How to Do an Annual Life Insurance Review

Many times, your life insurance policy can tick along just fine without you needing to do anything. Once your policy goes into effect, your coverage stays the same even if your health changes over the years. If you automate your premium payments, you may have even less to do on a regular basis to take care of your policy.

One thing you should still make time for is an annual life insurance review. Similarly to a doctor visit, an annual checkup on your financial health can help you make any adjustments you need to reflect updates in your life. This can be a simple, straightforward process — especially if you follow these steps.

1. Check Your Year in Review

There isn’t any one life insurance policy that’s perfect for everyone. You should always take your particular finances, family life and goals into consideration when determining what insurance coverage is right for you.

Ideally, your life insurance policy should serve you well for years to come because it reflects your long-term plans. Even so, some life updates are big enough that they can affect your coverage needs. Consider whether any of these events happened in your family in the past year:

• Adding a new child to the family

• Supporting parents or loved ones

• Buying a home

• Buying, selling or starting a business

• Getting divorced

• Getting married

• Having kids leave the nest

• Retiring

If more people depend on you or you have a new, significant debt (e.g., a mortgage), those might be good signs to consider whether you’d benefit from more coverage. In some cases, moving on from certain financial responsibilities may also be a time to think about reducing life insurance coverage.

Retiring can be an important time to review coverage because leaving a job often means losing group life insurance from an employer. While some families seek life insurance particularly during working years, some prefer to continue coverage after retirement, as well. Talk to a financial professional to review which options may suit your needs and wishes.

2. Review Your Policy Details

You can check your life insurance policy paperwork or log into your account online to review policy details. If you have questions or can’t find your policy, a customer representative at your insurance company may be able to connect you with information you need.

Coverage amount

When you look at your policy face value, or the amount of money your beneficiary would claim if you passed away, does it help bring you peace of mind or are you worried it might not be enough? As you rise in your career or your family situation changes, your lifestyle may require more money to stay in balance.

Beneficiaries

Your beneficiary is one of the most important choices you make about your life insurance policy. The beneficiary (or beneficiaries) is who can claim the death benefit. Even if your last will states a change in your wishes, the beneficiary named on the policy is the final word.

Divorce can be an important reason to update your choice of beneficiary. You may also want to update beneficiaries if you are taking on financial support for other loved ones and want them to be able to claim a portion of the benefit. Many insurance providers allow you to name multiple beneficiaries to split the death benefit in the way you choose.

Check your contingent beneficiaries, as well. Contingent beneficiaries can only claim the life insurance benefit if all primary beneficiaries have passed away. It’s still important to make sure that anyone who has a potential claim to your policy is someone you want on the list.

Your health and your family’s

Your premium rates are based on your risk classification, and health is a big part of the calculation. In some cases, taking charge of your health can be good for your finances, too. Some, although not all, life insurance companies will reassess your profile (and rates) if you make and sustain certain beneficial health changes, such as quitting tobacco or losing weight. Check with your insurance provider to see whether they offer rate reassessment and how long you need to maintain a change before it can affect your rates.

Your family’s health is also a critical factor in a life insurance review. For instance, if your child is diagnosed with a disability and will need lifelong care, you may wish to consider what insurance options offer the right support. Some term life insurance policies offer an option to convert to permanent life insurance, so you might look into whether this option makes sense for your family.

Cash value balance

You may be able to withdraw or borrow from the cash value during your life or use it to pay premiums. Some policies allow access to cash value via withdrawals and loans. 

Please note that withdrawals may be subject to charges, withdrawals of taxable amounts are subject to ordinary income tax, and, if taken before age 59½, may be subject to a 10% IRS penalty) and loans (e.g., interest is charged on loans, they may generate an income tax liability, reduce the Account Value and the Death Benefit, and may cause the policy to lapse.)

3. Update Your Policy With Your Insurance Provider

Depending what changes you need to make, updating your life insurance policy might be simple and take only a few minutes. 

Updating beneficiaries is sometimes a matter of getting a one-page form from your insurance provider (your agent or a customer service rep may be able to send it to you digitally) and returning it with your new choices.

If you’re hoping to add coverage, applying for an additional policy might make sense. You can start the process by getting a quick quote. If you’re a good candidate to apply for life insurance without a medical exam, you may be able to get almost instant approval.

Other changes, like requesting a rate reassessment or managing a cash value component, depend on what services your insurance provider offers and what you’re hoping to do with your policy. Talking with an agent at your life insurance provider can help you understand your options.

If your life is chugging along in the regular routine, you may not have any updates to make to your life insurance policy—and that’s totally OK. An annual review might be a quick policy read and simple gut check to confirm your coverage feels right. Sometimes it can be surprising to realize how much has changed in a year, though. Dedicating a few minutes to make sure coverage, beneficiaries and any other important elements of your policy are set the way you want can help you feel more prepared for the year ahead.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

Information provided is general and educational in nature, is not financial advice, and all products or services discussed may not be offered by Fabric by Gerber Life  (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Consult an attorney or tax advisor regarding your specific legal or tax situation. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. The views and opinions of third-party content providers are solely those of the author and not Fabric by Gerber Life.