Does the Protection You Have Still Fit?

The other day, I was filling my gas tank at one of those super-stations. In addition to fuel, they sold every hot and cold beverage imaginable, practically every variety of donut or sweet cake made, and all forms of fast food that can be stuck on a stick or stuffed in a bun with any combination of garnishments you choose.

Next to me at the pump was an older man who was using a gauge to measure the air pressure in his tires. It was hot and as he stooped over to unscrew the cap off each valve, the sweat from his forehead dropped to the pavement. I was tired just watching him and it got me to think about the things in life we religiously check and the things we don’t.

I spend some of my time selling life insurance, but I spend more time checking life insurance that is already in force. When I think about the deliberation of the man checking tires to economize on gasoline and minimize tread wear, the inconsistency occurred to me regarding how we often fail to check the one thing that we can’t do anything about if something ultimately goes wrong due to our lack of attention: the adequacy and order of our life insurance program.

We don’t like to think about providing for the possibility of our premature demise, so when we do put coverage in place, we tend afterward to give it as little thought as possible. But because our needs and our circumstances change, our coverage must be reviewed as much as any other “reviewable” thing in our life, e.g. our health, the progress of our kids in school, the performance of investments in our retirement plan, the condition of the roof on our house, the cost of our cell phone plan and, yes, the air in our tires.

If you have coverage, the person who sold it to you is amiss if he or she hasn’t insisted on periodic review of the policy. Consider what it might reveal:

  • Too much or too little coverage – An examination of changes in your life status can quickly determine if you have enough coverage to address all the needs left behind or created by your passing. It may also indicate you are buying more protection than you need.
  • An unnecessarily high-priced model – Carriers differ with regard to what they charge to protect your life. Even though you are a little older, you may not have the most cost-effective policy available.
  • Follow the money – Have the people that you want to benefit changed since the policy was purchased? Divorces, remarriages, additions to the family and other new obligations may make existing beneficiary designations in the policy undesirable. Sometimes a policy owner has simply designated that his or her “estate” be the named beneficiary. This often creates more cost and problems than it resolves.
  • Check mate – A review is a good time, too, for determining if others in the household need coverage. Often, protection is purchased on the bread-winner without thinking about the cost of the services of a non-working spouse that must be replaced in the event of death. Or some coverage on children can eliminate the economic concerns that should not be a part of all the emotional distress that is sure to attend the unfortunate loss of a daughter or son.
  • Conversion deadlines – Inexpensive term insurance often has a guaranteed option to convert to a permanent policy at the same medical underwriting class, no matter how many health problems have occurred in the meantime. However, the right to convert always expires at a certain date. This should be checked.
  • Good business! – Policies owned for business reasons should be checked as well. In fact, many undesirable tax consequences can result from poorly structured business life insurance plans that aren’t normally a concern in personal situations.

The good news is that reviews are easy. A worthy advisor will take your situation and your policies in hand and order inforce ledgers to determine the future effectiveness of your coverage. He or she will determine what your needs are now and going forward, and will determine if there is better or less expensive coverage available. If it has been 3-4 years since you have checked, then consider initiating a policy review. And remember to check the air in your tires as well.