How to Make the Most of Your Life Insurance Policy This Year

iQuanti: A life insurance policy is a must-have to ensure your loved ones will have coverage if you are no longer here to provide for them. However, are there steps you could be taking now to put your contract to work and ensure they'll be getting the maximum amount of value from it? This post will explore how to make the most of your life insurance policy this year.

Confirm Your Beneficiaries

First and foremost, take five minutes this year to confirm that the right people are named beneficiaries on your insurance policy. This can be done by logging on to your online account or by contacting your insurance agent directly.  

Life is dynamic, and the names you listed a year or even ten years ago may not be the same ones you'd want to receive your insurance proceeds today. There have been countless cases of life insurance death benefits paid to an ex-spouse because the policyholder remarried but forgot to change their beneficiary listing to the new spouse. Don't let this happen to you. 

Reaccess the Death Benefit Amount

Again, life is dynamic, and your needs may change as you move through your working career. You might earn more money, grow your family, and have additional dependents to care for, or one spouse may decide to stop working altogether.

Any one of these factors could shape how much your death benefit target should be. A good target to shoot for is between 10 to 12 times each spouse's annual earnings. Once per year, you should sit down with your partner, assess your current situation, and determine if additional coverage is necessary.

Ask About Conversion Options

Often, the first life insurance contract many people buy is a term life policy. However, you may now be interested in pursuing a permanent life insurance policy (such as whole life or variable universal life).

Thankfully, most term life insurance will allow for the conversion from term to permanent before the policy expires. To see if this is something that you may qualify for, read through the policy text or consult your local agent.

Consider Taking a Loan

If you've already had a permanent life insurance policy for several years, there's a good chance that the cash value component has grown. Policyholders are allowed to take out loans against it using the policy as collateral. This can be used to buy other income-purchasing assets (such as rental properties) or to start a business. 

Again, speak to your agent to find out what options you have for taking out a loan and consider how it might enhance your financial well-being this year.

The Bottom Line

Make the most of your life insurance policy this year by ensuring your beneficiaries are accurate and up to date. Consider if you need to change your death benefit amount or convert your contract from a term into a permanent policy. If you've already got permanent life insurance, then weigh the pros and cons of borrowing against it to use the cash value to grow your net worth.