With pretty much every other type of personal insurance, like home insurance or car insurance, you are required to renew every year and it is likely that you will take some time to look around at your options so that you can ensure you are always getting the best deal.
A life insurance policy is a little different as they typically last for about 20 or 30 years (or more) so many people set up their life insurance and forget about it. However, by doing this you could end up under- or over-paying for your policy and you may no longer have the coverage you really need.
Like all other types of insurance, it is a good idea to review your life insurance policy each year, especially if you have been through any life changes. So, when should you review your life insurance policy and what changes do you need to be making?
6 Reasons to Review Your Life Insurance Cover
1. Change of Circumstances
Over the coverage period of a life insurance policy, a lot can change in one’s life. Twenty or thirty years is a long time!
No matter who you are, there will be changes to your life and circumstances that will affect your life insurance policy. Yes, there will be years where there will be no major changes, but it is important to review your policy regardless, just so that you can always have peace of mind.
Although minor changes of circumstance may not affect your life insurance policy, there are several major changes that are likely to have an effect. These include, but are not limited to:
- getting married
- moving house
- having or adopting a child
- a change of occupation
- taking retirement
All of these can bring drastic changes to your life, but it is important that your life insurance policy is not forgotten about, and you look to adjust your policy accordingly.
2. Changes to Debt
Changes to the amount of debt you hold will make a difference to your loved ones if they are on a fixed income. If you have a fair amount of debt, it will be difficult for your family to pay off and so you need to make sure that they receive enough from your life insurance policy to cover these costs.
Conversely, if you have successfully become consumer-debt-free since you first took out your life insurance policy (congrats!), you may now find that you are overpaying for an amount of cover that you no longer need.
For this reason, it is recommended that you consider your yearly budget when reviewing your life insurance policy each year so that you can determine whether you have the best level of cover for your financial situation.
If you have young children, you most likely considered whether your life insurance policy would be enough to cover the costs of childcare, but did you think about the future as well? You might want to think about increasing your policy amount to cover future costs such as driving lessons and further education costs.
It is also important that you review and update your life insurance policy if you welcome a new little family member as your expenses are likely to increase. Conversely, if your children have since become young adults, you may not need quite as much cover and so can reduce your costs.
4. Increasing Funeral Costs
Over time, your life insurance policy benefit will stay at the arranged figure, but with consistent inflation, it will need to change to keep up with increasing costs, especially when it comes to helping your family cover funeral costs.
Many people take out life insurance so that their families will not be required to find the money needed for their funeral. However, if you never review your life insurance policy, you may find that your funeral costs are not covered as you intended, leaving a financial burden on your family.
According to British Seniors, the average cost of a funeral has been steadily rising since 2016 and this trend is likely to continue. In 2016, the average cost of burial was about £5,631 but now, even with the same funeral choices, you can expect to pay somewhere around £7,500 or more. So, it is clear to see that it is vital to make sure your life insurance policy keeps pace with inflation each year.
5. Change in Health
Another good time to review your life insurance cover is if you have experienced a change in health, whether it be for better or worse.
If your health has worsened since taking out your policy, you should look at increasing your coverage or taking on additional coverage. Just be aware that a new policy is likely to cost you more if you have a health condition, so you may choose to stick with your existing policy. Either way, review it and think about what you want to do, and if you need advice our team will be happy to talk you through the decision.
On the other hand, if your health has improved since taking out your life insurance policy, such as losing weight, quitting smoking, or taking control of a health issue, you could get a better rate and will therefore be able to get a lower premium. You will find the same thing applies if you leave a job with a high risk, such as roofing, or stop taking part in dangerous hobbies, like mountain climbing.
6. The Start of a New Year
If you haven’t experienced any major changes in your life, you shouldn’t need a better reason to review your life insurance than a new year!
A new year is a perfect time to take a look at all your finances and future plans, and that can definitely include your life insurance cover. It just takes 5 minutes to glance over your policy and check that it still meets your needs and that all your details are correct. It’s important to remember that certain wrong information may void a policy, so keep it up to date with accurate information.
So many people aren’t sure what cover they have and just allow the automatic payment to go out every month, so make sure you’re checking in annually so you’re familiar with your policy and can rest assured that all your information is correct, should the worst happen.
Make Sure You’re Getting the Best Deal
By taking the time to review your life insurance cover annually, or after a major life change, you can ensure that you have the right amount of cover at the best rate for you. At Red Star, we can help you find the right life insurance for you so that you can be sure your family will be taken care of financially when you pass. If you have yet to set up a policy or if you’re unsure if your policy is covering you correctly, a member of our friendly team will happily talk you through your options and ensure you have the right coverage at an affordable price point. To find out more or to reach out to us, click here.