Life insurance is one of those things that’s easy to set and forget—but it shouldn’t be. Just like with any type of insurance, it’s important to revisit your policy from time to time. As your life evolves, your coverage needs may shift, too. If your policy no longer matches your current circumstances, you could be leaving your loved ones vulnerable in the event of the unexpected.
That’s why regular life insurance reviews are so important. Our responsibilities, goals, and financial situations change over time, and our insurance coverage should reflect that. In this article, we’ll discuss a few key signs that it might be time to take another look at your life insurance policy.
Who Should Consider Life Insurance?
If you have a family that depends on you financially, life insurance is essential. It ensures that your loved ones are taken care of if something happens to you. But even if you’re single, life insurance still plays an important role. It can cover funeral and burial costs, which can run into the thousands, and help settle any outstanding debts. For example, if someone has co-signed a loan for you, a life insurance payout can prevent them from being left with that financial burden.
What Does it Mean to be Underinsured?
Being underinsured means you have life insurance, but the coverage isn’t enough to meet your family’s financial needs if you’re no longer around. If your loved ones rely on your income to pay the bills, your policy should be enough to help them manage without it. Having too little coverage could leave them struggling to make ends meet, so it’s important to review your policy regularly with your insurance advisor to make sure it still fits your current situation.
Top Signs You May Be Underinsured
Life changes, and when it does, your life insurance coverage should keep up. If any of the situations below apply to you, it might be time to review your policy and consider increasing your coverage.
1. Your Income Has Increased
Getting a raise or landing a higher-paying job is a great milestone, but it may also mean your current life insurance no longer fits your needs. A higher income often leads to an upgraded lifestyle, and if something happens to you, your loved ones may struggle to maintain that standard of living without adequate coverage. Make sure your policy reflects your current financial situation, not where you were years ago.
2. Your Only Coverage Comes from Work
Employer-provided life insurance is a good start, but it’s rarely enough. These plans often cover just one or two times your salary, far less than what your family might need. Plus, that coverage usually ends if you change jobs or lose your employment. Having a personal policy not only gives you more flexibility and control, but it also offers options like permanent life insurance, which can include benefits you can access while you’re still alive.
3. You’ve Recently Had a Child
Welcoming a new child, whether through birth or adoption, comes with increased financial responsibilities. From daycare and healthcare to school fees and future college costs, raising a child isn’t cheap. If your family has grown, your life insurance should grow with it to ensure every child is provided for, no matter what.
4. You Bought a Home
Buying a new home typically means taking on a mortgage. Your life insurance should be enough to cover your outstanding loan balance, so your family isn’t left with the burden of monthly payments. If your current policy doesn’t account for your home loan, consider upping your coverage.
5. You Haven’t Done the Math
If you’ve never actually calculated how much life insurance you need, you could easily be underinsured without realising it. Start by totalling your debts and mortgage. Add in several years’ worth of your income to cover your family’s daily expenses, and don’t forget long-term costs like college tuition. Lastly, factor in medical bills and funeral expenses. A clear breakdown will give you a better sense of how much protection your family needs.
6. Your Life Insurance Doesn’t Cover Your Debts
If your current policy wouldn’t be enough to pay off your debts, it’s time to reassess. Outstanding loans like credit cards, personal loans, or a mortgage can become a heavy burden on your family. The last thing they need while grieving is to worry about how they’ll cover bills or stay afloat financially. Increasing your coverage now can help protect them from future hardship.
7. You Rely Only on Employer-Provided Insurance
This one’s worth repeating: if your only life insurance comes through your job, you could be at risk. Employer-sponsored policies usually offer limited coverage and don’t follow you if you change jobs or retire. That leaves a major gap in protection, especially for families that rely on your income. A personal policy ensures continuous coverage no matter where your career takes you.
8. It’s Been a Few Years Since Your Last Review
If you can’t remember the last time you reviewed your life insurance, that’s a sign it’s time. Life moves fast, career changes, growing families, new financial responsibilities, and even if things seem stable, your coverage might not be keeping up. A quick check-up every couple of years helps ensure your policy still meets your needs.
9. Your Financial Goals Have Shifted
As your life evolves, so do your financial goals, and your life insurance should reflect that. Maybe you’ve purchased a second home, started planning for your children’s inheritance, or want to make sure your spouse has long-term care support. Life insurance can be customised to fit a wide range of goals, from legacy planning to retirement support. Make sure your policy aligns with where you are now and where you want to go.
Conclusion
Life insurance isn’t a one-time decision; it’s something that should grow and evolve with you. From income changes and growing families to new financial goals and homeownership, many life events can impact how much coverage you truly need. If any of the signs above resonate with you, now is a great time to review your policy.
By taking the time to reassess your life insurance coverage, you can ensure your loved ones are financially protected, no matter what the future holds. Peace of mind starts with being prepared.
