life Insurance Article

C’est La Vie: Keeping Your Life Insurance Up-to-Date

lifeinsRalph Waldo Emerson once said, “For everything you have missed, you have gained something else, and for everything you gain, you lose something else.”

If you’re one of the few smart households that have life insurance, you’ve already made the first step in a responsible decision. Unfortunately, many people think the work stops there, and are surprised at the worst time possible to find out that they’re not covered adequately–sometimes at all–when a major, life changing event has occurred. Many people buy a policy and never think about it again. They experience yet another loss when they realize they never updated their policy to reflect important life events–a wedding or the birth of a child.

Remember, no one is going to know when to update your policy unless you tell them. If you think there are major life changes that don’t have an impact on your life insurance–think again.

It’s worth a quick look at what life insurance policies are used for.

1.)Death

Maybe you purchased the policy when you were still single and you have a parent listed as beneficiary. If your parent has passed away, you’d have no listed beneficiary if you die. If you’re still single, you can choose a sibling or another family member to be the beneficiary until you feel you want to change it again.

2.) Wedded Bliss

One of the most important times you should updated your life insurance is when you make the big commitment to get married. When starting out, often you don’t have as much income or expenses to be concerned about, but you want to plan ahead for the future. You and your new spouse may only be making a little over minimum wage now, but you will probably be making more later in life. This means a different standard of living and a required amount of money needed to maintain your lifestyle. If a spouse dies, life for the other spouse goes on and responsibilities remain—mortgages, transportation, insurance, education and college, maybe a business, and more. With life insurance though, a spouse could continue on as though the household still has the same income as if the other were living. Not only should you look at the coverage limits, you also want to ensure you update your spouse as a beneficiary so you know they’d receive the money.

3.) Visits From the Stork

Having a baby is an amazing experience. Perhaps that’s what prompted you to buy life insurance to begin with. You’re enthralled with your “mini me” and want to be sure there’s future protection.

Sometimes another child comes along and by then life is so hectic life insurance is the last thing on your mind. However, this is exactly when you should contact your insurer to update the changes. Your policy needs to be updated with your new child’s information and review your coverage to be sure it’s still enough.

Always update your policy for subsequent children if you decide to have more.

This is also a good time to purchase life insurance on your child as well. Your agent can show you all the options and benefits, and it’s typically a very inexpensive policy.

The right policy can convert into your adult child’s life policy, and protect them should they have the misfortune of developing a childhood disease that makes them ineligible for life insurance later in life. They could even borrow against the value of a whole life policy for college.

4.) Mother-in-Law Suite Is Now Occupied

People are living longer, and hopefully with the amazing advances in technology and medicine the life expectancy rate will get even higher. According to the Center for Disease Control and Prevention, the average life span of those in the U.S. is 78.5 years.

Longer life expectancy is great, but the only problem is that it’s causing older people to run out of retirement and savings too quickly. The result is that more and more elderly are being forced to rely on their children for their care. If this happens to you, it is understandably an emotional, physical, and financial strain. However, you don’t want to put your spouse in the position of having to figure out how to support you, three children and a mother in law with a $10K life insurance policy bought fifteen years ago. With today’s high costs, $10K wouldn’t go very far (and would barely get you buried), much less is it enough to replace a salary and support five people after your death.

5.) Divorce

So you bought your life policy when you were a bright, young newlywed, head over heels in love, and had your first baby. Eventually you got a divorce, and got remarried. You don’t want to have a situation where your one single policy pays out to your ex because you never changed the beneficiary and updated the policy. If you have the greatest ex in the world, the ex may be understanding and spread the benefits, but this is of course highly unlikely.

Be sure to keep your agent abreast of any major life changes, including ones including things like divorce or changing beneficiaries. There’s no need to feel embarrassed, they’re there to help you plan for these life changes, not judge you.
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C’est la vie, right?

Not updating your policy can have several unfortunate consequences. Since life insurance is usually worth a good amount of money and due to the reasons you felt you needed life insurance in the first place, it’s worth it to be regimented and stay on top of it. If you pass and had been married twice, had two children by each spouse, and you failed to update your policies, one of your children could go without receiving anything while an ex-spouse gets all the benefits. Remember that life insurance isn’t just about paying for funeral expenses. Sure, it’s a comforting thought to know your final expenses will be taken care of when you pass so no one else has to pay for them. But more often than not, life insurance is for those you love and want to protect when you’re gone.

It’s easy to forget things, especially when it comes to maintaining insurance, and especially hard when the maintenance is needed after a major life change. It’s also easy to tell yourself you’ll change your beneficiaries once you have children and to let that task slip away. So even if you do remember it during that event, it can be quickly forgotten. Therefore, make it a point to go over your life insurance at least once a year—pick a date you can remember and every day on that year, make sure your policy is adequate in coverage, beneficiaries, and is updated to reflect the life you presently live—not the life you used to live.

-Desiree Baughman, InsuranceQuotes.org, @DesireeBaughman

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