older permanent policies were projected to be self-sustaining:
This is just one example of how a permanent policy’s underlying cash value performance could affect its ability to be there when you need it. It’s a reminder of why you can’t go on autopilot when it comes to your life insurance.
It’s always smart to consider ways your coverage could be more cost-effective.
For a policy that is underperforming — and therefore requires additional premiums — an individual could take the cash value and use it to fund the purchase of a new policy (perhaps one that’s already fully paid).
And the updated mortality tables that are used in current policies could mean that a new policy with the same coverage as the old policy costs less than the original policy — even when as the insured is now older.
Because interest rates have been so low for so long, the investments underlying a policy’s cash value may not be performing as originally illustrated by the life insurance company.
Another way to make your life insurance more efficient is to make sure it fits your