Is life insurance the right product for you?

Just like any other piece of your financial jigsaw, periodic monitoring of your Life Insurance policy is essential to ensure it will achieve your desired objectives. When reviewing your policy annually, here are a few questions to ask yourself.

Is my Coverage Up-to-Date?

A good place to start is to consider whether the original reasons for purchasing the policy are still applicable and if there are any additional needs e.g. a growing family, a bigger mortgage or future college expenses.

If your existing policy is term insurance, you may want to consider converting it to a permanent contract. Permanent insurance contains a cash value component that offers the potential for tax deferred accumulation, as well as the same death benefit features of term insurance. In the future, the cash value could be accessed to help supplement retirement income needs. It is however important to bear in mind that withdrawals and loans taken against a policy’s cash value could reduce the death benefit, increase the likelihood that the policy will lapse, and may have tax consequences.

Have my beneficiaries changed?

As a single person or couple with no children, you may have chosen some other family member as a beneficiary, however, now your circumstances have changed it might be more appropriate for the beneficiaries to be your partner or children. Additionally, if you eventually set up a living trust, a legal professional may suggest naming the trust as the policy’s beneficiary.

Has my Estate grown?

Regardless of the type of life insurance and the beneficiaries chosen, the proceeds from a claim on death will be included in the deceased person’s estate. So as the asset base increases in value, the family may want to periodically monitor and update their estate planning strategies to help minimize the effect of estate taxation.

Life insurance may play a significant role in protecting and preserving a family’s wealth. But as with all financial matters, life insurance policies should be reviewed on a regular basis. Be sure to consult a financial advisor to help you evaluate your present situation and determine an appropriate course of action.

Am I covered if I move country?

If you purchased the policy before you had any intentions of moving overseas, and the policy is still in force, it is likely to remain valid as long as you continue to pay the premium. Practically, unless the policy is paid up, you may need to maintain a US bank account for the insurance company to draw the premium from.

Should you pass away while overseas, the insurance company will pay out to your beneficiary as long as the legal death certificate is presented. Whilst it is likely they will only issue a check that is drawn on a US banking institution, if your beneficiary does not have any financial ties to the US, it may take an intermediary step to send the proceeds overseas.

As some policies may explicitly exclude acts of war, if you are moving to a country with high risks of war you should check the policy contract to see whether certain events or countries are excluded. If they are you may want to look for a new policy.

Life insurance may play a significant role in protecting and preserving a family’s wealth. But as with all financial matters, life insurance policies should be reviewed on a regular basis. Be sure to consult a financial advisor to help you evaluate your present situation and determine an appropriate course of action.

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