Life insurance is not a one-time purchase; it requires regular attention to ensure that it remains in line with your evolving needs and circumstances. As your life progresses, factors like family changes, financial priorities, and health status can significantly influence the amount of cover you require. Regularly reviewing your life insurance policy ensures that it continues to provide adequate protection for both you and your loved ones.
The Importance of Regular Life Insurance Reviews
Life insurance needs can change for a variety of reasons. Marriage, the birth of children, changes in financial goals, or even health challenges can all necessitate a reassessment of your coverage. A well-timed review allows you to adjust your policy, so it remains relevant, and it helps ensure that your family will be financially protected in case of an unforeseen event.
Yearly Life Insurance Audit Checklist
Step 1: Compare Your Current Cover with Current Circumstances
The first step in your yearly review is to evaluate whether your current life insurance coverage aligns with your life stage and financial situation. Ask yourself if any recent changes in your life impact your coverage needs.
Consider the following:
- Family structure: Have you experienced significant life events such as marriage, divorce, or the birth of a child or grandchild? These changes often increase the number of dependents and may require an increase in your coverage.
- Health status: Have you experienced any severe illness, disability, or other health concerns that could affect your life expectancy or the financial support you may need to provide for loved ones?
- Education costs: Are you now responsible for funding the education of children or other dependents? If so, this could impact the amount of coverage required to ensure those needs are met.
Step 2: Check Policy Benefits and Expiry Dates
Take time to review the specific benefits included in your policy. It is crucial to check if the benefits are still aligned with your needs and that the policy remains valid and effective. Look for the following:
- Benefit expiry ages: Policies may have specific age limits after which benefits expire or change. Ensure these align with your current life situation and long-term goals.
- Employer-provided policies: If you rely on a life insurance policy provided by your employer, confirm that the benefits are still adequate. Consider whether you need additional cover to meet your needs, especially if your role or financial situation has changed.
Step 3: Update Beneficiaries and Their Details
Review the details of your beneficiaries to ensure they are still accurate and reflect your current wishes. Significant life changes such as divorce, remarriage, or new relationships may require you to update your beneficiaries or their share of the payout. Key considerations include:
- Personal changes: Have you recently divorced, remarried, or had new children? These events can affect who you want to receive the policy’s pay-out.
- Relocation: If beneficiaries have moved or changed contact details, make sure this information is updated to avoid delays or issues when claims are made.
- Updated share percentages: Ensure that the distribution of the policy payout reflects your wishes and that each beneficiary’s share is clear.
Step 4: Reassess Life Insurance Goals
Evaluate your original life insurance goals and determine if they still apply. Consider whether your coverage needs to be adjusted for:
- Home loan or debt repayment: If you have taken on additional financial responsibilities, such as a home loan or other significant debts, you may need to increase your coverage to ensure these obligations are taken care of if you are no longer around to provide for them.
- Severe illness or disability protection: If you have recently been diagnosed with a serious illness or have concerns about long-term care, it may be necessary to adjust your policy to include disability or critical illness coverage.
- Education expenses: As children or dependents grow, their education needs may change, and additional funds may be required to ensure their future is secured.
Step 5: Review Your Estate Plan
Your life insurance policy should align with your overall estate plan. Any changes to your financial situation or asset holdings should be reflected in your policy to ensure that your loved ones are adequately protected. Key areas to review include:
- Offshore investments or international business: If your financial situation involves offshore investments or international business ventures, consider whether your life insurance policy addresses these complexities, including potential tax or legal implications.
- Wills and legal documents: Review your will and other estate planning documents to ensure that they are up-to-date and correspond with your life insurance plan.
- Estate liabilities and taxes: Ensure your estate plan addresses any potential tax liabilities and that the life insurance benefits are structured to cover these costs.
Step 6: Consult Your Financial Adviser
Engage with a professional to review your life insurance policy and address any gaps or oversights you may have identified. A financial adviser can help:
- Adjust your policy: Based on any life changes, your adviser can help you make adjustments to your policy, whether increasing coverage, adding riders, or altering the beneficiaries.
- Ensure that your coverage remains optimal: A professional review ensures that your policy provides the necessary protection and aligns with your long-term financial goals.
Key Takeaway
A yearly review of your life insurance policy ensures that your coverage stays in line with your changing needs. By following this checklist and adjusting your policy as necessary, you’ll be better prepared for life’s unexpected events and ensure that your loved ones are financially secure when they need it most. Regular reviews not only provide peace of mind but also safeguard your family’s financial future.
