6 Signs You Should Re-Evaluate Your Life Insurance Policy

Laura Shin

Out of the all the important things we do for our loved ones, taking out the right life insurance policy is probably one of the most important.

And once you get the right policy, you might be tempted to check that item off your to-do list and think: Whew. Now I don’t need to think about that again.

And in fact, most people don’t: According to “Life and Disability Insurance: What 20- and 30-Somethings Think,” a survey by LearnVest and The Guardian Life Insurance Company of America, almost eight in 10 people have never changed or even considered changing their life insurance policy.

But the reality is, our lives change, and our insurance policies should change as our circumstances do.

Do you know the signs that you might need to reevaluate your coverage? We’ve compiled a list of the top six reasons you should probably take another look at your policy to make sure it still works for you.

1. The number of people who depend on you has changed.

Let’s say you’re married and have a policy with your spouse listed as a beneficiary. If you have children, you should consider adding them as contingent beneficiaries, which makes them the backup beneficiaries in case something happens to you and your spouse at the same time. You might also want to get coverage for a larger amount to, say, provide for the expected cost of their college educations.

This is not as simple as increasing coverage on the policy you already have—it might be cheaper for you to buy a separate policy for the additional amount. To decide which option is right for you, talk to your financial planner or an independent insurance agent who can compare rates from different companies. You can also compare rates online and determine which is the least expensive route.

On the flip side, if a dependent, such as a child, becomes self-sufficient—say, your youngest graduates from college and gets a job—or, God forbid, in the event a dependent on your plan passes away, you can lower the amount of your “death benefit,” which is the amount that would be paid out in the event of your death, or reevaluate how much insurance you need.

2. Your child becomes disabled.

Some parents take out a term policy to be sure to provide for their children until they become self-sufficient. But if circumstances change, and a child becomes disabled, the parents may want instead to look into a permanent policy that will provide for the child no matter when you should pass away. The longest term policies typically last 30 years, so if you have a disabled child who is 10, and you’re only 45, you may want a permanent policy, because it will provide a benefit to him or her even if you pass away at 76 or later.