When you take out life insurance, it’s often your current circ*mstances that determine the amount of cover you need and what you’re trying to protect. However, it could be helpful to review your life insurance regularly, as your circ*mstances can change. Important milestones in your life can affect your need for life insurance, and by reviewing your cover you can make sure you aren’t paying above what you need.
Failing to review your insurance policy could result in having too much or too little cover. The former could leave you over-paying for cover you don’t need, while the latter could mean your family isn’t left with enough financial support if something happened to you.
With that in mind, here are the top 9 reasons why you should review your life insurance regularly.
1. You’re moving house
If you’re buying your first home, or moving to a more expensive property, it’s likely that you are now liable for more debt thanks to your mortgage. A mortgage is often a household’s biggest outgoing, and so it’s important to ensure you have the right amount of cover in place to ensure your loved ones could pay off what’s left of the mortgage.
Did you know that only 58% of mortgage holder’s have life insurance and even fewer have critical illness cover (28%) or Income Protection Insurance (12%), which provide financial support if you are diagnosed with an illness that's covered by the policy, or if you're unable to work due to illness or injury.
Your life insurance policy should be able to cover your debts. So, if you have moved house, it may help to review your policy and make sure you still have enough.
2. You’re getting married
When you get married, you might wish to consider updating your cover in order to protect your other half. In particular, a joint policy could be a helpful solution for covering the mortgage, as it only needs to pay out once to cover the debt.
You might also want to change how your policy pays out, to make sure that the proceeds from a pay-out go to your spouse if something should happen to you. This is known as writing your policy in trust.
3. You’re getting divorced
Unfortunately, things don’t always work out. When getting divorced, it’s likely your financial situation will change, and joint policies can’t always be divided. It’s important to ensure that you decide whether to take over the joint policy or start a new one.
You should also consider who was listed as the beneficiary on your policy before the divorce, as it was likely to be your now ex-spouse. You may be able to change the person named as the beneficiaries to the trust to reflect changes in your family dynamic.
4. You’re starting or expanding your family
When having children, often life insurance is the last thing on your mind as you settle in with your expanding family. However, having a child means you should review your existing cover, as it’s likely you will want to increase it.
Having a baby means you now have an extra person who is financially dependent on you, and having the right amount of life insurance means they are financially protected if something should happen. You might also want to consider things like the cost of childcare and school fees in your policy.
5. Your children are grown up
Alternatively, if your children are now grown up and are not as financially dependent on you, you could reduce your cover to reflect this. For instance, if your children have their own income and wouldn’t need as much financial support, you can adjust your cover as necessary.
Some policies will include benefits for your children but only up to a certain age, so it’s helpful to keep an eye on this limit and adjust your cover to either reduce or increase the amount.
6. You’re changing jobs
Changing jobs can come with a number of new factors to consider, including a possible change in salary. This can impact the amount of cover you need on your life insurance policy, whether you are taking a pay increase or a pay cut.
Your new employer may offer benefits you didn’t have access to before, such as death-in-service benefits. It’s helpful to check what you are entitled to at your workplace and then update your cover accordingly, to make sure important financial responsibilities are covered.
7. You’ve accrued new debts
If you’ve taken out additional debts, such as a loan for home improvements or a new finance deal on a car, your loved ones will be responsible for paying them off if something happened to you. It is similar if you have accrued any further debt on credit cards.
New or increased debt is another important reason to review your policy, and ensure your cover is enough to help your family pay off any debts in your name.
8. You’ve quit smoking
If you were a smoker when you took out your life insurance policy, it could be in your best interests to quit smoking; both for your health and the cost of your insurance premiums. Once you have not smoked or used any nicotine and tobacco replacement products in over 12 months, you can be described as a non-smoker on your policy.
If you’re now a non-smoker, be sure to review your policy and make this change on your policy information.
9. Adding benefits available
Reviewing your policy can also make sure you’re happy with your provider and the cover you’re receiving. Many of the leading providers offer additional benefits to help with your health and wellbeing, as well as access to GP appointments and other related services.
This includes AIG Smart Health, Royal London Helping Hand and Scottish Widows Care.
