Reviewing your life insurance: just like spring cleaning

Spring is often a time of renewal: new house, new car, new travel – sometimes even a new relationship! All of which should prompt us to think about our life insurance coverage.

Granted, no one really likes to talk about life insurance (except insurance specialists, of course). That’s why so many people treat their insurance portfolios like some kind of machine they can set once, and then ignore forever.

Actually, life insurance lives up to its name:  it’s about life – those of our spouses, our children and our other survivors – and that’s why all kinds of life events should trigger a reconsideration of our coverage. Here are some examples of trigger events. If any of these ring a bell with you, it might be time to talk to your financial services professional!

  • Legal separation
    If you forget to change the beneficiaries for your policy, in the future your new spouse could end up with fewer rights than your “ex” and even his or her children. Any change in your marital status should immediately be reflected in your life insurance policy.

  • Children
    Life insurance exists so that your spouse, your children and sometimes your grandchildren can maintain their standard of living and financial security, and carry out the plans you have made for them (education, for instance), in the event of your death. If more children arrive, update your coverage. It might also be a good idea to get life insurance for your children to protect their insurability early in life. Often, grandparents or godparents will provide a “gift” of life insurance for a child.

  • Death
    If your spouse or someone you rely on financially dies, the responsibility for protecting your dependents then falls to you – including after your own death.

  • Buying a house
    Are you raising your standard of living by purchasing a new home? Your life insurance should enable your survivors to take on the expenses associated with this more valuable asset. Have you bought a vacation home? Be aware that the capital gain on your second residence will be taxable at the time of your death. Your life insurance could help your heirs pay this tax.

  • A renovation project
    The same thing goes when you make substantial renovations. Ensure that you have enough coverage for this new asset if you want your survivors to benefit from it.

  • A new job
    If a promotion comes with a higher income, it will likely also raise your family’s standard of living. Don’t forget to protect this quality of life in the event of your death.

  • Starting a business
    You and your partners have a heavy responsibility:  you have to protect not only your respective families, but also the company’s continuity and the smooth transfer of share ownership in the event of a partner’s death. It’s better to deal with this question right from the outset by means of a partnership agreement and the appropriate insurance policies.

  • A trip
    Travel is a great pleasure, but also a risk factor. Whenever you plan a trip to a foreign country, it might be a good habit to check that your life insurance policy is still up to date.

  • Illness
    Illness can have a serious impact on a household’s financial security. This is especially true if one of your parents develops a long-term degenerative disease with age. If you die before they do, your life insurance should provide for their needs as well. Of course, the same thing applies if your spouse or children have special needs.

  • Returning to school
    The decision to go back to school could remove one spouse from the job market, leaving the other to provide for the household’s financial security during this time. The couple’s insurance portfolio might need to be changed to reflect this situation.

  • An inheritance
    An inheritance might seem like a gift from heaven, but it quickly becomes an integral part of your asset base. Assess its impact on your standard of living.  If that has risen, see if a change in your life insurance is in order.

  • Approaching retirement
    Finally, your coverage needs change as you get older. Your survivors will probably have made lives for themselves and will be less dependent on you. On the other hand, you yourself might be facing new coverage needs that would be better met by long-term care or critical illness coverage than life insurance.

Numerous studies show that a large number of Canadians – up to 40% – do not have life insurance that is appropriate for their situation. It’s spring… Why not tidy up your insurance portfolio?