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  • Writer's pictureYvonne Darby

Is Your Life Insurance Policy Still Necessary?

Life insurance policies are like estate planning documents. They tend to be set up and then left to collect dust. No one likes to talk about insurance, but it could be your saving grace when you need it the most. Life insurance policies don’t grow with our life circumstance, so it’s important that we take the time to assess their value as our lives change.

It might be time to review your life insurance policies. Maybe they made sense for that period in your life, but now are you unnecessarily paying premiums? Would it be better if you cashed out your policy? What options do you have with your current policy? What should you do with your soon to be expiring policy? Should you renew it or let it expire? Should you convert it into a permanent policy? These are questions that might run through your head, but they might leave you feeling more unsure than leaving your policies on autopilot. This is where we can help.

What is life insurance?

Life insurance is an agreement in which an insurance company agrees to pay a specified amount after the death of an insured party, as long as the premiums are paid and up to date. This amount is called a death benefit. Policies have the potential to give insured people the assurance that their loved ones will have peace of mind and financial protection after their death. [i]

What is the purpose of life insurance?

Buying life insurance protects those dependent on you: your spouse, children, and others from the potentially devastating financial losses that could result if something happened to you. It provides financial security until you can self-insure with your own resources. Even then, some people prefer to have life insurance in place to leave more of their own assets to their beneficiaries. Here are a few reasons why people decide to get insurance in the unfortunate event of a premature death: [ii]

  • Income Replacement

  • Pay for end-of-life expenses

  • Pay off debts

  • Replace lost income

  • Pay for college tuition

  • Leave a financial gift

What are the steps to getting a life insurance policy? [iii]

  1. Determine your goals, determine how much insurance you need to meet your goals over time, and determine what you can afford to pay.

  2. Learn what types of insurance can help you meet your needs. Is it term life, whole life, or universal life insurance?

  3. Research different life insurance carriers.

  4. Fill out an application.

  5. Prepare for your phone interview.

  6. Schedule a life insurance medical exam.

  7. Wait for approval and rates.

  8. Sign for the policy that best meets your needs.

Remember, working with a financial professional can help make this whole process easier. A financial professional can help explain the differences between types of policies, help you calculate the amount you need, and present potential options that may best suit your needs. [iv]

Here are few questions to assess the relevance of your current policies:

  1. Is this life insurance policy still serving a relevant need? Perhaps you got life insurance when your kids were still minors, but now they are self-sufficient and no longer need your direct support.

  2. Is there a better policy out there for me? Timing is everything. You may have locked in a great insurance policy or perhaps they have made great improvements to the benefits of a similar insurance policy. That may be your cue to replace your current life insurance policy with a new one.

  3. Do I have enough life insurance to protect my family? Am I underinsured? Do I need to take out an additional policy to protect my family?

  4. Am I over-insured as I’ve become self-insured through my wealth building? Am I unnecessarily paying these premiums?

If you need help reviewing your current insurance policies or want to understand your overall insurance risk in the context of your full financial picture, we’d be more than happy to walk you through that process. Schedule a complimentary introductory call today at info@sherwoodfp.com.

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