The Need to Update Life Insurance Policies

Many may feel that because a term life insurance is in place for a specific period that it is in place as is for the duration of the term. Essentially, what is fixed is the term and the death benefit. Otherwise, you may want to take a look at your term life insurance policy at least once every year. The reason for this is because life is hectic, and big events can happen that make it even more important to take a look at your present policy.

Adding and Deleting

When you set up your policy you may have expected to be single with a child forever, with only your parents as the legal guardians (on your will) and as the financial guardians and beneficiaries on your policy. Times change, and perhaps you headed back to the altar last year, had a bouncing baby boy this year, and your parents are getting older and more frail. Well, it sounds like some impressive and mostly good changes. But, if you have not yet updated your term life insurance policy then you are making a big mistake.

Your new spouse needs to be added to the policy, and you might think about removing your parents and finding a new legal guardian and beneficiary for your children. If you and your spouse pass away at the same time, your kids, who are very young, could be in trouble. Your parents may be too old or frail to care for your children financially and otherwise. In addition, if they have not made arrangements with long-term care insurance for themselves, the money that you earmarked for your children may be eaten up with nursing care in a retirement home.

Considerations for Beneficiaries

It is essential that you include your spouse on the policy as the primary beneficiary, if you plan on having the death benefit take care of your family. Depending upon how much money you project life in your household to cost until your kids are well into college you may be able to split beneficiaries among your spouse and children. But, keep in mind that you want your spouse to be able to access as much money as he or she would need to pay for your children while they are young and unable to care for themselves.

Many parents strongly believe that leaving the money to the kids is a great idea. That is only true if your spouse has the means to pay for your children, the household expenses, the mortgage, and college. It depends a great deal upon how your term policy is set up and what kinds of benefits it offers if you should pass away. As painful and hard to imagine life without you, it may be important for you to think seriously about what your family's financial status would be if you passed away. You may find that your spouse does great financially, and that the term policy would pay for the kids' college education.

The need to update life insurance policies can occur at any given time. A good rule of thumb is to revisit your term life insurance every year to make sure that your policy does not grow outdated. Otherwise, your family may end up with more harm than good if you are to pass away and they need that money to survive. You may also want to consult an estate planning attorney to help you decide the best way to designate beneficiaries so that your family can survive in your absence.

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