“I haven’t reviewed my life insurance in years…how do I evaluate it?” “How do I know if my policy matches my situation?”

People are asking these common questions daily. The process to review, while relatively simple, can at times seem overwhelming due to the unknowns and misconceptions about life insurance that exist today. Unfortunately, there have been situations where a person has purchased a policy that either didn’t fit their unique situation or wasn’t fully explained in its entirety. Both of these instances create doubt and a false perception that agents are “out to get me” leading to paralysis-by-analysis. In the end, we do nothing and our family ultimately suffers.

The truth of the matter is that MOST advisors DO have their clients’ best interest at heart. Sure there are a few bad apples (as there are in every industry), but following these simple steps below can help people wade through this process of reviewing their current policies:

1) Discuss your life insurance matters with someone YOU TRUST. Trust is crucial when it comes to this topic due to the nature of the matters at hand. This is important because at the end of the day the person advising you will most likely be the person delivering a check to your wife, husband, children or grandchildren in the event something happens to you. If you do not have a trusted advisor who can help, ask a close relative or friend who helps them evaluate their insurance matters.

2) Make sure that your advisor has looked at multiple companies. This gets overlooked all of the time by consumers who meet with an advisor selling one company’s insurance products only. There is no company that exists whose product line fits EVERY person’s specific situation. Companies today specialize in targeting certain parts of the market where they are a good fit. For example, there are mutual companies (owned by the policy holders) who are very strong when it comes to their whole life contracts, but their term insurance premiums will more than likely be higher than a stock company who is focused on bringing a cheap term insurance product to the market. In some cases it may make sense to pay the higher term premium if a client has the intent to convert their term insurance to permanent insurance down the road. But in any case, it is important that your advisor has access to the company or companies that will be a good fit for you.

3) Make sure that the life insurance you buy fits into your OVERALL FINANCIAL PLAN. It is a mistake to make decisions about your insurance in a silo, separate from all of your other financial decisions. It is important that your advisor understands everything that you have going on financially before making a recommendation as to the amount and type of insurance you should own. Your life insurance decisions should be coordinated with all of your protection, savings, and retirement decisions. If your advisor does not understand this, that should be a red flag.

4) When you are reviewing your life insurance (especially if you have not reviewed it in years) it rarely hurts to apply to see what a company will offer you. Most people think that if they fill out an application that they are somehow on the hook to purchase that insurance. This is not true and should be explained better by most advisors. The application process simply allows an insurance company, or multiple insurance companies, to underwrite the applicant and make an offer detailing the amount of insurance approved, the type of insurance, and ultimately the premium that would be required to move forward. Do not be fooled by misleading quotes that are made prior to an application being completed. A quote is a “best guess” based off of assumed criteria (mainly health) that in many cases are not accurate. The best way to know what the REAL premium would be is to apply. The only cost to the applicant is the time it takes to complete the application, the medical exam usually required, and possibly a phone interview with the insurance company.

5) The final step is to review your life insurance constantly! Do not let yourself fall victim to the “I haven’t reviewed it in years” mantra. Health changes, companies change, insurance rates change, mortality tables change, and most importantly financial situations change. There are too many variables that factor in to making sure you have the right coverage to let yourself go years without reviewing it. Life insurance is important, so be intentional and proactive about making sure you and your family has the right coverage for YOU! That’s a win!

When was the last time you reviewed your coverage? Who helped you work through this process? Are they a trusted advisor who researched the market to find the best coverage available to fit your specific situation? Do you know how much coverage and what type you have?