Should you review your life insurance policy if your circumstances change?
Most people take out a life insurance policy to protect their loved ones in the event of the most serious life change – death. To ensure that you have adequate life cover, it’s important to review your insurance policy when major life changes occur.
There will be times in your life that change your family size and will affect your finances – for better or worse.
These events would normally include the following:
Getting married is often a trigger to think about life insurance. The financial responsibility for your spouse is just part of the commitment you make during marriage. As Newlyweds, it may seem a little morbid to think about the consequences of your partner’s death but it’s important to have protection in place. Will you be able to manage financially if your spouse dies (or vice versa), particularly if there is a mortgage to pay and children to provide for?
If you already have a life insurance policy in place before getting married, you may now want to update the beneficiary as your new spouse.
At the other end of the scale, divorce is also a reason to review your life insurance policy. Divorce could affect your finances for the better or the worse depending on your circumstances so you may want to alter your level of cover accordingly. You may also want to consider removing your ex-spouse as a beneficiary,
Adding to your family is an essential time to review your life insurance policy. Your household expenses will most certainly increase. If you took your life insurance out when you were single, or as a newly married couple, you’ll need to consider whether you have enough cover for the child’s care and education should anything happen to you or your spouse.
Buying a new home
Most new homeowners take out life cover to help your spouse or partner pay the mortgage if something were to happen to them. However, in some cases, they never review the cover. Even if further down the line the policyholder moves to a larger, more expensive property. If your mortgage payments increase, then it’s definitely worth thinking about extending your life cover to reflect this.
It would also be savvy to review your life insurance policy if you move to a smaller property and therefore don’t require as much cover.
Changes to your employment
Over your career you will probably find that your income increases, and thus your outgoings may rise in line with this. If this is the case, then your life insurance should increase accordingly to ensure that the financial needs of your family are met if you unfortunately pass away.
As well as the above, there could also be other circumstances that arise throughout your life that require a review of your life insurance. Anything that causes a significant change to your income and expenses or a change to your family dynamics should trigger a review of all your finances, not just your life insurance policy.