Life insurance awareness month is here again.
It’s time to review my list of things you should do this month to clean up your life insurance.
Outside of weird people like me who really dig into how life insurance works, most people have their life insurance on a set it and mostly forget it mode.
Unfortunately, that’s one of the worst things you can do if you want your life insurance to be there when you need it.
In this article, I’m going to walk you through a list of practical and specific things everyone should do with their life insurance this month.
Before I get started, a quick history lesson on Life Insurance Awareness Month.
What is Life Insurance Awareness Month?
Life Insurance Awareness Month was started many years ago by the Life Foundation to get people thinking about their life insurance. Each year, they develop a promotional campaign to help educate consumers and agents about life insurance.
As part of that, they also choose a spokesperson. Past spokespeople include Molly Shannon from Saturday Night Live, Chris Noth from Sex and the City and former NBA star Lamar Odom.
This year’s spokesperson is former IndyCar driver Danica Patrick. Here’s a video message from Danica.
Now that you know what life insurance awareness month is all about, let’s talk about some specific things you should do during life insurance awareness month.
1. Update your contact information
The first thing you should do is make sure that all of the insurance companies you have life insurance with have your current contact information. Along with your address, phone and email, make sure that if you changed your name, to also change it with the insurance company.
Having current contact information with the insurance company is important because insurance companies mail out premium due notices, annual statements and other important notice to the address they have on file.
If something happens and you die, whoever is taking care of your important paperwork will get these notices. This will alert them to the fact you had life insurance if you didn’t tell them.
They won’t get these notices if you have the wrong contact information on file with the insurance company.
Don’t forget about any individual life insurance you may have purchased through work. Changing your address with your employer doesn’t always change it with the insurance company.
2. Update your beneficiaries
Did you get married or divorced in the last year but forget to change your beneficiaries? You’d be surprised that many people fail to update their beneficiaries after they get divorced and then the life insurance gets paid to the ex-spouse.
Did you get married but still have your parents as beneficiary?
Did your kids turn 18 and now you want to name them beneficiary instead of another family member you named?
This is the time to review your beneficiaries.
I always suggest if you aren’t sure who the beneficiary is, just fill out a new beneficiary change form and send it in to the insurance company.
3. Review your life insurance riders
A child term rider is not automatically removed since you may have had additional children since you took out the policy. That means you’ll still be paying for it. You also might have a term conversion option available for your kids in that rider if needed.
You should also review any whole life dividend options.
4. Review any rated life insurance
If you had a medical condition when you got your life insurance, it may have been “rated”. This means you had to pay a higher premium than other people your age because of your health.
You could also have been required to pay an additional premium called a “temporary extra” which you want to make sure comes off when it’s supposed to.
Work with your agent to see if you can do anything better now.
5. Pay your loan interest
If you have an outstanding loan against your policy, you’ll receive a loan interest statement from the insurance company every year.
Many people just ignore their loan interest statement and don’t pay it.
You want to pay this loan interest. Otherwise, it’s taken out of any cash value in the policy. Then, you’ll be paying interest on the interest this coming year.
Ignored long enough, it’s possible that your life insurance could lapse because the interest is making the loan build higher and higher every year and eating up the cash value.
6. Replace underfunded universal life insurance
If you have any universal life insurance, there’s a strong possibility that your life insurance is underfunded and will lapse if you don’t pay additional premium when you are older.
If you don’t know it, I hate universal life insurance because it’s almost always underfunded and that increases the chance it won’t be there when you need it.
I personally think you should get rid of it if you can and it makes sense (along with any loaned up policies you aren’t paying the interest on).
7. Take advantage of any term conversion options
Term insurance you own often has a conversion option. A conversion option allows you to change a term policy that will expire into a permanent policy you can keep that won’t expire (unless it’s converted to universal life that’s underfunded!)
In addition to the term life insurance you own that may have a term conversion option, group term life and child term riders also may have term conversion options.
If you or someone you have covered on a term policy (or rider) has a health issue, this might be the only opportunity to obtain permanent life insurance.
8. Own your life insurance outside of work
Many people rely completely on their employer’s group term life insurance.
What happens is that most people outlive this group term and either it starts reducing because of an age reduction schedule or ends when they leave employment.
Owning your own life insurance allows to lock in your own rates that aren’t subject to an attained age rate structure (rates often increase every five years on group term).
It also give you control of your life insurance. Employers change their group term life all the time and in some cases, they’ve also been known to discontinue or reduce it.
9. Have at least enough permanent life insurance for a funeral
The average funeral costs about $7,181. I suggest people expect a funeral to cost between $10,000 to $20,000. You should have at least that much permanent life insurance to cover the cost of your funeral.
It’s probably a good idea to have at least $25,000 of permanent life insurance if you are over 50 and at least $50,000 if you are under 50.
That’s because you’ll be a lot older when you die and the average cost of a funeral will increase over time.
You want to have at least enough life insurance for the cost of a funeral so your family or friends don’t have to pay for your funeral or lean on other people to donate to a GoFundMe funeral campaign.
Arrange to take care of your own funeral expenses.
10. Increase your life insurance
You’d be surprised at the number of people who only have the life insurance their parents took out for them when they were kids.
Everything cost more today than back then. You’ve likely got a lot more obligations like a family, mortgages or other debt than you did back then.
Term life insurance isn’t as expensive as you might think and you should check into at least $200,000 to a $1,000,000 of additional term life insurance on top of the $25,000 to $50,000 of permanent life insurance you should probably own.
11. Totally organize your life insurance information
Life Insurance Awareness Month is a good month to sit down and totally organize your life insurance paperwork so it’s all in one place.
It’s not unusual to have life insurance through several companies on your own as well as through your employer.
I wrote a complete guide on how to organize your life insurance you can use to get a complete handle on how to do exactly that.
12. Find a life insurance agent
An interesting thing about life insurance is that it costs the same whether you have an agent or not.
Why go it alone?
Work with a life insurance agent to help you get a handle on your own life insurance.
Let me know if you need help.
Life Insurance Awareness Month is a great opportunity to review your life insurance. Use my to do list above to take this time to bring your life insurance up to date.
Let me know in the comments if you used my suggestions or how I can help improve these suggestions.