Do you have life insurance? If you do, you probably bought it because of a special life event (i.e. getting married, buying a home or adopting/having a child). Chances are the choices you made in acquiring the policy were affected by your life and the events happening in your life at that time.
However, as your life and your choices helped to determine which policy you bought, your life has not stood still; or, for that matter, ended. Accordingly, it is important to review your life insurance regularly to ensure that it covers any changes in past obligations, new obligations or to guarantee that your life, critical illness and accidental death insurance portfolio is still consistent with your current life, its realities and its goals. Or put differently, your life is always changing and your insurance portfolio needs to adapt to it.
One’s life insurance policy portfolio is most effective when it is current. For example, a person’s living arrangements might change. Any of us might buy a first home, move into a larger home, downsize into a smaller home or purchase a vacation home. It is also possible for one to become a renter because of a fire, a divorce, a bankruptcy, a move or a change in lifestyle. Therefore, it is important to review your coverage so as to ensure that a significant planned or unplanned life event will not derail it. So does one start?
With an annual review, of course. Let’s use the previous example as a starting point. I have changed my living arrangements a few times in my life and I can say that moving never goes to plan. It is always full of unanticipated problems which have to take priority because developing your “home” is such an important need, want and desire. With this in mind, one can understand that your life or health insurance policy(-cies) might not be top of mind. Accordingly, I always recommend creating an “artificial” reason for reviewing your policy or policies.
The “artificial” reason could be anything; consequently, the “artificial” review day could be anyday. It could be the same day that you file your federal and provincial income taxes, it could be the day after the RRSP deadline or it could be your dog’s birthday. What is important is that that “artificial” day be an annual and recurring one because your life doesn’t stop and your life never stands; so neither do your obligations, compliments and reasons for having a life insurance policy.
However, I know that a review is not always possible. Accordingly, planning for an annual review makes a lot of sense. So, if you can’t remember the last time that you spoke to a Life Insurance Professional about your life insurance policy (or policies), please contact me today.
Now most people must be asking one important question: What will a review entail? When you sit down with your insurance professional, the conversation should concentrate on a few simple areas.
Firstly, you should look at your current coverage. If you have no coverage, you know you need some. However, for many people the questions are a bit more complex because they have some coverage or used to have it. The questions might sound like: “I bought a life insurance policy; but is it still valid?’. Or there might be questions about group benefits coverage from your employer or a policy bought in the past by a parent or relative. These questions are where you start and then you jump into looking at your life, your financial obligations and the objectives that you want to accomplish. Now, if you already have policies, these questions that might be asked might just be in relation to the last policy that you bought or the last time you saw an insurance agent. In either case, this is where you begin because you want to ensure that you are protecting yourself, and/or others, from this day forward.
Now, if you have some existing policies, the review should focus on the details next. For example, are the beneficiaries still the beneficiaries that should be listed. Or put differently, are the beneficiaries right? Births, marriages, divorces and estrangement are just some of the few reasons that beneficiaries could be incorrect. The other reasons could include spelling, name changes or gender “realignments”. At the end of the day, there are an infinite amount of reasons why the beneficiaries could be “wrong” and a review is an ideal time to get it right.
The Third Step is simple: build a financial profile. Over the next five to ten years, one hopes that your situation will improve. This will mean that you might acquire more stuff and possibly pay more in taxes. A good insurance review recognizes this reality. At this point, a Life Insurance Professional will inventory the assets that you or your family have and try to figure out if you are going to be acquiring any new assets in the near future. If you do this, you can then have a discussion about how those assets might be disposed of either in life or in death. In understanding this a Life Insurance Professional, in consultation with a lawyer and/or accountant, can begin to understand whether the Insurance Portfolio - the culmination of all the Life, Critical Illness, Long-Term care or Disability Insurance policies - is sufficient for your needs.
Now you are half way through the review, it is all easy from here. The Fourth Step would be to discuss any health changes. This is an important and an often forgotten step because clients don’t want to talk about their health information and sometimes Life Insurance Agents don’t want to pry. But it is important because some life changes can lead to drops in premiums; while others portend dramatic increases. From changing medication to losing weight, from changes in your family members health to trying to quit smoking, discussing your health changes with Life Insurance Agent is just as important as not telling a doctor, dentists, physiatrist or other medical professional about symptoms you are suffering from.
The Fifth Step is to take a big guess and to forecast into the far future. For, while one wants to be prepared for a premature mortality or morbidity event, one should also plan for good luck. A Life Insurance Professional is uniquely qualified to do both. Consequently, if you have taken care of some of the basics in Steps 1 through 4, Step Five is meant to look after the things which are far in the future like retirement savings, long term care costs and legacy building.
To this point, in this review, your Life Insurance Professional and you will have taken care of your present needs and obligations. Details - such as changing the beneficiaries, updating your smoking status, checking your date of birth and your health - will have been looked at and discussed. By now, hard questions - like your retirement and future - will have been looked at. With all that being said, what is left?
Well, your cash flow of course. When everything else has been reviewed, it is time to ensure that your present Insurance Portfolio is still aligned with your bank account. The cost of life insurance is foreseeable, so it is important those costs are still aligned with your means and that if there should be a change, there is a plan for it.
Keeping your life insurance up to date is critical. Your Policy should reflect the changes in your life because experience tells me that when something happens to you, Life Insurance is a powerful financial asset. It can help protect yourself, your family and your community in those dire times. Like a car, it makes sense to pay attention to it and to tune it up every so often. Otherwise, your life insurance policy (or policies) may not provide the most amount of protection needed when you, your family, your business, your personal objectives, your friends and community need it the most.
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