Tips for Healthy Life Insurance

At least 32 million U.S. households own insurance policies that are not appropriate for them, according to a recent survey.¹ This doesn’t necessarily mean that people routinely buy the wrong insurance. It’s more likely that they buy good coverage but don’t update their policies to reflect changes in their lives.

Some obvious life changes that would warrant a review of your existing coverage include the birth of a child, marriage, divorce, or the death of a beneficiary. But have you considered the effect that retirement could have on your life insurance? If you are about to retire or have recently entered retirement, it’s a good time to consider whether your current policy meets your needs.

Consider Your Spouse

Married couples who pool their retirement resources face the possibility that the death of one spouse could imperil the survivor’s income, possibly by leaving him or her with significant medical bills. Consider whether your life insurance would be enough to offset any lost income that might result from the insured’s death. The appropriate death benefit can supplement the surviving spouse’s income and retirement savings. The death benefit could also be used to help pay final expenses and estate taxes or even help pay off a mortgage.

Don’t Let Your Coverage Retire, Too

It’s fairly common for an employer-sponsored life insurance policy to terminate or significantly reduce coverage following an employee’s retirement. If you’ve been relying on an employer plan to supplement your personal coverage, now may be a good time to consider how or whether to replace the lost coverage.

Keep Inflation in Check

If you bought your policy years ago, you might be surprised at the toll that inflation has taken on the face value. Adjusting your policy to keep pace with inflation may help prevent a shortfall later on.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Most policies have exclusions and limitations. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Before you take any specific action, be sure to consult with your tax professional.

If life insurance is part of your long-term strategy, a regular policy review can help make the most of your premium dollars. It can help you determine whether your policy is ready for retirement. We can help provide you with costs, comparisons, and complete details.

1) Insurance Information Institute, 2008

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.