Posted: Nov 1 ’24
Life insurance is a crucial component of financial planning, providing a safety net for your loved ones in the event of your passing.
However, securing a life insurance policy is just the first step. To ensure that your coverage remains adequate as your life changes, it’s
essential to review and update your policy regularly. This is particularly important for Edmonton residents who may experience changes in
their financial responsibilities, lifestyle, or family structure over time.
Let’s explore the importance of reviewing your life insurance policy, key life events that should prompt a review, and a step-by-step guide
on how to effectively update your policy to ensure that it meets your evolving needs. To review your life insurance policy, get in touch
with you Vistaplan advisor today.
Why Regularly Reviewing Your Life Insurance Policy is Crucial
When you first purchased your life insurance policy, it was likely based on your financial situation, health, and family needs at that time.
However, life is dynamic, and as your circumstances change, so too might your insurance needs. Regular reviews of your life insurance policy
can help ensure that your coverage remains adequate, avoiding potential gaps that could leave your loved ones financially vulnerable.
Here are some reasons why you should consider a periodic review of your life insurance policy:
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Adapting to Life Changes: Major life events such as marriage, the birth of a child, purchasing a home, or even a
change in employment can significantly impact your financial obligations. Updating your policy to reflect these changes ensures that
your coverage keeps pace with your responsibilities. -
Adjusting to Inflation and Increased Living Costs: The cost of living in Edmonton, like in many other places,
tends to rise over time. A policy that was sufficient five years ago might not be adequate today due to inflation. Regular reviews
allow you to adjust your coverage to maintain its real value. -
Aligning with Long-Term Financial Goals: Over time, your long-term financial goals may evolve. Whether it’s
ensuring that your children can afford higher education or that your spouse can maintain their standard of living, your life insurance
policy should align with these goals. -
Health Changes: If your health improves or worsens, it could impact your insurance needs or even your premiums,
especially with term or universal life insurance. Regular reviews allow you to adjust your coverage based on your current health
status. -
Taking Advantage of Policy Features: Some life insurance policies come with additional features, such as cash value
accumulation in universal life policies or living benefits. Regularly reviewing your policy can help you take full advantage of these
features as your needs change.
Key Life Events That Should Prompt a Review of Your Life Insurance Policy
Certain life events are pivotal moments that should trigger a review of your life insurance policy. These events can significantly alter
your financial landscape, and your life insurance should reflect these changes. Here are some key events that Edmonton residents should
consider:
1. Marriage or Common-Law Partnership
Getting married or entering a common-law partnership brings with it shared financial responsibilities. It’s essential to review your life
insurance policy to ensure that your partner is adequately covered. You may want to increase your coverage to provide for your spouse in the
event of your passing, ensuring that they can maintain their lifestyle without financial strain.
2. Birth or Adoption of a Child
The arrival of a child is a joyous occasion, but it also comes with new financial responsibilities. From daycare and education expenses to
providing for your child’s future, your life insurance policy should be updated to reflect these new needs. Ensuring that your coverage is
sufficient to support your children until they reach financial independence is crucial.
3. Home Purchase
Buying a home is one of the most significant financial commitments you’ll make. If you’ve recently purchased a home, it’s a good idea to
review your life insurance policy to ensure that the mortgage is covered in the event of your death. This can prevent your family from
facing the risk of losing their home if they are unable to keep up with mortgage payments without your income.
4. Career Change or Job Loss
A significant increase in income through a career change might necessitate a higher coverage amount to protect your newfound financial
status. Conversely, if you experience a job loss or reduction in income, you may need to reassess your policy to ensure that it’s still
affordable and meets your basic coverage needs.
5. Divorce or Separation
If you go through a divorce or separation, you should review your life insurance policy to reflect changes in your beneficiary designations.
In many cases, you may need to remove your former spouse as a beneficiary or adjust the coverage amount to reflect new financial
responsibilities, such as alimony or child support.
6. Health Changes
As mentioned earlier, changes in your health can impact your life insurance needs. If you’ve experienced a significant change in
health—whether an improvement or a decline—it’s wise to review your policy. For instance, quitting smoking or managing a chronic condition
better could potentially lower your premiums, particularly with term life insurance.
7. Retirement
As you approach retirement, your financial needs and priorities may shift. You may no longer need to provide for dependents, but you might
want to ensure that your spouse is covered or that your final expenses are taken care of. Reviewing your policy as you transition into
retirement ensures that it aligns with your new lifestyle and financial goals.
Step-by-Step Guide to Reviewing and Updating Your Life Insurance Policy
Regularly reviewing and updating your life insurance policy doesn’t have to be a daunting task. By following these steps, Edmonton residents
can ensure that their policy continues to meet their needs over time.
