By Karla Sullivan
The Federal Trade Commission reminds us that April is Financial Literacy Month, which offers information on consumer protection, credit, finance debt, loans , insurance, investments and other services that will help you spend wisely. It is also a great time to re-examine your life insurance.
“If you want to learn about everyday financial issues, like saving and shopping, credit and debt, buying a home or car, looking for a job or paying for school, the FTC has information for you,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.
“Financial Literacy Month is an ideal time to learn – or teach others – the importance of consumers’ rights, and how to file a complaint if something goes wrong,” according to their latest press release.
Most people overlook evaluating their insurance needs. Many will buy a policy, shove it in a drawer and never open the drawer again unless they need to file a claim. Many life changes need to be considered and your insurance may have to be updated to include those changes, such as the arrival of a child that may prompt you to buy additional life insurance. Even checking to see if certain changes that you have made is cause for a discount in your insurance plan. Generally, an individual’s life changes every 7 years.
It is imperative to calculate the following:
Your Financial Situation
Constantly analyze what you need today and what you will need for the future, figuring in your dependent status. What kind of standard of living do you want to maintain? What kind of future are you considering such as college education and debt?
Use a life insurance needs calculator to help you assess the best amount.
Your Life Insurance Agent
Have a trusted agent that keeps in contact with you periodically to review your current situation and to offer updates on policy information. A good agent will be able to answer questions concerning how much it may take to pay off your debts. Make sure you understand your policy’s duration, rate of return and death benefits. Rate of return refers to policies with a cash value. Not all policies have this. Understand your policy’s duration, death benefits and any riders you may have like waiver of premium, living needs benefits or child riders.
If you did not get the highest classification when you applied for the policy, you can improve on that if your health improves. If you were a smoker and no longer smoke after 12 months, can you adjust your premium? If you run into financial trouble, what kind of options can the insurance company provided? If you run into financial trouble and cannot afford your premiums, do not just cancel your policy. You may be able to reduce the term length or face amount to save on your premiums without sacrificing your policy.
Your financial needs will change as you age, especially when you are closer to retirement age. You should speak to your agent about the terms and conditions of your policy as you age. Many term life policies have conversion privileges where you are able to convert your policy into a permanent form of insurance with no proof of insurance required. This is a good option if you have had significant health changes or just want a permanent policy to cover your final expenses.