Looking to reevaluate your current term insurance plan? Here’s what you need to know
Purchasing a term life insurance policy is a very wise financial decision for a better financial future for your family. However, once you purchase the policy, being unsatisfied with the terms might indicate some problematic decisions that may hinder the growth of your capital.
It’s also one of the biggest mistakes to not evaluate your insurance policy and simply sleep over it. Reevaluation of the insurance policy allows you to tweak the terms of your financial plan to suit your requirements so you don’t feel any kind of dissatisfaction with your investment. Vin Agarwal with Diabeteslifesolutions.com/ mentions “Many people will overpay for life insurance by not reviewing their options periodically. As an example, many people take out a policy when they may not have been in the best health. Overtime, your health may improve which means cheaper premiums are available to you. This truly applies to diabetics. By simply reviewing your situation from time to time, you could save thousands of dollars on life insurance for type 1 diabetics.”
As a general rule of thumb, you must reevaluate your policy based on the changes in your income and lifestyle to be able to yield good returns. Life never tends to be consistent, and you could never know when your lifestyle gets hit by unknown circumstances – either good or bad.
This article provides you with a set of guidelines that indicate when and how you should reevaluate your term life insurance policy in a proper way while adhering to the policy’s terms and conditions. As you finish reading this article, you’ll be able to generate a better corpus to achieve your desired milestones.
When Should You Reevaluate Your Term Insurance Portfolio?
If you purchased term insurance a long while ago, chances are you may not have brainstormed much about it since then. In case there’s a significant change in your life, it’s the right time to tweak it according to your needs. Here’s when is the high-time to reevaluate your term insurance policy:
1. Your Income or Career has Changed
You might have changed your occupation or received a promotion that offered a hike in your position and salary. In either situation, you should consider reevaluating your policy by modifying the cover amount equal to seven years of your salary.
As with a higher salary, your lifestyle might transition either slightly or majorly (depending on the difference) and by reevaluating your cover amount, you can make sure that your generated corpus allows your family to sustain their existing lifestyle in the future.
2. You have new members in the family
In case you purchased your insurance before your marriage, you need to make sure that your spouse is also covered properly with your policy. Moreover, if there’s a newborn baby in your house, you need to recalculate your coverage amount from scratch.
Additionally, if you have started caretaking of an elder, you have to ensure that your term life insurance policy covers all the members dependent on you. By reevaluating your policy, you can make sure that you give a financially secure future to everyone who counts on you for survival.
3. You Added A Financial Obligation
If you have bought a house, taken a loan, or started a new business, you have introduced a new financial responsibility in your life. With this new obligation, you would require more coverage to make sure that you meet the commitments for these mortgages.
This ensures that your loved ones won’t have to inherit your liabilities and bear unexpected costs, especially when they’re not even adequately prepared or recovered from your loss. Therefore, in such circumstances, reevaluation is extremely crucial.
How to Reevaluate Your Term Insurance Policy?
Purchasing a term life insurance plan at an early age provides a lot of benefits. However, through periodic review and changes in your plan, you can mitigate the risks that may evolve due to the various changes happening in your life and career.
If you believe that it’s high time to reevaluate your policy and make it a lot more efficient, you’re at the right place. Here are all the possible options that allow you to reevaluate your term insurance policy to meet your future financial requirements:
1. Change Beneficiary
Change in beneficiary mostly happens with a change in your marital status. The majority of people choose to add their spouse as a beneficiary in their policy. If you recently got married or divorced, might as well consider changing your beneficiary and reevaluate it as per your current marital status.
However, keep in mind that you should not add minors as a beneficiary in your term plan. As a policyholder, you have all the liberty to change your beneficiary at any instant of time through an easy-to-follow process.
2. Purchase More Coverage
The addition of members in your family calls for the need for higher coverage that allows you to fulfill the growing needs of your growing family. It can be done by purchasing second insurance that adds to your existing coverage.
Alternatively, several insurance companies also provide a guaranteed insurability rider that allows you to increase the coverage of your plan during life-changing events like birth of a new child, and so on. These riders make it highly convenient for you to reevaluate your policy later.
3. Sell Your Policy
A fairly unique way to reevaluate your term life insurance is by selling it to a third party at a price higher than the cash value, and lower than the death benefit. The rest of the term plan premium payments will be made by the new owner of the policy.
Eventually, the new buyer will also receive the death benefit upon your death. This is ideal when you are suffering from a critical financial crisis and need immediate funds. Make sure that you contact a financial advisor before selling out your policy to a third party.
It’s a wise habit to review your term insurance plan periodically and evaluate the existing needs of your household. There are situations when you don’t feel that the policy will be able to fulfill your monetary requirements. In such situations, reevaluating a policy is a perfect solution. Hope, you found this guide helpful in knowing when and how you need to reevaluate your term life insurance policy.
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