How to Keep Track of Your Life Insurance Policy

Monitoring a Life Insurance Policy

It is important to regularly monitor life insurance to be sure the current policy effectively meets the needs of the insured. Monitoring policy performance also gives policyholders the ability to take action if needed. For example, if the cash value of a policy no longer adequately supports the death benefit, changes may need to be made.

Trustees Can Help

All insurance trusts and policies require regular monitoring. Irrevocable Insurance Trust is common in estate planning. The goal with an Irrevocable Insurance Trust is to avoid taxes being attached to the insured’s estate when paid out. The responsibility of monitoring the trust typically falls on the shoulders of the estate planner, accountant or family attorney. If a legal or financial professional is not overseeing the trust, the responsibility of monitoring will fall on the trustee.

Whether a person is a trustee or the policyholder, the policy should be monitored because there are components of a life insurance policy that can have an effect on the performance of the policy. The key to evaluating and monitoring a life insurance policy is to understand how changes can affect performance. The goal is to maintain adequate coverage should a death result.

Although premiums must be paid for coverage to be continued, life insurance is regarded as an asset and must be treated responsibly. The face amount of the insurance policy should be monitored every two to three years. The face amount should appropriately match current life insurance needs. The face value of life insurance policy is what would be paid out as a death benefit. The coverage needs may change with time and monitoring helps insured persons determine if changes should be made to coverage amounts and beneficiaries.

Which Policies Do You Need to Watch?

The policy type should also be considered when monitoring a life insurance policy. In some cases the policy needs to be changed from term life to whole life or some other classification. As insurance holders age it may be necessary to modify the type of plan based on current age, health status and income.

Regular monitoring of a life insurance policy also helps insurance carriers identify the riders on the policy and determine if the riders are still needed. Some insurance providers mail a summary annually for clients to review information and make changes. The summaries provided are based on information provided at the initiation of the contract.

If changes are made to a life insurance policy, the premium may be affected. When monitoring a life insurance policy is it also wise to become aware of the last conversion year. The last conversion year is the last year that a term life insurance policy can be converted to a permanent life insurance policy. If changes are made within the allowable conversion period evidence of insurability may not be required.

It is not difficult to monitor a life insurance policy. The insured should have a copy of the policy to review as well as any summaries. If the policy cannot be located, the insurance agent or carrier has access to policy information and can help the policyholder make the necessary changes. Monitoring also offers insured persons a piece of mind knowing the current policy meets coverage needs.