Step 1: Gather Your Policy Documents
The first step in reviewing your life insurance policy is to gather all relevant documents. This includes your current policy, any riders or
add-ons, and any correspondence from your insurance provider. Having all the information at hand will make it easier to understand your
current coverage and identify areas that may need updating.
Step 2: Assess Your Current Coverage
Once you have your documents, take a close look at your current coverage. Consider the following questions:
- What is the death benefit amount?
- Who are the beneficiaries?
- What type of policy do you have (term, whole, or universal life)?
- Are there any additional riders or features?
- What are the premium amounts, and are they still affordable?
Understanding the details of your current policy will help you identify whether it still meets your needs.
Step 3: Evaluate Your Current Life Situation
Next, evaluate your current life situation and any changes that have occurred since you first purchased the policy. Consider the key life
events discussed earlier—marriage, the birth of a child, home purchase, career changes, etc. Reflect on how these events have impacted your
financial responsibilities and goals.
Step 4: Determine if You Need Additional Coverage
Based on your assessment, determine if you need additional coverage. For instance, if you’ve had another child, you may need to increase
your death benefit to provide for their future. Or, if you’ve paid off your mortgage, you might consider reducing your coverage amount. It’s
important to ensure that your policy accurately reflects your current needs.
Step 5: Update Your Beneficiary Designations
Life events such as marriage, divorce, or the birth of a child often necessitate changes to your beneficiary designations. Make sure that
the people you want to benefit from your policy are correctly listed. It’s also a good idea to review any contingent beneficiaries in case
your primary beneficiary predeceases you.
Step 6: Consider Adding or Removing Riders
Life insurance riders are additional features that can be added to your policy to provide extra benefits. For example, you may have added a
rider for critical illness coverage when you first purchased your policy. If your needs have changed, you might want to add new riders or
remove ones that are no longer relevant. Reviewing these options during your policy review ensures that you’re maximizing the benefits of
your coverage.
Step 7: Consult with a Life Insurance Broker
While it’s possible to review your policy on your own, consulting with a life insurance broker can provide valuable insights. A broker can
help you understand complex policy details, suggest appropriate coverage amounts, and guide you through the process of making changes. They
can also help you compare options if you decide that a new policy might be more suitable.
Step 8: Implement the Changes
Once you’ve reviewed your policy and decided on any changes, it’s time to implement them. Contact your insurance broker to make the
necessary updates, whether it’s increasing your coverage, changing beneficiaries, or adjusting riders. Make sure to get written confirmation
of any changes to avoid misunderstandings in the future.
Step 9: Schedule Regular Reviews
Finally, schedule regular reviews of your life insurance policy. While an annual review is ideal, you should also revisit your policy
whenever you experience a significant life event. Regular reviews help ensure that your coverage continues to meet your needs as your life
evolves.
Common Pitfalls to Avoid When Updating Your Life Insurance Policy
While updating your life insurance policy is essential, there are some common pitfalls that you should avoid:
1. Failing to Inform Your Beneficiaries
Ensure that your beneficiaries are aware of the policy and where to find it. This can save them a lot of stress and confusion during a
difficult time.
2. Overlooking Policy Riders
As life changes, certain riders may no longer be necessary, while others may become more relevant. Always review your riders carefully
during your policy updates.
3. Ignoring Small Changes
Even minor life changes, such as a salary increase or paying off a loan, can affect your life insurance needs. Don’t dismiss these small
changes; consider how they might impact your coverage.
4. Procrastinating on Updates
Delaying updates can result in insufficient coverage when it’s most needed. Stay proactive about reviewing and updating your policy
regularly.
Protecting Your Future Through Regular Life Insurance Reviews
Regularly reviewing and updating your life insurance policy is crucial for ensuring that your coverage remains adequate as your life
changes. Edmonton residents should consider key life events such as marriage, the birth of a child, purchasing a home, career changes, and
health shifts as triggers for a policy review. By following a structured approach to assessing and updating your policy, you can ensure that
your loved ones are protected and that your financial goals are met.
Remember, life insurance is not a “set it and forget it” aspect of your financial plan. Life changes, and so should your life insurance
policy. Whether you’re navigating a significant life event or simply want to ensure that your coverage is up-to-date, taking the time to
review your policy is an investment in your peace of mind and your family’s future security. Working with a knowledgeable life insurance
broker can make the process smoother and help you tailor your policy to your current and future needs.
About the Author – David Motkoski
David is a well-respected insurance advisor with over 30 years of experience helping healthcare professionals, business owners, and their
families secure their financial futures. He takes the time to make certain his clients understand the life, disability, and health insurance
products they are purchasing, so they can make the right choices for their budgets, plans, and futures.
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