Why Personal Coverage Reviews are Important

Claire Gallagher

By Claire Gallagher | February 20, 2018

A personal coverage review is more than just an update on your life insurance protection. Though it may touch on savings, income, retirement plans and other financial goals, the purpose is to make sure that the life insurance you have in place is still adequate and aligned to your current situation. Life insurance is not a “once and done” decision, as the needs and purposes behind life insurance changes over the course of a lifetime. The review could discover that you simply need to update your beneficiaries, or it might lead to a complete reworking of your financial strategies.

The “personal” in the phrase “personal coverage review” is intentional, as the process starts with a review of what has changed in your personal life. Whether you get a promotion at work, have another child, or get married or divorced, things are always in flux. That is why it is essential to have a personal coverage review with your financial adviser on a regular basis to make sure that your financial plan keeps up with your life.

For example, I have had a client who went through a divorce. While I’m sure a personal coverage review was the last thing on his mind, when we sat down and discussed his new situation, it really helped clarify things for him. Yes, we updated his beneficiary designations, but he also had many other changes in his financial situation, not only in terms of his income and his assets but also in terms of his financial goals.

It is also especially important to keep death benefits aligned with the current financial circumstances. If a business owner has a buy/sell agreement in place that is to be financed by a life insurance policy, then the death benefit of the policy needs to keep pace with changes in the business. If the business has increased in value but the death benefit hasn’t changed, then the buy/sell agreement won’t work as it is supposed to, which is to provide liquidity for the business and ensure its ongoing success.

As advisers, we understand that our clients can live such busy lives, so sometimes having to arrange a meeting can seem overwhelming, and it can sometimes be a very difficult conversation to have if there are some hard truths that need to be faced. Not all clients are going to follow through with setting up personal coverage reviews, but I try setting the expectation initially when I start a relationship with a client that our success depends on regular contact and they should expect an in-depth review every year. I strive to learn about my clients’ lives both personally and professionally, which includes getting to know their family, so that, in the event that something happens, they know who I am. It is our job to make sure our clients feel comfortable reaching out on a variety of issues involving their own financial and personal planning.

So, if you haven’t sat down with your financial adviser in a while, set a reminder in your calendar to give them a call and set up an annual review. You will thank yourself later.

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