Spring Is The Perfect Time To Rejuvenate Your Life Insurance Policy

Spring is a time of rejuvenation in every facet of life, from Mother Nature to your financial assets. And when it comes to life insurance, you should take this time to evaluate where you’ve been, where you are, and where you’re headed. “Unfortunately, most people don’t take the time to routinely evaluate their life insurance planning to make sure it keeps up with their ever-changing lives,” stated Cincinnati Insurance in a recent blog post.

Citing a study from LIMRA, a life insurance trade and marketing association, the company notes that three in 10 American households – or 35 million people – are uninsured or underinsured. “Additionally, more than half of Gen X and Gen Y households – or 30 million people –  need more life insurance.”

Worried you might not be adequately covered? Answer the following questions.


1. Who Are My Beneficiaries?

First, the surface answer: your beneficiaries are the people, who would ultimately benefit from the policy in the event of your death. However, that’s really not the answer we’re looking for. Instead of just keeping things to a surface level, let’s delve in to who your beneficiaries are as individuals. How capable are they of picking up the pieces and moving on should something happen to you? Think about not only the quantity of your heirs but also their earning power. If your spouse has more education, work experience, and earning power, then a larger policy may not be necessary. If, however, your spouse and children depend solely on your income, then you’ll want to incorporate that into the coverage limits and purchase a larger policy.


2. What Debts Will They Be Liable For?

The answer to this question is highly important. If you died tomorrow, what debts would your loved ones be responsible for paying back, and what other assets are in place to ensure they’re capable of doing so? Most of the time, when life insurance coverages are selected, the policyholder does so with the intent of making sure their loved ones are debt free and have enough of a cushion to rebuild their lives. If total outstanding debt is $25,000, and the average funeral costs around $10,000, we’re up to $35k. On top of that, you want to make sure that your loved ones have the time to properly grieve and get back in to their routines. Unfortunately, grief is not something that can be set to a specific timetable.

That’s why, in my own experience, I opted for a $375,000 policy. My wife and I have very little debt. Since I currently have more earning power, I want her and my daughter to be financially stable enough to figure things out without being forced through the grieving process. Paying off all our remaining debts (including student loans) would only take around $50,000. That leaves $325,000. You can get a new 2,000 square-foot home in our state for under $200,000. She would essentially be able to buy one outright and have about two year’s income left over. Apply that same logic to your own salary, quality of life, and location, if you’re uncertain of how much life insurance you need to buy.


3. How Has My Life Changed In The Last Year?

No one’s life stays the same year after year. In that expanse of 365 days, a lot can happen. You can lose a loved one, file for divorce, get married, lose your livelihood, win the lottery, have a child (or, gasp, twins!), take on a mortgage, incur new debt — the list goes on and on. Each and every one of these issues can either add or take away financial burdens, thus altering the coverage amount necessary for taking care of your beneficiaries. That’s why you should revisit your life circumstances each and every year. You don’t have to do it in the spring, but it’s as good a time as any.


In Summary

By examining your earning power, financial obligations, and quality of life, you can make sure your beneficiaries have everything they need to go on should they be forced to face life without you. In that sense, an adequate life insurance policy has a lasting impact and gives you the ability to go on taking care of your loved ones long after you’re gone.

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