Death and taxes are the only certainties in life. Everything else throughout your life will change periodically. Sometimes for the better, other times for worse.
As such, your life insurance needs are going to change. What you take out now may not be the same level of cover you need two decades from now, and likewise, what you’ve already taken out, could very well not be the right level of cover for you now.
You may be over insured, under insured, or not insured at all.
7 Markers In Life When It’s Worthwhile Checking Your Life Insurance
When you change jobs
This is for two reasons:
- Your previous employer may have had a policy in place for your family which likely ended when you switched jobs. Your personal life insurance may need revised if you included that policy in your financial planning
- Your salary is likely to have changed. For better or for the worse, but if it’s for the better and you get a higher salary now, your family’s lifestyle will likely change and require your life insurance sum to increase to help them sustain the higher cost of living
When your mortgage situation changes
Buying your first family home is often the biggest purchase you make in a lifetime and this is when life insurance is mostly taken out. After that, you’ll likely move your mortgage provider, maybe land on higher rates; refinance using your home equity or take out further secured loans to improve your home. The cost of home ownership can go down as your equity increases but it can also increase if you choose to renovate, upgrade, and perhaps expand your home.
Whatever secured home loans you have, your life insurance policy should be revised to ensure you’re sufficiently covered, or at least that you’re not over insured which would mean you’d be paying more than you need to.
In line with any savings plans you have for your family
It may be the case that your life insurance policy is only part of what you’ve planned to safeguard your family’s financial future. Perhaps by taking out a decreasing life policy to at least cover the mortgage, but instead of being reliant on a life insurance policy, you’ve diversified to safeguard the debt repayments with life insurance and chose to invest savings to secure your families future.
Things happen in life. You may have been out of work for a period, or went through some expensive spells resulting in the savings and investments falling shorter than you planned for. If you’ve set a savings goal to have banked for your family’s future, it’s worth checking in to make sure you’re still on track to reach your target.
A huge reason is to check in with your insurer
Not all plans are equal because not every insurer links your plan with inflation. If you took a life insurance plan out for £100,000 15 years ago, that could and may well be the same today, despite the cost of living increasing dramatically. A decade and a half ago, money went further so if your policy isn’t rising in line with inflation, there’s every chance you’re under insured.
If you do find yourself to be underinsured, don’t immediately rush to increase your pay-out. It may be possible to take out a smaller policy to cover any shortfalls for less than it would cost if you were to adjust an existing policy.
When you separate from a partner
If you had a joint mortgage and have since separated, there’s a good chance that you’ve a joint life insurance policy in place that’ll need separated too. With all the commotion surrounding the break-up of a long-standing relationship, life insurance will be the last thing on your mind. It will need sorted out eventually though along with many other financial matters.
In the case of separations, policies cannot be split. They can be taken over by one person, in which case the other would be left with no life insurance in place, or it can be cancelled and both people would be without cover.
To include child maintenance fees
Following on from the above about separating, if you have kids there will still be financial support being provided. Whatever the amount is, that’s something that needs included in the life insurance policy to ensure that in the event of something happening to the person paying towards the childcare, the income would be covered. It can be a lump sum policy, or a decreasing term policy which would expire when the payments would end, probably when the child reaches the age of 18 years old. A decreasing term policy doesn’t need to be linked to a mortgage to ensure the home is paid. If you have dependents, you can use a decreasing term policy to cover the loss of income should something happen to you or the person providing financial support.
To cover for inheritance tax bills
If you took out a policy to cover potential inheritance tax bills a while back, you could find your property is worth a lot more than you valued it at the time you took the policy out. Over the years, you may have accumulated more assets for which could take you over the IHT threshold. If that were the case, it may be wise to review your policy to ensure your family will be left with enough money to pay for all the expenses.
How to Change Your Policy
Should you discover there are amendments to your life insurance policy required, changes are usually straightforward with your existing provider. Simple changes are things like changing the names of a beneficiary, or altering the amount of cover you have. What will be more difficult is to change the type of policy.
What you may find happen is insurers can ask you about your health and it can be like going through an original application process. Premiums can rise if there’s health issues identified and also if you’re increasing your level of cover.
Before agreeing to any price increases and pressing forward with the changes, it’s worthwhile checking with both your existing provider and other insurers to find out how much it would cost for a top up policy, and also whether you’d be approved for suitable cover based on your existing health circumstances.