Life insurance is part of your financial plan. Just like a GPS reroutes you when things change on a trip, your financial plan and your life insurance coverage should also be updated to take account of new routes or events in your life. Edwin Theron, CEO at Sanlam Indie, says: “Although your policy will renew routinely, a policy you may have bought five or ten years ago might not provide you with enough benefits for your current demand.”
As a general rule of thumb, it’s a good idea to review your life insurance at least once a year, but also when certain circumstances change. Theron takes us through five possible life events that would require you to review your life cover and insurance:
1. Getting married
Many couples forget to build a solid financial foundation for their marriage. When it comes to preparing for your new financial life as a married couple, life insurance is one of the puzzle pieces. The abrupt and unexpected loss of a partner can be extremely expensive as well as emotionally distressing, especially in households dependent on both incomes as is the case for most couples these days. A surviving partner may use the death benefit from a life insurance policy to cover living expenses, funeral costs, or any outstanding debts, such as a mortgage or student loans.
2. Getting a promotion
Your hard work, long hours and dedication have paid off! Before you know it, your family will be accustomed to your new income and the lifestyle it allows. Revisit your life insurance coverage when you receive a job promotion and a bigger paycheck. This is particularly crucial if you have income protection, so that you can be sure your income is sufficiently protected if an unexpected disability prevents you from working even just on a temporary basis.
3. Kicking the smoking habit
We all know that smokers pay more for life insurance than non-smokers, so if you have stopped smoking, your insurance company might lower your rates because of your new status. Remember that most insurance providers will ask you to sign a non-smoker declaration and reserve the right to request smoking tests that gauge the amount of cotinine in your system. There is no such thing as a “smoker-free zone” when it comes to insurance, so it’s best to tell your insurer the truth.
4. Buying a house
Being a homeowner is exciting! However, it becomes pricier when you account for your mortgage, homeowner’s insurance, property taxes, maintenance, and upkeep costs. Life insurance is an important consideration when buying a home because it’s likely to be both your biggest financial commitment and asset. One of the top five reasons people get life insurance is to settle mortgage debt if something happens to them. It is essential to review your life insurance so your family won’t have to leave their home in the event of the unexpected, especially if you or your partner couldn’t afford homeownership bills on their own.
5. Having a baby
One of the largest changes you can go through is the arrival of a new family member, whether it’s your first or second child. Given the shift, most individuals will increase their life insurance coverage so that, in the event of their death, their loved ones would have enough money to support them until they are financially independent.
