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February 1, 2011
If it’s been awhile since you first bought your life insurance policy, youmay find that your life has changed dramatically since then.Perhaps you’ve gone through a divorce, added a second income or hada child. Whatever the change may be, it’s important to regularlylook over your policy to make sure that it best reflects yourcurrent wishes and meets the current needs of your family.
When to give your policy a second glance
Any significant life change should be an indicator that it’stime to sit down and review your life insurance policy. If you haveexperienced any of the following changes, it may be a good idea toreview your coverage:
* A change in marital status
* Purchasing a home
* Having a child
* Changing jobs or starting your own business
* Becoming the primary caretaker for an elderly relative
* Paying off your home
* Sending children off to college, have children that areapproaching college-age or have children already in college
* Getting close to retirement
Switching from term to whole life
The two most common policy options are term life andwhole life. Termlife insurance is, quite simply, insurance that protects you for aspecific period of time, or “term.” Premium payments are madeduring the period of time you’ve selected to be covered, or “term.”If something happens to you during that term, your loved onesreceive the payout from your policy. Term life insurance has lowerinitial premiums than other types of insurance, which makes itsuitable for budget-conscious families.
Whole life insurance is financial protection that covers you foryour entire life. Quite simply, when you own a low-cost whole lifeinsurance policy, your payments never change, and as long as youpay your premiums when due, your loved ones will receive theinsurance payout.
A whole life insurance policy also builds cash value that, inmost cases, grows on a tax-deferred basis. Better yet, not only mayyour death benefit – the amount your loved ones receive when youdie – increase, but once there is cash value, you can borrow up tothat value to use as you see fit.
In many cases, it’s possible to switch all or even a portion ofyour term life policy to whole life if you decide it is a betterfit for you and your family.
Changing your beneficiary
If it’s been a while since you’ve looked at your policy, youshould review your beneficiary or beneficiaries. Is the person, orpersons, you named still who you’d want on your policy?
Changing beneficiaries is not a complicated process. Mostbeneficiary changes can be made by the policy owner using abeneficiary change request, including:
* Designating an individual or multiple persons equally.Designating percentages when there are multiple beneficiaries canbe done provided that the total of all percentages equals 100percent.
* It is not recommended to name minors as beneficiaries, withoutdesignating a custodian or trustee.
* Designating children of an individual entitles all present andfuture children, both born and legally adopted, to share equally.Again, it is not recommended to designate minors asbeneficiaries.
* Designating the insured’s estate.
* Designating a trust (this is the recommended option if youhave children that are under 18 whom you would like to benefit fromyour policy).
* Designating a corporation or charity. Insurance companies willlikely require the name, address and taxpayer I.D. number for thecorporation or organization.
Reviewing your life insurance policy at important junctures ofyour life will ensure that your policy is distributed and usedprecisely the way you intend. This can save your family membersadditional burden down the road.
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