5 Things to Do After You Buy a Life Insurance Policy
You’ve purchased life insurance coverage. Congratulations! Now hat do you do? In most cases, people buy a life insurance policy, put it in a drawer and forget about it. Life insurance is not “set it and forget it” Coverage. Your insurance needs, health and policy should be reviewed every few years. Many things can change in your lifetime such as your health, marriage status, beneficiary designations and the amount of insurance you need. A good agent will make sure that you are always getting the most out of your coverage. It is important to have an agent that will be around well after they’ve sold you a policy. Here are 5 things you should do after you buy a life insurance policy.
Monitor your life insurance needs and your health – Your life insurance needs and your health may change over time. Certain events can increase the need for additional life insurance such as having more children or buying a larger home. Your health could worsen, which could create the need to convert some or all of your term coverage to permanent coverage. Your health could improve, which could create the opportunity to get a new policy with better rates or a rate adjustment on your current policy. It is best to address your needs every few years to make sure that you have adequate coverage.
Get an in force ledger every few years if you have permanent insurance – As mentioned earlier, life insurance is not a “set it and forget it” product. If you purchased a cash value policy, an agent probably had you sign an illustration that showed several hypothetical scenarios of how your cash value could grow in the future. Illustrations are hypothetical which is why you should have your agent show you an in force ledger every few years to see how your policy is performing. This will give you an idea of how the policy is performing now compared to what was shown to you during the original sale. This will help you determine if your policy is on track to helping you reach your goals.
Tell loved ones that you have a policy and where it is kept – You should keep all of your estate planning documents like trusts, wills, deeds and other important planning documents together in a safe place like a security deposit box. You should also tell your beneficiaries that you have a policy and where it is kept. Insurance companies do not go out of their way to find a beneficiary if a policy holder passes away. It is important to tell beneficiaries that you have a policy as they will most likely be the ones that have to come up with the documentation to claim the death benefit. There have been many cases where life insurance death benefits weren’t claimed until many years after the policyholder passed away. The beneficiaries simply didn’t know that the deceased had a policy. This is money that could have been used to settle an estate or provided for other final expenses.
Review your policy periodically – Insurance rates have decreased over the past decades as life expectancy rates have increased. You could save money by getting a new policy, especially if your old policy was based on an outdated mortality table. Your health could improve as a result of lifestyle changes since the purchase of your last policy. If that is the case, you could qualify for a higher health rating with a new policy thus lowering your premiums. Life insurance products have evolved so much over time. More efficient products could mean that you can get a higher death benefit, lower premiums, better cash value growth or all of the above if you get a new policy. It is very important to remember that exchanging policies should only be done if it is truly beneficial to you and if it is consistent with your goals. You should also note that the two year contestability period will start over again which is a very important factor to consider. Lastly, if you are going to replace your policy, don’t cancel your existing policy until your new policy is in force.
Monitor beneficiary designations – Many things could change in your life while your life insurance policy is in effect. It is very important to look at your beneficiary designations to make sure that they reflect your intentions should you pass away. You should always name primary and contingent beneficiaries on your policy. Be as specific as possible when naming a beneficiary. Simply naming your “spouse” or “children” as a beneficiary could lead to issues if you ever get remarried and pass away. You should also update you beneficiary designations immediately if one of your beneficiaries predeceases you. Unfortunately, there have been many cases where not having the intended beneficiary listed has led to long drawn out court proceedings after a policyholder has passed, costing unnecessary dollars and time for something that could have easily been avoided.
One more thing (who has ever heard of a Top 6 List?). After you purchase your policy, there is a free look period so you can review the policy to make sure that you want the coverage. The length of the free look period will vary depending on your state of residence. Although most term life policies are pretty straightforward, it is very important that you feel comfortable with the terms of the policy before you own it for the long haul. If you change your mind and decide that you don’t want the coverage within the free look period, the insurance company will refund any premiums that you’ve paid.
About Us
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com.
