When was the last time you reviewed your life insurance policies? According to the experts, you should conduct a review at least once a year to ensure you have the right amount of coverage as your needs change. This is especially true after a major life event.
Financial Reasons For Changing Your Life Insurance
Of course, if you get married or divorced, you’ll likely want to change beneficiaries to make sure the right person receives the policy proceeds. However, there are other financial reasons that may trigger a change. When you take out a loan, a new mortgage, or even refinance your current mortgage, you want to make sure your spouse has enough coverage to pay the additional debt should you die unexpectedly. The opposite is also true. If you and your spouse have paid off a mortgage or other substantial debt, you may want to reduce your coverage.
Family Reasons For Changing Your Life Insurance
If you’re responsible for taking care of your elderly parents or a disabled child, life insurance is a good way to make sure you leave behind enough money to cover their needs should something happen to you. The same applies if your spouse needs to resign from their job to care for a loved one leaving you as the only source of family income. Another reason to consider increasing your life insurance is if your spouse develops health problems that may require special care. If you predecease them, life insurance can pay for their long-term care.
“As a federal employee, you also need to update the beneficiary form for your Thrift Savings Plan (TSP) because it pays a death benefit.”
Why Updating Life Insurance Beneficiaries Is Crucial
You may be surprised to learn that a beneficiary designation supersedes a Last Will & Testament, a Trust and even a pre-nuptial agreement. Over the years, some court cases have been filed because the policy owner failed to name a contingency beneficiary when the primary beneficiary passed away before them. Other cases landed in court because the policy beneficiary wasn’t updated after a divorce. Updating your life insurance beneficiaries is another way to ensure sure your wishes are honored when you pass away. As a federal employee, you also need to update the beneficiary form for your Thrift Savings Plan (TSP) because it pays a death benefit.
Life insurance is an essential asset in your overall estate plan. Yet, far too many people forget about it after they’ve purchased a policy. Though it may not be pleasant to think about your death, reviewing your life insurance is an important component of retirement planning. Consider working with an FRC® trained advisor who can help you get started.
