When Should You Review Your Life Insurance Policies?

Chris Riley

Chris Riley

Chris is the Founder and CEO of USA Rx. Chris has led the USA Rx team to continue to push for further transparency and more savings options in the U.S. prescription marketplace for the Diabetes community. With COVID-19 transforming and normalizing how consumers view and use digital health, Chris led the transformation of the USA Rx brand to a digital health marketplace.

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Last Updated on June 4, 2023

You purchased life insurance because you wanted to make sure everything is taken care of for your loved ones when you pass away. However, your policy is based on your life and situation at the time you take out the policy. But life doesn’t sit still, does it? Life insurance policies can last a lifetime and you may want your policy or policies, to match your financial objectives. And you might think how often should I review my life insurance coverage? 

As you move through the stages of your life, reviewing your insurance policy is a good habit to get into. This will allow you to rest easy knowing that – no matter what changes come your way – your policy will be exactly how you want it to be at the time of your death. Because of this, it is strongly recommended to spend a few minutes every year, and make sure your life insurance portfolio meets your current goals and financial needs. Is it time to review your life insurance policy?

Having diabetes tends to make obtaining life insurance more difficult to begin with. Especially with type 1 diabetes. But having diabetes should not prevent you from reviewing your life insurance policies from time to time. How often should you review your life insurance policy? Let’s take a look at some events that should prompt you to review your life insurance portfolio.

7 Events That Should Prompt You to Review Your Portfolio

1. Marriage or Divorce

Both marriage and divorce can cause a change in your life – including your lifestyle and your finances. These situations are huge changes and should immediately prompt a review of your life insurance policy. You definitely don’t want to make any ‘rash’ decisions, and just cancel a policy. But rather take a look at your current situation and determine how much, if any coverage, you should own.

When you get married, you transition from a one-person income to a two-person income. And, you are now responsible for seeing that someone else (your new spouse) is cared for if something should happen to you. Perhaps that is why getting married is one of the most common events that prompt someone to purchase life insurance. Studies have shown that spouses always fear how they would continue their lifestyle, if one of them were to pass away. This concern is a perfect example as to why you should look into life insurance.

If you are getting divorced, your finances are likely to diminish, and you will lose that person who was to likely receive your death benefits. It will depend on your personal situation entirely, but you will likely want to decrease the amount of your life insurance policy to save money on premiums. Or in some situations, you may be required to purchase life insurance, thru a divorce decree. Now the situation arises to “review my life insurance policy”!

In certain situations, you may have to share a child with your ex-spouse. If this is the case it generally would make sense to still have life insurance. Possibly, it may make more sense to reduce the amount of life insurance, as you no longer have a spouse. Everybody’s situation is different, so you want to review your personal situation, and make sure you have the proper amount of life insurance in place.

2. Purchasing a New Home

If you – and your spouse or someone else – choose to purchase a new home, you will want to review your life insurance policy. Why life insurance policy review is important? Because taking on a mortgage is a huge obligation. Upon your death, the responsibility of maintaining the home will be on the surviving party. Paying a mortgage on two incomes is a lot easier than paying it with one. In addition, if you have any children, you would likely want to help them maintain stability amid their grief.

To reduce any potential hardship and to make sure that the house remains secure, get a life insurance policy review and be sure that your life insurance policy is worth enough to pay off the mortgage in its entirety. Many people take out a term life insurance policy, to specifically address an outstanding mortgage. You can even structure the policy with a term length that matches the number of years as your mortgage.

Having a life insurance policy that will pay a lump sum, and tax free death benefit to your beneficiary gives your loved ones peace of mind. If you pay off your mortgage quicker than you anticipated, you may simply cancel the life insurance, if no longer needing the coverage.

3. Nearing Retirement

Many people have the misconception that once you near retirement, or enter it, that the need for life insurance goes away. For some there may be no need for life insurance. Others, might want to ask these questions:

Do you need life insurance to maximize social security or pension benefits? Life insurance can be utilized to offset the loss of income from these monthly payouts. Generally there’s a survivor benefit, but that is reduced when a spouse dies.

How much debt are you in? Not everyone who enters retirement is debt free. Perhaps you still have a mortgage, or other types of debt. If this is the case, reviewing your life insurance portfolio is a must.

Do you need life insurance to address estate taxes? Life insurance is the most tax efficient way to pass money to another. It may be a wise decision to work with an attorney who specializes in estate planning. They could then tell you the appropriate amount of coverage you would need.

Maybe you have a permanent life insurance policy, such as whole life insurance, that has accumulated cash value over time. If no longer needing the life insurance benefit, you could transfer the cash value into an annuity, and use it as retirement income.

