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Review Your Policy

So you’ve bought a life insurance policy. First off: Congratulations!

A life insurance policy is an integral component to a strong financial plan and by taking the steps to purchase one, you have ensured that your family and your assets are protected, even if something should happen to you.

If you’ve bought a term life insurance policy – or a policy designed to protect you at a set premium for a designated amount of time – then you are good to go, so long as you continue paying your premium.

However, if you have purchased a whole life insurance policy, or a policy designed to protect the policyholder for his or her whole life for a set premium, you may need to perform a maintenance check annually.

Frequently Asked Questions

Why Whole or Permanent Life Policies Require Maintenance

Whole or permanent life insurance policies are designed to last the duration of your lifetime, regardless of changes in health, so you may think that as long as you pay your premiums you will not have to check or update your policy.

The truth is that these policies actually require a bit of maintenance. Since the premiums on whole or permanent policies are tied to interest rates, you want to make sure you are routinely reviewing these interest rates to ensure that they are enough to keep your policy in place. When interest rates are low, these policies could be subject to interest rates, in terms of dividend reduction or direct interest rates.
An annual review of your whole or permanent life insurance policy could keep these policies from lapsing.
Additionally, because of the built-in cash growth potential for these policies, you should be checking on them frequently to see how your investment is performing.

The truth is that these policies actually require a bit of maintenance. Since the premiums on whole or permanent policies are tied to interest rates, you want to make sure you are routinely reviewing these interest rates to ensure that they are enough to keep your policy in place. As with any investment that depends on market performance, you should be checking your account’s growth frequently.

Why Policy Review Is Always a Good Idea

Even if you have a term life insurance policy, reviewing your policy periodically is always a good idea.

For example, if you bought a term life insurance policy at a smoker’s rate, but you have since quit, you will want to review your policy with your agent, who may be able to communicate these changes to an insurance underwriter in order to help you obtain a more favourable rating and a less expensive premium.

Additionally, if you purchased your policy before other big decisions, such as starting a family or buying a home, you will want to review your death benefit and to factor in these new calculations. This is because the amount of your death benefit will need to change to cover these costs. This is particularly important in the events of births and marriages, where you will need to increase your death benefit to provide for your beneficiaries.

The opposite is also true: if you have paid off your home, debts or loans, you will want to review your term life insurance policy, as this could save you money. You may think that when purchasing a term life insurance policy, a larger death benefit is best; however, this could result in you overpaying for life insurance that you may never use.
It’s best to tailor your death benefit to the financial needs of you and your family so that you can ensure that you aren’t overpaying for your policy.

A good rule of thumb for policyholders is to speak to your life insurance agent whenever you have encountered a significant life change. This way, your policy is always up-to-date and your benefit is tailored to your unique situation.

The Responsibilities of a Policyholder

Obviously, once you have a policy, your responsibility is to pay your premiums in a timely fashion. However, if you are a policyholder, you have a few other responsibilities to your beneficiaries and loved ones, as well as to yourself.

Additionally, you are responsible for reporting any changes in your health to an agent or an underwriter.
In certain situations, such as life insurance for smokers or for those with diabetes or health problems, every update could be crucial to lowering your premium or making sure that you are adequately covered. If you have been labeled a high risk client, you should be following any treatment plans your doctor has prescribed and you should be notifying your agent or carrier of any significant changes to your health.

As a policyholder, you are also responsible for seeking out a reputable agent and asking questions. The best way to find the best insurance for your needs is to shop around, and an agent is the easiest way to do so.
An agent can also clarify any confusions you may have concerning your coverage and can point you in the right direction toward getting an adequate policy. Perhaps the most important thing an agent does for his or her clients is get to know them on a personal level, which allows him or her to present his or her clients as more than just as risk class to underwriters.

You should always be checking your policy to make sure it is up-to-date and your benefit is enough to cover your needs. Ultimately, once you purchase an insurance policy, it is your responsibility to maintain it for your beneficiaries. You aren’t purchasing this policy for yourself; rather, you are purchasing this policy for your loved ones: your spouse, partner or your children. It is your responsibility as a policyholder to ensure that your loved ones get the best protection to suit their needs.

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