There’re a lot of ins-and-outs of buying life insurance that go overlooked. In particular, the somewhat arduous and time-consuming upkeep of your life insurance policy.
That’s a job your broker can help you navigate, but how do you know when to call for a review? What qualifies as a significant enough event that you should go over a policy. Most experts recommend an annual review, but those can overlook some events that need immediate addressing.
#1: When You Feel You Can No Longer Afford Your Insurance
If you’re a senior or you’re over 50 and looking forwards to retirement, that life insurance premium may be starting to eat a hole your pocket; particularly if you bought a larger policy in the past that you’re no longer in full need of.
If you can’t afford your life insurance, you probably aren’t benefitting from the level of coverage under it. Simply letting your policy lapse by stopping payments, however, can do more harm than good if there’s a smaller benefit amount that can still be of use to you and your family.
Many whole life insurance policies offer cash surrender on select amounts of coverage, while others let you stop payments and keep a fixed amount paid-up. Term policies let you reapply for lower coverage or convert to a lower permanent plan. All in all, there’s cost-effective ways to transition your life insurance policy to a senior’s budget and still cover necessary costs.
#2: When You Go Into or Back Out of Retirement
Retirement these days is nominally a life goal, and more something of a potential or possible life transition. We can slide into retirement at any time and at any age, not just at 65; yet we can easily slide back out of it – as indicated by the growing number of Canadian seniors working into their golden years.
Whether retirement is on the menu or still a pie-in-the-sky aspiration, setting aside a financial framework is still as important as ever. For most seniors, that means securing or planning for a reliable income stream.
For many still, reviewing your life insurance policy at this critical time will allow you the means and the perspective to translate your financial portfolio to retirement or un-retirement life as needed.
#3: If You Take New Debts or Settle Old Ones
Debt isn’t something that ends at retirement anymore (in fact, it’s where many debts begin), and your debt will be closely tied to your monthly day-to-day costs, and thus something that can and should be addressed at all costs by your life insurance.
Remember, debt may not be paid off in our lifetimes, but all debt will get paid one way or another. For many of us, that can come out of our savings, or worse – our estate. Taking on debts or paying off debts necessitates looking at your policy and deciding: “Is this protecting what matters, or is it not protecting enough?”
#4: If You Have a Major Crisis of Health
It’s unfortunate that many people don’t consider life insurance until they’re forced to reflect on their own mortality – but it is the case, after all.
While policies do exist to help individuals get coverage despite a serious, life-threatening illness (such as guaranteed life insurance), many more already have policies in force but don’t take the time to review them following illness.
It’s a tough call for many to do, but looking at your life insurance after a major health crisis is essential for a variety of reasons:
- To ensure that the policy remains in force and there’s nothing that would complicate a benefit;
- To ensure that the amount of coverage is still sufficient for final needs, and;
- If the policy has a terminal illness benefit: to check how it can be accessed and paid out as soon as possible.
#5: If You Lost Your Policy (And it Happens More Often Than You Think!)
What’s the most common question we receive from readers? Other than a request for quotes, there’s one simple, universal, and altogether avoidable problem that tends to creep up:
You’ve lost a policy.
Now, that can be a policy that a loved one had (such as a parent who has mentioned a policy), or it can be a policy you yourself own, have paid into, but don’t have the paperwork for.
There’s a number of ways you can avoid losing a policy (a fire-safe is a foolproof solution), but should it happen that you do lose a policy’s paperwork: you’re putting that very policy at risk of going unclaimed if no one can actually find it.
For just an hour out of your day periodically, you can ensure that you and your broker can work towards a more affordable, more accessible, and altogether clearer insurance plan. Even if maintaining paperwork is a tiresome chore – it’s one that doesn’t cost any money when failing to do so can lose you quite a bit of money.