Is your family self-sufficient? For many people, children may still be living at home, or maybe just starting out in the real world. Often times you may need to help support a child, or children. Having a policy just to be on the safe side may make a lot of financial sense.

4. Having a Baby (or gaining another dependent)

Congratulations on the baby! Now, you need to review your life insurance policy. This is one of the biggest life changes you can encounter. You not only have to worry about replacing your income for your spouse should you die, but also for your child. This means that you will definitely want to consider an increase in your life insurance.

On average, it is rumored to cost about $15,000.00 per year to raise a child. Will your child be provided for if you can’t be there? How long do you want to provide this coverage for? Whether it is short term coverage to help your loved ones remain standing after you are gone or if you want your life insurance to follow your child into college, you need to make these changes accordingly.

As your family grows, it’s probably a good idea to increase your overall amount of life insurance. Taking out term life insurance or whole life insurance policy, will protect your family in the event of a premature death. Having a child is always a good time to reevaluate your life insurance portfolio.

5. Changes in your employment

Any time you have a change in employment, it should trigger a review your life insurance. An increase in income means that you may want to consider taking out additional coverage. Or in some cases, look to purchase a permanent form of life insurance. Since permanent insurance is more expensive than term life coverage, you may not consider this until you are older and more financially stable.

However, if you lose your job or find yourself having to take a pay cut, then the opposite will occur. You will find that you may just have to lower the death benefit of your policy, to lower your premiums. This may be the only way you can maintain a policy and still afford it. Or in some cases, you may have to surrender coverage entirely, due to your financial situation. Life changes, and so does your life insurance coverage.

6. Positive and Negative Changes in Your Health

As much as we’d like to always be healthy, that doesn’t happen. Age and life can take a toll and eventually we may begin to feel the effects on our body. If your health is declining, you don’t have anything to worry about if you already have a life insurance policy. However, if you don’t, then you definitely want to consider obtaining one.

On the other hand, if your health has improved, such as you quit smoking, have lost weight, better control of your diabetes etc., then you may want to consider reviewing your coverage to see if you qualify for a better policy or a lower premium.

Many times people with type 1 diabetes or type 2 diabetes apply for coverage, when their condition isn’t as well controlled as they like. If your A1C improves, it would probably be a good idea to reapply and see what new rates you may qualify for. Often time’s rates may come back 25% better. You may also qualify for no medical exam life insurance policies as well, that allow you to skip the medical exams. An individual may always replace one insurance policy, with another in the future.  Or perhaps you’d benefit from laddering multiple policies together.

7. Changes in Beneficiaries

If your circumstances change, such as a divorce, a new child, etc. and you do not update the beneficiary or beneficiaries listed on your life insurance policy, it could have some devastating effects. You set up your policy to take care of those you love after you are gone. But, failing to update this paperwork could leave your life insurance money in the wrong hands.

Always, always make sure that you update your beneficiaries immediately.

You don’t know the date or time of your death, so don’t leave it to chance. Otherwise, it could be your biggest regret.

Ready to review your policy? Consider this.

Whether you are reviewing your policy because you have had a life change or you just want to make sure you are prepared, ask yourself these questions:

  • Do people rely on me financially? If so, who exactly should be my beneficiaries?
  • What is my financial situation currently? How much money will be available to my family when I die? Is it enough to address all of my debt?
  • How is my life different now from when I last reviewed my policy?
  • If I am making more money now than I was, should I consider additional life insurance coverage? Would it be the best use of my extra income?
  • Upon my death, will my loved ones be financially secure? If so, for how long?

Thinking about this time in your life can be difficult. Reviewing and making changes to your life insurance policy is much easier than applying for coverage, but it can still be a daunting – and emotional – task. However, it is something you probably would want to spend a few minutes reviewing, from time to time.

If you think you may benefit from a life insurance review, please contact us. We’d love to speak with you, and help you re-look at your current life insurance position. A quick call to 888-629-3064 is all that it takes and we can help you know when to review your personal insurance.

Contact us today to see how we can help ensure that your life insurance policy is set and ready to go when you need it. Life is busy and it keeps you on your toes. Don’t push the task of reviewing your policy to the back of your to-do list.

Matt Schmidt is a nationally licensed diabetes insurance expert. Over this time frame he's helped out over 10,000 clients secure life insurance coverage with Diabetes. He's frequently authors content to Forbes, Entrepreneur, The Simple Dollar, GoBanking Rates, MSN, Insurancenews.net, and Yahoo Finance and many more.

Matt Schmidt is also the Co-Founder of Diabetes Life Solutions and Licensed Insurance agent. He’s been working with the Diabetes community for over 18 years to find consumers the best life insurance policies.  Since 2011, he has been a qualified non-member of MDRT, the most prestigious life insurance trade organization in the USA

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