How to Upgrade a Life Insurance Policy
Life insurance is an important purchase, but it should not be a one time purchase. Simply buying a term life or whole life policy in your twenties and forgetting about it is not enough. It is important to revisit that initial life insurance decision from time to time. This is the best way to ensure that your family is truly protected and that they will have the stream of income they need in the event of your untimely demise.
If it has been a number of years since you last reviewed your life insurance coverage ask yourself this question – have there been any changes in my life in the past 5 or 10 years? If you are like most of us the answer to that question is a definite yes. Perhaps you have changed jobs, or even changed careers. Maybe you got a big raise last year, or your family moved to a larger (and more expensive home). No matter what the changes in your life chances are good that they will affect the amount of life insurance you need. A periodic checkup will help you to identify these changes and make the changes that need to be made.
One of the most important factors driving the amount of life insurance coverage you need is of course your annual salary. Many financial advisors urge their clients to purchase life insurance with a death benefit equal to between 20 and 30 times their annual salary. While this can seem like a great deal of coverage, it is actually the amount of money your family will need to replace your income. A higher income means a higher death benefit is probably in order.
In most cases upgrading an existing life insurance policy will be a simple and straightforward process. If you purchased your original life insurance policy from an agent, that agent is a good place to start. Begin by contacting the insurance agent and asking about possible upgrades and additions to the policy. Most good life insurance agents will be happy to help you find the optimum level of coverage for your current needs. A good life insurance agent should review the changes that have taken place in your life since the policy was first enacted, including any promotions or raises, as well as life events like marriage, divorce or the birth or adoption of children. . Once this information is gathered the life insurance agent can make recommendations that will help you make the most of your policy.
While in some cases a simple upgrading of the existing policy will be sufficient, in some cases the life changes that have taken place may make a completely different kind of life insurance policy a better fit. For instance, if you have accumulated a significant portfolio of investments outside of life insurance that expensive whole life policy may no longer make sense. It may be more cost effective to cash in that old policy and invest in a new term life insurance policy with lower premiums. No matter what type of life insurance coverage you have in place, it always makes sense to review your coverage and make sure that it still meets your needs. After all, life insurance is a very personal investment, and it is important that the policy you choose be tailored to your specific needs and those of your family.