Annual life Insurance Review

Annual Life Insurance Review

Issues to Consider

By James Tobin, CFP®

Critical Takeaways

  • Personal life events drive life insurance decisions
  • Beneficiary changes and Conversion windows are time sensitive actions
  • marketplace changes often present financial opportunities

Expert Review Of considerations for Annual Life Insurance Review

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Reviewed by

Jim Tobin, CFP®

Why you can trust this review

At Workers Bequest Life Insurance, we value our editorial independence. We keep our reviews strictly factual so you can use them to make informed decisions. Life insurance carriers referred to on this site do not approve reviews. 

The reason that you should consider an annual life insurance review is pretty simple.... If you have individually owned life insurance (as opposed to any work related benefit), you very likely bought it to fit your needs at the time of purchase. This, only makes sense. 

However, if you are like most people, your life has changed some in the intervening years. Whether it was an additional child, a bigger house, or a financial crisis.... your situation is, it's likely different than you thought it would be two, five ,ten or more years ago.

With  such changed realities in mind, the purpose of this post is to outline the things you should consider when reviewing your life insurance policy.

If The Terms Are Fixed, Why Do A Review?

The reason to do an annual life insurance review is the same reason you should get an annual physical, because things change. While the policy terms will not change on a term policy, your needs almost certainly will.

In addition to personal and family life events driving change, the market place also changes. A blood pressure condition that resulted in an expensive policy may be far more affordable with pharmaceutical advances.

Common Life Events That Drive Life Insurance

Life insurance is often bought in conjunction to life milestones. Annual reviews should take these and less apparent milestones into consideration. While a child being born is an obvious reason to recalculate need, your changing health status or a child's graduation from college may not be so front and center when assessing your policy needs.

Below is a list of issues that we encourage all policy holders to consider with the help of an independent agent:

  • Birth of a child/Adoption of child
  • Marriage/ Divorce
  • Material increase/decrease in financial obligations (college/mortgage)
  • Material increase or decrease in retirement funds from initial plan 
  • Birth of grandchild
  • Change in health  
  • Material change in the life insurance marketplace
  • Medical enhancements that affect the insured life expectancy

The Common Actions That Come From Annual Life Insurance Review

As a general rule, most insured want to increase their life insurance in times of greater obligation. This makes sense, as mortgage and college bills will remain, even in the face of tragedy.

LIMRA, the Life Insurance Marketing Association routinely highlights stories of people well known and unknown, who's futures were made possible - following the loss of a parent- by life insurance. 

Conversely, as people's obligations dwindle, the mortgage gets paid down and the kids are done with school, people may look to invest, or spend, the money spent on life insurance.  Others, will conclude that although they no longer need the insurance as income protection, they will keep the policy in force as a tax free legacy to their beneficiary.

Alternatively, the insured may consider a life settlement. This is a situation where the insured sells the policy for a lump sum. there are drawbacks to this strategy, including tax consequences and the possible dissemination of your health  condition.

Life Insurance Marketplace Changes

No matter whether decision made is to increase, decrease or maintain the level of life insurance, it makes sense to measure your current policy against the marketplace. After all, your life is not the only thing that has changed.

Advances in medicine and updated mortality tables have made life insurance pricing more competitive than ever. Additionally, if you have quit smoking or lost a bunch of weight you are likely to receive a better underrating grade and a lower premium.

Annual Life Insurance Review: Conversion Options

If, rather than getting healthier, your health has declined, you may want to consider if your policy has an option to convert to permanent insurance. These type policies all have different characteristics, but when properly funded they will remain in-force until death or endowment.

Some of these policies will accumulate cash value and are considerably more expensive than term. Nonetheless, if they are all that is available, they may make sense for you.

Annual life insurance reviews are of particular importance when dealing with universal life policies, because, unlike whole life, they are not "lapse-proof" and if they are being used as a cash accumulation tool, the terms must be adjusted once withdrawals (loans) start. 

Beneficiary Changes

Perhaps the most common service request that an agent gets is for the change of a beneficiary. This is an easy thing to do but really important to get right.

You probably know someone who had to deal with a probate court because a beneficiary designation was not filled out. Worse, are the stories in the press about current and ex-spouses arguing about a death benefit because the beneficiary was never changed.  Don't let this happen to you! 

Your Next Step

Setting up an annual life insurance review, of course. Make sure that you speak with an independent advisor for this task, even if he/she is not who sold you the policy. Not only is having more options available is to your benefit, not having them can be very expensive. 

We are glad about the efforts you've made on checking out for a better upgrade for your Employer Sponsored Life Insurance Plan and finally decided on Workers Bequest. We are committed to a totally transparent process (we'll even share our computer screen with you if you'd like), and making the application process as painless as possible.'

Simply give us a call or send us an email so we can get you started. If you have any questions, We'd also like to hear them.

The Time to get covered is now!...

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