New Year, New Plan: What to Know About Adding Life Insurance Coverage

The start of a new year is the perfect time to set fresh goals and reassess your financial plans. While your mind might turn to budgets and investments, life insurance also plays a key role. Whether purchasing coverage for the first time or expanding an existing policy, adding life insurance can help protect your loved ones and prepare for life’s uncertainties.

Here’s what to consider if you want to purchase life insurance in the coming year.

Why Add Life Insurance Now?

Life insurance can support your family’s future, helping to cover their financial needs if you pass unexpectedly. During times of change and uncertainty — not to mention emotional stress — having a life insurance death benefit can provide your loved ones with some financial security and stability when they may need it most.

Major life events like buying a new home, getting divorced, or retiring from your career may mean it’s time to evaluate or expand your coverage. Purchasing a new policy or additional coverage after major changes can help ensure you’re prepared for unexpected events while covering your new financial needs and responsibilities.

Reviewing your current coverage and potential policy needs early in the year can also help you lock in premiums based on your current age and health, which could potentially save you money in the long run. Going over your coverage needs at the start of the year also gives you time to make the right decisions.

5 Questions to Ask When Shopping for Life Insurance

Shopping around for life insurance can often feel complicated — but it doesn’t have to be. Asking the right questions can help you narrow options and find the coverage that aligns with your needs.

1. What Type of Life Insurance Is Right for Me?

To begin, consider which type of coverage is right for you. Term life insurance provides affordable coverage for a set period. Meanwhile, permanent options like whole life insurance are more expensive but provide coverage for the rest of your life and can offer cash value accumulation.

2. How Much Coverage Do I Need?

A good rule of thumb is to look at your current financial obligations, like your mortgage, debts, future expenses, and consider income replacement for a set period, such as 10 years. This can help determine a baseline for how much financial protection you need to provide your loved ones.

For example, you might have a group life insurance policy through your employer that’d replace your current income. However, this may not be enough to sustain your loved ones for an extended period. Buying additional life insurance can help ensure you’ll have the coverage you need, even if you leave the workforce.

3. Can I Afford the Premiums?

Once you know how much coverage you want, figure out how much you can comfortably pay in premiums. Remember, the insurer may void your policy if you can’t make your premium payments. So, you’ll want to find the right balance between the coverage and your budget.

4. Is the Policy Flexible?

Review the various options your policy offers for allowing changes over time. For example, you may need to adjust your death benefit down the road, want to add life insurance riders, or consider a term policy that converts to permanent coverage. Speaking with a financial professional can help you determine if a particular policy is a good fit.

5. How Do I Choose the Right Provider?

Shop around and request quotes from multiple life insurance providers to find the best mix of value and coverage. If you have other insurance policies from one provider, you may be able to bundle coverage. Also, research insurers to ensure they have a good reputation, are financially stable, and have good customer service reviews.

As you consider your policy options, don’t be afraid to ask potential insurers or agents questions about their policies and your needs. Buying additional life insurance coverage is an important part of your future financial plans, so you want to feel comfortable along the way.

What to Know About Beneficiaries

A beneficiary is the person who receives your policy’s death benefit if you pass while the policy is active. Naming a beneficiary helps ensure your life insurance serves its intended purpose, providing financial security to your loved ones after you’re gone.

It’s common to name a spouse, child, or close relative as a primary beneficiary. But you can choose multiple beneficiaries and divide the death benefit to your wishes. For example, you may give 50% to your spouse and 25% each to your two children. You could also name an organization important to you or a charity close to your heart as a beneficiary of your policy.

A contingent beneficiary is who the policy’s death benefit reverts to if the primary beneficiary has passed or can’t be found. In that case, you could name your spouse your primary beneficiary and your kids your contingent beneficiaries. If you don’t name a beneficiary, your death benefit may have to go through the probate process.

It’s important to review your beneficiaries regularly. The start of a new year is a great time to review and update your beneficiaries, especially if you’ve had any major life changes in the past year. That way, you can feel confident your death benefit aligns with your priorities and who you want to receive it.

Exploring Riders and Other Customization Options

Life insurance riders are optional add-ons to your policy that lets you customize coverage to better suit your needs. Riders can provide extra protection and flexibility, but they also come with additional costs. Depending on the year ahead, you might want to customize your coverage with these options.

Some common riders include:

• Accelerated death benefit rider. This provides access to a portion of your death benefit, if you’re diagnosed with a qualifying illness, to help cover medical costs.
• Waiver of premium rider. This covers your policy premiums if you become disabled and can’t work, so it helps ensure coverage stays active.

Riders can help tailor a policy to your specific needs, but it’s important to weigh the cost of riders against the potential benefits to make sure they fit within your budget.

Using Life Insurance as a Wealth-Building Tool

Life insurance isn’t just about protection — it can also be a tool for building long-term wealth. Certain policies, such as whole or universal life, accumulate cash value over time. This cash value grows tax-deferred and can be accessed through loans or withdrawals, providing a resource for emergencies or major expenses. Though, this may reduce the amount of your death benefit.

It’s important to note that using life insurance for wealth building should align with your broader financial goals and strategy. Policies designed for this purpose may have higher premiums. So, consulting with a financial professional to explore how these policies may fit your goals can help determine if the benefits outweigh the costs for your situation.

Adding Life Insurance and Expanding Coverage

Remember that life insurance is just one part of a comprehensive financial plan. Combined with other strategies, like retirement savings and an emergency fund, it can create a solid strategy for your future needs.

Adding life insurance is a proactive step towards protecting your loved ones. Start this next year strong by reviewing your financial goals and taking steps to ensure your family has the security they need. Don’t hesitate to reach out to a financial professional if you could benefit from having them take a look at your needs and provide personalized guidance.

Colonial Penn is here for you!

Colonial Penn has specialized in making life insurance simple and accessible by offering it directly to consumers since 1957. Click here to learn more.

Insurers and their representatives are not permitted by law to offer tax or legal advice. The general and educational information here supports the sales, marketing or service of insurance policies. Based upon individuals’ particular circumstances and objectives, they should seek specific advice from their own qualified and duly-licensed independent tax or legal advisors.