Wealth is painstakingly built but easily lost. Accidents, lawsuits, medical crises and other surprises can swiftly wipe out the most carefully laid financial plans. That’s why life, property/casualty and long-term-care insurance are a necessity.
Insurance should be an integral part of any wealth plan to help ensure assets are protected and to provide income replacement should you and your family need it. Unfortunately, many people set up insurance policies early in life and then fail to revisit them as their personal situations and needs change.
Six key reasons to sit down with your wealth advisor to review your insurance coverage:
- Family Configurations Change
- Property Value Changes
- You’ve Added New Life Risks
- Significant Career Changes Occur
- You’ve Adopted Healthier Habits
- You Add Significant Debt
1. Family Configurations Change
You’ll want to update your life insurance beneficiaries any time the makeup of your family changes, such as marriage or divorce or the birth or death of a family member. Updating beneficiaries helps ensure your family members are protected. If your kids are grown and financially independent, you may consider reallocating benefits to those who might be more financially vulnerable in your absence.
2. Your Property Value Changes
Your homeowner’s insurance policy should cover the value of your physical property like homes, vehicles and jewelry. You may want to take time to get current appraisals of your physical assets so that you have a better idea of how much property and casualty coverage you’ll need to reduce potential out-of-pocket costs in the event of damage or loss. Along with general market appreciation, things that can raise the value of your property include, adding a hot tub or pool, buying new appliances, completing a renovation or home improvement or buying or selling property such as musical instruments or artwork. In some cases, you might find that you are over-insured, so decreasing coverage is warranted.
3. You’ve Added New Life Risks
What do getting a new dog, installing a pool, driving more often and entertaining guests often have in common? They all introduce more risk of expensive accidents and mishaps. And they’re all good reasons to review umbrella insurance, which covers high-dollar liability claims that can arise when someone is injured on your property or if a family member is involved in an auto accident.
4. Significant Career Changes Occur
If you’ve started a new job or landed a lucrative promotion, you’re likely to upgrade your family’s lifestyle. That means you’ll likely want enough life insurance coverage, such as a term life insurance policy, to serve as income replacement for your family to support their lifestyle in the event of your death.
Starting a new business can also change your insurance calculus. Because you’ve likely taken out a large loan or made a big personal contribution, money that you had earmarked for inheritances may no longer be available. Boosting your life insurance coverage can be a way to make up the shortfall and ensure your loved ones are provided for. If family members will be responsible for a business loan in the event of your death, you’ll want to know your life insurance will cover it.
Changes in your income or wealth level can also alter the equation when it comes to long-term care insurance. If you have more savings or assets that can be converted to cash than when you bought your policy—you may have paid off a mortgage or received an inheritance, for instance—that money can go toward paying for long-term care. Keep in mind, the cost of long-term care has steadily risen over the years, so you will want to ensure you’ve set aside enough to cover those costs either through your own investments, a permanent life insurance policy or from an annuity.
5. You’ve Adopted Healthier Habits
If you’ve lost weight, quit smoking and started exercising regularly, your healthier outlook may translate into better rates on life insurance and long-term care policies. Ditto if you’ve quit dangerous practices like mountain climbing or exchanged a dangerous job for a safer one.
6. You Add Significant Debt
New debt, such as a home equity loan or a credit-consolidation loan, might have a larger impact than you would expect on loved ones who are likely to be dependent on a fixed income stream after you’re gone. If you’ve taken out a mortgage to buy a comfortable home, your family members will probably want to continue living there. In both cases, it’s worth reviewing your life insurance policies to make sure coverage amounts and durations are appropriate for the needs of your survivors.
And if you’re incapacitated and become unable to work, added debt can create an extra burden for loved ones who will be caring for you. Thus, more debt, in the form of a new mortgage, for instance, could be cause for increasing term-life or whole life insurance coverage.
Don’t Put Off a Life Insurance Review
Life moves fast. Without our realizing it, gaps can open between our insurance needs and our current coverage. You may have purchased a policy as a young adult, forgotten about it yet it no longer meets your needs today.
Regular insurance reviews—as often as annually for many households—help you close those gaps and give you peace of mind that your assets and loved ones are protected with the right amount of insurance coverage.