When reviewing your Life Insurance coverage, there are many different aspects of the policy to consider. For example, it’s a good idea to look at policy type, conversion privileges, term expirations, and coverage needs.
Life Insurance policies range from temporary-style coverage, all the way to guaranteed, lifetime coverage with investment-like functionality. Term policies do not contain cash values, while permanent policies typically do. Some permanent policies have a predetermined, fixed accumulation, while others may be tightly or loosely tied to the market. Certain policy types require a mandatory level of performance to stay in force. Should the market be less favorable than anticipated, you may be required to self-fund the difference. Essentially, the more variable qualities your policy has, the more you should keep an eye on it. Many times you can obtain the necessary information through your policy statements, but you may need someone from the life insurance industry to interpret what you are looking at. If a permanent policy is what you have, you may want to review it with your agent every year or two, to make sure it is doing what it needs to do.
A “conversion option” allows you to convert a Term policy to a Permanent policy without an additional health screening. This is a particularly valuable option to someone whose health has deteriorated during the duration of their temporary coverage. Should they find themselves wanting more coverage at the end of their term, they may not qualify for coverage or they may be rated at a sub-standard rate – causing their insurance cost to sky-rocket. Conversion privileges are not offered on all policies and they are usually limited to a certain window of time (you should definitely find out if you have this option or not). If your policy does contain this provision, you should keep a mental note of the conversion period. Reviewing your policy every year or two can remind you that this option is available, so you can plan if and when you will take advantage of it while it is still there.
Temporary policies will have an expiration date. Unfortunately, many policyholders do not realize their policy is expiring until they get the “notice of expiration” in the mail. The best way to avoid this is to meet with your agent every few years to review your policy. You do not have to wait till the final year of your term before looking at your options. If you already know you will want to extend the length of your coverage, your agent can work with you to calculate the best plan of attack to save you the most money. If you just wait till the other policy expires, you will never know what other options you had.
Without going into too much detail, your coverage needs will definitely change over time. By keeping in contact with your agent every 12-24 months you will be able to change and revise your coverage goals as your family’s needs also continue to change. Although policy reviews are never required by any insurance carrier or agent, they are always in your best interest and can help you to make sure you are properly covered.
If you need help determining your coverage needs, please contact me to set up an appointment and I will be happy to help you out.