CONSIDER FOLLOWING FACTORS WHILE REVIEWING YOUR LIFE INSURANCE

No matter how well you set up your life insurance policy when you first took it out, the policy may no longer fit your needs. life is marked by changes, and it’s not unusual for those changes to render your life insurance policy unsuitable in one or more ways.
Here is a list of some of the most important aspects of your policy that you need to evaluate every few years:

Amount of coverage.
You may need to increase your coverage if your income is higher than when you opened the policy, you’ve had more children, or your spouse’s earnings have decreased. You may also need to increase your coverage if you’re using permanent insurance for estate planning purposes and your potential estate has grown in value or whenever estate tax rates rise, or if the excluded amount is decreased by changes in the estate tax code.

Type of policy. It’s not uncommon for young family breadwinners to take out a term policy, since premiums are considerably less expensive for the same amount of coverage as they are for permanent, cash-value policies. But permanent policies provide different kinds of benefits, including savings that can increase the policy’s value and provide a source for loans. Converting from a term to a cash-value life policy can make good financial planning sense as your income and assets grow.

Policy ownership. Most life policies are owned by the person they insure. There are a number of advantages to this, including the right to name and change beneficiaries, increase or decrease coverage, and cancel or convert to a different kind of policy. But when it comes to exposure to estate taxes, this ownership structure can be a disadvantage, because when benefits are paid out, they are considered part of the owner’s estate. .
Instead of owning your policy, it may make sense for it to be owned by your spouse, your heirs, or a life insurance trust. This keeps the proceeds out of your estate and lowers its exposure to estate taxes. On the other hand, it usually means you give up the rights to make all decisions regarding the policy, unless you are a trustee of the life insurance trust.
If you own the policy that insures your life, here’s a cautionary note: if you die within three years of changing ownership, benefits will still be included in your estate. It’s best to make the change sooner rather than later, and while you’re still in good health.

Beneficiaries. People die, get divorced, their families grow larger. Your attitudes toward the people you once named as beneficiaries may change, and their needs for support may change as well.

Improvements in your health. If your health has improved, you’ve stopped smoking, become more fit or lost considerable weight, you may be qualified for lower premiums, either from your current insurer or another carrier. If these conditions apply to you, it may make sense to contact your insurer or insurance agent and shop around for a new policy.

The financial health of your insurer. Not all insurers are equally financially healthy. The vicissitudes of the investment markets and underwriting standards can also make a once-strong company relatively weak. Instead of taking an insurance company’s word for it, check for yourself.
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