Seven Questions to Help You Review Your Current Life Insurance Policy

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You probably donít need to re-examine your life insurance policy every year, but like almost everything else in your financial portfolio, you should review any insurance policy you own at least every few years. You should also review your life insurance each time you change jobs or undergo a significant change in circumstances such as the birth of a child, the purchase of a home, or a divorce. Here are some important things to look for when you examine your life insurance policy.

Do I Have Enough Insurance?

Inflation can quickly eat away at the value of a policy. A hundred thousand dollars was quite a bit of money in 1975, but in todayís world, it wonít even pay for four years of college. If you purchased a life insurance policy decades ago, chances are that inflation has eroded much of its value. The good news is that you can supplement an older policy with additional insurance.

Do I Have Too Much Insurance?

If youíve purchased life insurance to protect your wife and children, and your wife has passed away and your children are all adults with stable jobs, you may not need an expensive life insurance policy. Generally, life insurance exists to provide for the financial needs of dependents in the event of your death. If you have fewer dependents, you need less life insurance. If youíre having trouble making payments and no dependents, itís worth considering jettisoning some of your coverage.

Should I Change Beneficiaries?

If youíve undergone a divorce, your ex-wife may still be listed as the beneficiary on your life insurance policy. Unless this is intentional, you may wish to assign your life insurance benefits to your children or another worthy recipient. Some people also may wish to add a child as a beneficiary, if the child has been born after the policy was issued.

Am I Paying Too Much for My Coverage?

If you purchased your coverage in the 1970s or earlier, your insurance companyís mortality tables probably predicted that you would die in your sixties, since that was the most common age of death at that time. Consequently, people in their fifties and sixties who are relying on older policies may be paying far too much money, because the older tables may predict that they will die soon leaving their the insurers to pay hundreds of thousands of dollars. Updating to a newer policy that uses a more current mortality table can save you big bucks.

Do I Have Duplicate Policies?

It costs your insurer considerable overhead to administer each policy in its portfolio, which is why itís much cheaper to buy a $500,000 policy than it is to buy two $250,000 policies. If youíve somehow wound up with duplicate life insurance policies in your portfolio, you can save substantial money by combining your policies.

Am I Paying Extra for an Accidental Death Benefit?

Some policies pay extra if a death is a product of an accident, like a car crash, rather than from natural causes like a heart attack. This doesnít make senseóyour familyís financial needs are the same, regardless of the way in which you died. Donít pay extra for an accidental death benefit. Cancel the benefit and pay less money.

Am I Healthier Now Than I Was When I Took Out My Life Insurance Policy?

People with habits that life insurers may feel arenít healthy may pay more for life insurance. Smoking and being overweight are two examplesópeople who fall in these categories often pay more for their life insurance. If youíve quit smoking or lost weight, you can sometimes negotiate a reduction in your life insurance costs.

Laura Ginn knows that before she makes any changes to her life insurance policy there are several things that she needs to take into account. Anyone looking to review life insurance over 50 years of age should consider the ways in which their life has changed since they took out the original policy.

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