By Rick Ochenkowski, Senior Manager
Life happens, but more specifically, change happens in our lives that affects the building blocks of our well-being. A few of the building blocks that drive our risk protection needs include lifestyle, health, and income. While it’s ideal to review your insurance situation annually, it is especially important as these building blocks change.
When Should I Consider an Insurance Review?
Here are four changes that may trigger an insurance review: Changes in your life, the insurance marketplace, your estate plan, or your beneficiaries.
1. Life Changes
Changes occur frequently in a person’s life, but the major ones can affect risk protection needs. Below is a brief list of the ones to watch out for that can trigger the need for an insurance review.
- Marriage/Divorce – Adding or losing someone who is dependent on you will adjust your protection needs.
- Children – This change not only includes the joyous occasion of having a child, but also when your children become adults and can support themselves. Needs also change during the lifecycle of a child, from the long-term commitment of raising a child to the needs for college.
- Health – If you have recently lost weight, stopped smoking, or just have begun to live a healthier lifestyle, your insurance rates could be affected. Generally, companies will discount, sometimes significantly, your premiums based on your health.
- Housing – Changes in your liabilities when buying a new home or paying off your mortgage will impact the amount of your insurance needs if something were to happen to you.
- Significant shift in income/Change in employment – Have you started a new job? Have you received a pay raise/cut? Are you winding down and getting ready for retirement? These changes may affect the amount of protection that you will need.
2. Marketplace Changes
As everything else changes, so do the insurance policies that companies offer. Whether it is interest rates going down, rates going up, or new policy riders (such as long-term care, accelerated death benefit, etc.), these changes can affect whether your current policy is the right policy for you. It is also very important to make sure that life insurance policies are with companies that are financially strong to make sure they are still there when you need them the most.
3. Estate Planning Changes
When in the process of making sure your estate is in order, a critical part of the estate plan is reviewing your insurance policies. Insurance proceeds are a terrific way to add liquidity to the estate of high net worth individuals with estate taxes due as well as providing tax-free transfer of funds to beneficiaries. These funds will bypass probate and go directly to the designated individual or individuals (see below on beneficiaries).
4. Beneficiary Changes
Your beneficiaries are the people who are named on your insurance policy and will receive the benefit. This is an extremely critical issue when it comes to insurance policies and should be reviewed frequently. Changes to your beneficiaries can be triggered by some of the events mentioned above (Life Changes or Estate Planning Changes) or other circumstances. Here are some reasons why you should review your beneficiaries and keep them current:
- Your assets may go to someone other than who you intended them to
- If there is not a named beneficiary, your assets may go through your estate
- If there is not a named beneficiary and you don’t have a valid will at the time of your death, the state can determine how your assets will be distributed
How DHJJ Financial Advisors Can Help