Is Your Life Insurance Living in the Stone Age?
Let’s be real. It’s tough to be on top of every aspect of your finances. Hell, sometimes it’s hard enough to remember to pay your bills on time (automatic bill pay linked to a credit card may do down as this century’s best invention!).
Life insurance is one of those financial products that is vitally important, but easy to shove into the “out of sight, out of mind” category. You probably pat yourself on the back for even having a policy. But as scintillating as a life insurance review sounds, you need it. Here’s why:
Which Will Die First? You Or Your Policy?
I’m going to play a mind game here for a minute. Normally when you think of life insurance, you imagine the policy paying out a big benefit to your loved ones when you die. That’s the purpose, right?
Think again. What would happen if you lived longer than your life insurance policy? There’s a chance your current policy has an expiration date that you are clueless about. Many policies are set to expire at age 95 or 100. You may not believe you will live that long, or even want to live that long, but in the past 30 years alone, the U.S. centenarian population has grown 65.8%.
If you outlive your policy, the repercussions may be disastrous. (Insert dramatic movie score here). Make sure you understand and plan for this situation, especially if you purchased your life insurance policy when you were relatively young.
Only 2 Things are Certain: Death* and Taxes
Life insurance is often thought of as being income tax-free at your death, but some policies are inadvertently set up to be taxable at death. If this is the case for your policy, how would that affect your family down the road?
If you think taxes could cause financial chaos for your beneficiaries, comb through the fine print of your policy and create a strategy with a professional to make sure your family doesn’t have more than just grief to deal with when death comes knocking at your door. (*As a random, mind-blowing aside - and an interesting use of life insurance - there is a chance at some point only taxes will be certain).
Performance Problems
Did you know that your life insurance policy can grow and decline just like other investments? When you purchased the policy you might have been given a projection of values, but have you seen an updated estimate since then? How would it compare to what you were originally shown? I’ve seen a number clients that showed me projections that were quite rosy and failed to live up to the projected returns.
While it’s possible that your policy is outperforming its original projection, it may not perform well forever. What might that mean for you and your plans for your loved ones?
There’s no time like the present to update your projections and ensure they are on track. It’s way easier to make adjustments before things go too far off course. That’s my job - to help you evaluate how the policy has performed since you purchased it and what you can expect in the future.
Times Are A-Changin’
Throughout the last few decades, life insurance has evolved into a more valuable and robust risk management tool. Today’s policies can cover more than just premature death. There are options to cover chronic illness and long-term care, and they have the ability to direct policy cash values among multiple options — not just the insurer’s general account.
If it’s been a few years (or decades) since you first purchased your policy, you may need to add additional coverage, such as long-term care, with a rider, which can be more cost-effective than buying a separate policy.
Even if you don’t need to add features, it’s always a good idea to verify that your beneficiaries are up-to-date and check if you have the correct amount and type of coverage.
Let an Expert Review Your Policy
Life insurance can seem simple at first glance, but the deeper you go into the insurance world, things can get overwhelming quickly. Instead of ignoring the problem, make some time for an insurance update.
Since you are putting your hard-earned money into something, don’t just sit back and cross your fingers. I can help you examine your policies in-depth so that you can have increased confidence that your plans are on track. Tell us your main life insurance concern and we can have a 15-minute phone chat about how I can help and additional resources I can point you towards. We make it easy on you.
