Many people often ask the question “How often should I update my life insurance?” Well, the answer isn’t straightforward, as there are a lot of factors that go into this question.
Today, we’re going over some of the basics of updating life insurance or term insurance to help you better understand what you do–and don’t–need when it comes to insurance.
Simply put, life insurance is insurance you get against the event of your death. So, if car insurance is insurance you get against something happening to your car, life insurance is to pay out in the event of your passing. A commonly asked question, though, is how often you should update your life insurance.
If you have term life insurance, or life insurance that only covers you for a set period of time, then you should be checking your rates every time your term expires to see what you need to change or update. If you have whole life insurance, or a life insurance policy with a savings component, you should be checking every few years to see where your rates stand.
As you build wealth and eliminate debt, you should reevaluate your life insurance. Your insurance is primarily to help your loved ones deal with your debts in the event of your untimely death, so as you grow your wealth and your debts get smaller, you should need less and less life insurance to handle your affairs.
As such, once your kids are grown, your house is paid off and you own your own car without any payments, you should be checking on your life insurance rates every three or four years. This way, you can make sure you’re spending the right amount of money on your premium compared to the expenses it would help your family handle.
The most important question to consider when checking your life insurance is this: Will the benefit paid out be enough to take care of your family in the event of your death? If it will cover your funeral expenses and any estate management that needs to be done, and your debts are covered, then it’s the right insurance for you.