Life insurance represents an investment that runs the risk of being purchased initially, paid for regularly and otherwise largely forgotten. The practice is based on the erroneous assumption that life insurance is a financial product you analyze at the time of initial enrollment but never again. The decisions made at the time of purchase put a policyholder on a permanent suitable course. The reality is that life insurance coverage must be subjected to a regular audit, review and reconsideration. A number of significant reasons underscore the need to audit a life insurance policy.
Extent of Coverage
Life moves onward. Change is inevitable. The extent of life insurance coverage required at the time a policy initially was taken out may not be appropriate even 12 months down the road. For example, a new child in a family demands an examination of an existing policy to determine if an increase in coverage is necessary.
Life insurance products evolve. New policies enter onto the marketplace with regularity, policies that may offer similar coverage for a markedly reduced cost. A primary reason to conduct a life insurance audit is to determine if, in fact, similar coverage is available from a reputable insurer at a lower cost.
Review of Insurance Company
A life insurance policy is a major investment and one that must pay off as planned at a crucial moment in time. Therefore, a policyholder cannot take a cavalier approach to the state of the insurance company itself. Financial institutions of all types have experienced significant turmoil in recent years. Insurance companies can go bankrupt. While some protections exist for policy holders through state insurance commissions or departments, a person is far better served taking a proactive approach if an insurance company faces financial struggles.
As mentioned previously, the circumstances of life change, sometimes rapidly. Another important reason for a policy review is to make certain intended beneficiaries are named in a policy. Oftentimes a significant other, be that spouse or other type of partner, is the named beneficiary. When a relationship ends, changing the beneficiary on a life insurance policy can be overlooked.
In order to ensure that a life insurance policy fully serves its intended objectives, conducting a regular annual review of coverage is an advisable course. Additional reviews can occur as specific circumstances dictate.
The consumer assistance division of the insurance commission or department in every state maintains informational resources helpful in conducting a life insurance review. These materials are available at no cost.
- Photo by Tetra Pak
- License: Creative Commons image source
Peter Wendt is a freelance writer and father of 4 living in Austin, Texas. To make sure his family would be taken care of in the event of his passing, Wendt decided it was time to get a life insurance policy. To make sure he was choosing the right policy, Wendt used a life insurance auditor, and was very happy with the results and at peace knowing his family will be protected.