People don’t generally think about their mortality until they get bad news from the doctor, someone you know dies, or you start a new venture, and, decide to upgrade your life insurance policy. I mean it’s good to look at your policies regularly, but the insurance broker I spoke to, from Insure guard, stated that most people just consider it covered, by the insurance attached to their superannuation.
Here are the three questions to consider when evaluating whether your policy will match your family’s needs.
1. The length of the policy?
Newer policies are maturing at ages 80-95 some as old as 100. My original one I filled out when I was in my 20’s was 75. Its far more likely due to medical gains that you may outlive your policy. So what happens then? Some insurance companies simply continue the policy. Many will write you a cheque and pay off the policy. That payout becomes taxable and won’t be available to family members upon the death of the insured. If you own or have financial interest in several companies, or portfolios, and, have arranged for your assets to be dispersed to several different parties, there may be insufficient proceed to pay for future requirements like estate taxes etc.
2. Is your policy underfunded?
Lower interest rates have left some policies significantly underfunded. That means you either increase the premiums you pay, or settle for a reduced death benefit. Checking the policy and the amount of fees, administration, costs charged may determine whether, or not, your policy benefits you, your beneficiaries or just the insurance company.
3. Has your net worth fallen?
With many local investments and home values taking a hit, you may not have as much to pass on to your loved ones as you once had. If your net worth has fallen significantly, you may want to purchase additional life insurance to fill the funding gaps. After all, if you, like me, still want to be able to provide your children with the opportunity to further their education, or for your spouse to have the investment properties paid off, you need to take up the required insurance, Now.
