It Makes Sense to Review Your Life Insurance Policies

It seems to me that one of the inescapable facts about life insurance is that once you have recognized (or been convinced by a life insurance agent of) your need for coverage and have actually purchased a policy, you tend to put a check mark in your mental to-do list and not worry about life insurance again. In reality, that head in-the-sand approach can be very costly to you, your family, and your business associates.

All of us should review our life insurance policies regularly, or have them reviewed for us by our financial advisors. You may be thinking, "Oh no, I don’t want to give my agent another opportunity to sell me more coverage," but there are some very salient reasons to have your program reviewed now.

One of the most important points to remember, particularly if you purchased policies several years ago, is that life insurance policies now available for sale are utilizing mortality tables that assume persons will live longer. When I first entered the life insurance business, eons ago, all mortality tables assumed that everyone would be dead by age 100.

These days, mortality tables stretch all the way out to age 121. This change means that if you were to compare what your coverage would cost now versus what you paid in premiums when you originally purchased your policy, the current premiums would be less. The savings could even be enough so that you might be able to purchase a new policy now for less than you have been paying, even though you are now older.

Another reason to have another look at your current program, particularly if you originally purchased permanent insurance (with cash values), is that it may well be possible to use your current cash values to fund future coverage with no future required premiums. Then too, if your policies have goodly amounts of cash value, it may be possible to arrange a tax-free exchange of those policy values for more up-to-date policies that have long-term care benefits built in, once again with no future premiums being required to keep the policies in force. In addition, one of the best features of cash value insurance is that you may be able to keep the policy in force while you are taking tax free withdrawals from those policies.

If you had purchased term insurance in the past, it may be that your premiums are about to go up substantially. For example, if you had initially bought a 10 year term policy, and if the 10th policy anniversary is approaching, you will be in store for sticker shock when you discover how much your 11th year premium will go up. Also, the majority of older term policies contained conversion privileges, which allow you to convert that term policy into a permanent policy, without having to qualify medically now (pass a new physical exam). So, if your health has declined since you purchased the original term policy, you may want to protect your insurability by converting the policy to a whole life policy.

Changes in your family or business may call for a review. For example, you may have more children, so that you do indeed need more coverage. If you have been divorced, you may want to consider changing the beneficiary on your in-force policies. Also, you may have purchased or sold a business which would trigger changes in the amount of death benefits that your beneficiaries/business partners would require.

A final reason to review your current life insurance program is the peace of mind that you and your loved ones or business partners will have, knowing that you are adequately insured. So if you haven’t reviewed your current life insurance policies recently, give your financial advisor a call.

Full disclosure: Greg Roberts is a certified life underwriter and a Certified Financial Planner. He holds an MBA from the Wharton School of Business. He is also the brother of Athens Patch editor Rebecca McCarthy.