Why is it Crucial to Regularly Review and Update Life Insurance Policies?
A life insurance policy is an essential financial tool that helps provide peace of mind to policyholders by ensuring the financial security of their loved ones in the event of their untimely death.
But, just having life insurance isn’t enough. Life circumstances can change over time. Getting married, having children, buying a home, retiring, getting a new job, and much more, can all impact life insurance needs.
This article highlights why reviewing, adjusting, and updating policies is crucial for Canadian families and the benefits it can provide. This way your policy can always perfectly align with your and your family’s current and future needs.
Life Insurance Policies in Canada
There are two types of life insurance policies in Canada – Term Life Insurance and Permanent Life Insurance.
However, most Canadian families have life insurance through their employers as part of their group benefits plan. Life insurance as part of a group benefits plan is almost always a term life insurance policy. These policies are designed to offer coverage for a designated pre-set period and pay out a pre-set death benefit in the event of an employee’s death to their designated beneficiaries.
Permanent life insurance, on the other hand, lasts the lifetime of the insured person and has a cash value component on top of a pre-set death benefit. This type of insurance policy has much higher premiums than term life insurance.
Knowing the type of policy you have, the cost of premiums, and the benefits it offers is essential to maintaining adequate coverage for several reasons.
7 Reasons To Review & Update Life Insurance Policies Regularly
Here are seven reasons as to why reviewing and updating life insurance policies regularly, or at the very least, once a year, can go a long way in ensuring that coverage meets current needs.
Changing Life Circumstances
As the years tick away your life circumstances change. Getting married, starting a family, buying your first home, having a divorce, starting a business, taking out a loan, having children, losing your job, and planning to retire all warrant a prompt review of your life insurance policy.
A formal review can help add new beneficiaries to your existing policy, increase or decrease your coverage amount, or cancel your policy altogether, depending on your current circumstances.
Changes in Lifestyle
The cost of life insurance can vary dramatically depending on your lifestyle and overall health.
If you have improved your lifestyle or health during the duration of your policy you can benefit from these changes in the form of lower premiums.
For example, if you quit smoking after taking out your policy you can potentially qualify for lower premiums. The same is true for if you were overweight and now are focused on fitness and wellness which has improved your overall health.
Lifestyle changes can be a great way to further benefit from lower premiums but only if you regularly review your policy’s terms and conditions.
Market & Regulatory Changes
Changes in the insurance market and unforeseen regulatory changes can also impact your life insurance policy. If you aren’t reviewing your policy regularly you can easily miss out on new products and regulatory shifts that can help lower premiums while offering optimal coverage.
A formal review can help ensure your policy complies with any legal and regulatory updates. It can also help with leveraging any benefits to be had from these legal changes and shifts in market dynamics.
Shopping for New Offerings & Better Deals
Regularly reviewing your insurance policy can allow you to take advantage of new offerings and potentially lower premiums.
As the average lifespan of Canadians is growing, the cost of premiums for life insurance has been steadily declining in recent years. Advanced medical testing, more accurate medical diagnosis, intense competition, and improved actuarial analytics have all contributed to making it easier for insurance companies to price premiums.
The same is the case for policyholders. Advancements in technology, online tools, AI, and underwriting innovations have all made comparing insurance policies from different providers a lot easier and a lot more convenient.
Let’s just say it pays to shop around in today’s digital age and the best way to do that is to review your insurance policy annually.
Gauging the Investment Performance of Your Life Insurance Policy
Permanent life insurance policies should also be reviewed regularly in order to track and adjust the cash value or investment components of the policy. Doing so can allow you to discover new investment opportunities that align with your financial goals or spread out to lucrative alternative investment options.
Adjusting Premium Costs & Managing Budget
Premiums for any type of life insurance policy can add up to be a significant expense for most Canadian families. Thus, regularly reviewing your policy can help you assess whether your policy is still affordable, is offering the coverage you need, and is still within your budget.
Estate Planning & Tax Implications
Life insurance is a powerful financial tool that is not only critical for estate planning but also helps minimise tax liabilities for your beneficiaries or heirs. Regularly reviewing your policy can help ensure your life insurance aligns with your estate planning goals.
Consulting With A Qualified Insurance Advisor
Despite what many people think, life insurance isn’t a financial product that is to be bought once and forgotten. Policyholders need to review their policies as regularly as possible to ensure they stay relevant to their current needs and financial goals. Doing so is the only way to ensure that your loved ones are always protected and that your financial legacy remains secure regardless of whatever curveballs life throws at you.
For a no-obligation life insurance policy review, call 1-902-220-3279 today, or email [email protected]
FAQs
Q) How often should I review my life insurance policy?
Ideally, you should review your insurance policy once a year. If not annually, then you should be at the very least reviewing your policy after major life events or every few years.
Q) What should I look for during a life insurance policy review?
There are many things that you should be looking at during a policy review including updating beneficiaries, ensuring coverage adequacy, exploring market offerings, and adapting to legal and financial obligations.
Q) Can changing my life insurance policy save me money?
Yes, shopping around or changing your insurance policy can help save you money on premiums either through discounts, new product offerings, or adjustments in coverage.
