Life Insurance Policy Review: What Should You Actually Check?

Most people buy life insurance at a turning point: a marriage, a first home, a child, a new business. Then the policy goes in a drawer while life keeps changing. A review closes that gap.

1. Why does the policy exist?

Start with the original purpose: family income, mortgage, business debt, key person protection, buy-sell funding, estate planning, or final expenses. Then ask whether that purpose still exists, has grown, or has disappeared.

2. Is the death benefit still enough?

A policy bought on $70,000 of income, a $300,000 mortgage, and one child may look very different after raises, a second child, a larger home, or a business. Ask: if the insured died today, would this amount do what it was meant to do?

3. Are the beneficiaries correct?

Review beneficiaries after marriage, divorce, a birth or adoption, a beneficiary's death, a new trust, or a business ownership change. An outdated beneficiary designation usually overrides what a will says, so this is one of the most important checks. Involve your estate attorney when trusts or minors are involved.

4. Who owns the policy?

The owner controls the policy: changes, loans, beneficiaries, cancellation. Ownership matters a great deal for business-owned policies and for estate planning, and it isn't always the same person as the insured.

5. Premiums: what are you paying, and can it change?

Confirm the current premium, whether it's guaranteed, whether payments are current, and whether any payment has been missed. Flexible-premium policies can quietly drift toward lapse if they're underfunded.

6. Term coverage: when does it end, and can you convert it?

For term policies, find:

• When the level-premium period ends
• What the premium jumps to afterward (often dramatically)
• Whether the policy has a conversion privilege, and its deadline
• Which permanent policies are available for conversion

7. Cash-value policies: how are they performing?

For whole life, universal life, and indexed universal life, request an in-force illustration from the carrier. Review:

• Current cash and surrender value
• Guaranteed vs. non-guaranteed values
• Any outstanding loans and loan interest
• Credited interest or index crediting compared with the original projection
• Policy charges
• How long the coverage is projected to last at current premiums

Universal life policies bought when interest rates were higher are a common source of surprises: a policy projected to last for life may now be projected to lapse years earlier unless premiums increase. See permanent life insurance.

8. Loans and withdrawals

Policy loans reduce the death benefit, accrue interest, and can cause a lapse if they grow too large. A lapse with a loan outstanding can also create a tax bill. Treat loans as something to manage, not free money.

9. Your health and insurability

If your health has changed since you bought the policy, your existing coverage may be impossible to replace at the same price, or at all. That makes it more valuable, not less.

When should you review life insurance?

• Marriage, divorce, birth, or adoption
• Buying a home or taking on major debt
• A significant change in income
• Starting, buying, or selling a business, or adding a partner
• A business loan that requires coverage
• Approaching the end of a term period or a conversion deadline
• Changes to a trust or estate plan
• Every few years even if nothing major changes

Be careful with replacement

Replacing a policy is sometimes the right move. It can also cost you more than it saves. Before canceling or surrendering existing coverage, compare the old and new policies on:

• Death benefit and premium
• Guarantees
• Surrender charges on the old policy
• Underwriting class (your health may now earn a worse rating)
• A new contestability period and suicide exclusion period, which restart with a new policy
• Riders you'd lose or gain

What a good review should leave you with

• What you own and why
• Whether the original need still exists
• Whether the amount still fits
• Important dates coming up (term end, conversion deadline)
• What needs attention now
• What should be left alone

Sometimes the best recommendation is: keep exactly what you have.