When to Review and Update Your Life Insurance Policy

Life changes—like marriage, children, or income shifts—are the perfect time to review and update your life insurance coverage.

Life insurance can provide for your family members and loved ones in the event of the unthinkable. Many purchase life insurance when they start a family and keep their policy throughout adulthood. Periodically reviewing your life insurance policy can help ensure that your policy meets your needs and the needs of your beneficiaries.

How Much Coverage Do I Need?

There are different ways to calculate how much life insurance you need. Here are some examples of ways to calculate life insurance coverage:

• Use an online calculator: Online calculators help you estimate adequate life insurance coverage. There are many types of life insurance calculators online. Your insurance agent can help you find a life insurance calculator to help you meet your goals.
• Multiply your income by 10: Multiplying your income by 10 is a fast and straightforward way to calculate life insurance coverage, but it doesn’t consider coverage for stay-at-home parents or your existing savings.
• Add debts plus income: Add your debts, including your mortgage, plus $100,000 for each child to attend college. Next, add ten times your annual income to the total. The resulting amount is a good starting point to determine how much life insurance you need.

As you’re determining your life insurance coverage, know your goals. For some people, the purpose of getting life insurance is to ensure their family can live comfortably, even if they lose a source of household income following a death.

Others want life insurance to provide for a significant expense, like their mortgage, so their family can live less expensively when they die. Knowing your goals can help you decide how much life insurance to get.

When Should I Review My Life Insurance Coverage?

Some people review their life insurance policy annually when they review their home insurance policy. Others wait for significant life events to initiate a review. Here are some examples of the times when to review your life insurance policy:

• Significant life changes: Many people choose to review their life insurance policy when a baby is born, when they get married, after a divorce, or during a time of other significant life changes.
• Changes in income: If your income has gone up or down, this may affect how much life insurance coverage is needed to maintain your household.
• Financial changes: If financial changes affect how much life insurance you can afford, this may be when you should review your insurance coverage.

If you haven’t had a major life change or reason to update your life insurance policy in the last several years, review your policy every five years, regardless of your perceived need.

How to Review Your Life Insurance

Reviewing your life insurance policy doesn’t have to be a complex undertaking. Work with your insurance agent to ensure the process is fruitful and productive. Here are the steps to reviewing your life insurance:

• Gather the policy documents. You may need to request the insurance policy documents from your insurance agent.
• Know your financial obligations and assets. Create an updated list of your debts, future expenses, and income replacement needs. Create a separate list of assets. This information will help you calculate your life insurance needs.
• Review the policy. Know how much your policy will pay in the event of your death and review your beneficiaries. Will the amount indicated on the policy cover your financial obligations? Will it meet your goals for your life insurance policy?
• Explore the options. If your life insurance policy is no longer adequate, schedule a meeting with your insurance agent to explore your options and upgrade your policy as needed.
• Make adjustments as needed. Adjust your policy as needed once you’ve worked with your insurance agent.