You may have purchased life insurance years ago and never looked back. However, that’s a big mistake! Just like life is always changing, your insurance needs are too.
Here are 5 questions every person should ask about their life insurance coverage:
1. Do I have the right type of coverage?
There are two types of life insurance: term and permanent. With term life insurance, you pay a premium and if you die within a certain period of time, a death benefit is paid out. Once this type of policy expires, it gets more expensive as you get older. Permanent life insurance typically provides both a death benefit and a cash value. Part of the premium will go to the cash value, while another goes to a death benefit. The cash value can be invested in different ways. However, unlike term insurance, permanent insurance does not expire as long as you keep paying the premiums. It is important to
take into account your health when deciding which plan is right for you. For more information, read our article “Term Vs Whole Life Insurance: What’s the Difference?”
2. Am I paying a fair price?
To ensure you are paying the best price, it’s best to purchase life insurance when you are younger. The premiums are more reasonable because you are at a lower risk and are often in better health.
Many people that have life insurance haven’t reviewed their coverage in years. As people continue to live longer, the tables used to calculate risk change. Many people find that they can keep the same level of coverage at a lower premium or continue paying the same premium while getting additional coverage because the numbers work more to their favor.
3. Do I have enough coverage?
One of the biggest mistake people make is thinking the coverage they have through an employer is enough. Employers will often provide a group insurance policy as part of their benefits package, but that coverage may not be sufficient.
There are 4 main reasons people choose to purchase life insurance:
Pay off debt: You may want life insurance to pay off some of your debt, such as your mortgage, student loans, credit cards or car loans.
Income for survivors: When purchasing life insurance, most people focus on replacing the income they earn from their job. Many people don’t take into account the value of a spouse that stays at home. Don’t forget about the costs associated with childcare and running a home. The surviving spouse would have to find a way to replace that income.
Pay off your final expenses: Funeral costs are anything but cheap. Money may also be needed to pay for things you would want to happen based on your final wishes. Without life insurance, your loved ones would be stuck with the bill.
Leave a legacy: Many people want to leave their families in a better place than they were before.
Think about all of these factors and how they apply to you and compare it to the life insurance you have and the death benefit proceeds, often times there’s a gap.
4. Is my policy at risk of lapsing?
Holders of term policies are required to pay their premiums either monthly or annually. If you don’t pay your premiums, you don’t get the benefit. You should make sure your premiums are up to date and that your policy is current. Permanent life insurance has a cash value and death benefit inside the policy. When the cash value gets big enough and is generating dividends, some people will let the dividends in the policy pay the premiums. Be careful: your policy runs the risk of lapsing if your cash value and dividends aren’t enough to pay the premiums.
5. Does my life insurance support my objectives?
As your circumstances change, it’s important to reevaluate your need for life insurance. If you pass away after your children are done with college, you won’t need to fund any educational needs. If you recently paid off your home, your survivors won’t need that money to pay the mortgage. As you continue your career, gain assets and decrease debt, you can often fulfill any needs with existing assets or other resources. That means your need for life insurance may go down over time.
While life insurance is an important part of proper financial planning, it is not a one and done purchase. Do yourself a favor and work to understand your life insurance needs now. Determine if you have adequate coverage for those needs. Review your policy on an ongoing basis to make sure it’s keeping up with your changing life. And if you need any help, just call us at 724-929-2300 today! We have local life insurance specialists here to answer any questions you may have. Call or stop in the office to review your policy and needs to ensure you have the right coverage at the best price.