What are the dangers of not reviewing your policy?
Policy assumptions and performance are constantly changing and, without proper review, many policies may fail to do the job for which they were originally intended.
For example, you could buy a policy, put it aside and then your health deteriorates. You find out later that you can’t continue the policy as initially planned because you didn’t pay attention to it and adjust the premiums when the performance lagged. The need for coverage may last longer than the coverage.
What are the benefits of periodically reviewing your policy?
Depending on your policy, you may be able to buy coverage now for less than you could 10 years ago. Let’s say you have a 10-year level premium policy and you’re eight years into it. You only have two years before the premium is going to start going up every year. You might find that you can buy the same coverage for a very similar premium today and get an extension of another 10-year period. That’s valuable if you bought the policy at age 30, and realize that you’re almost 40 and still need coverage for another 20 years. In that case, it’s smart to try to extend that for a lower premium.
In addition, the value of the business usually increases over time and you may need to increase coverage to cover that value.
How can a business owner best determine his or her life insurance needs?
Consult with a professional insurance advisor. Some business owners feel they can do it on their own and they mistakenly focus on price rather than duration of coverage. They may be thinking that cheaper is best and that life insurance is like car insurance, where you go with the lowest quote because many of the policy provisions are similar.
With life insurance, policies could be vastly different depending on the type of policy, the policy provisions and how long you want it to be in effect. Things change, someone becomes disabled, and suddenly the cheapest policy you bought 10 years ago is no longer the best policy for you now, but it’s the only one you can get and you’re stuck with it.
John Blatt, CLU, ChFC, CFBS, CLTC, is a financial advisor with Skylight Financial Group. Reach him at [email protected] or (216) 592-7313. Blatt is a registered representative of and offers securities, investment advisory and fee-based financial planning services through MML Investors Services, Inc. Member SIPC. Supervisory office: 1660 West 2nd Street, Suite 850, Cleveland, Ohio 44113-1454. Phone: (216) 621-5680. CRN201204-133514
