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Financial Planning and Life Insurance Reviews

Financial Planning and Life Insurance Reviews

November 01, 2022

Financial Planning and Life Insurance Reviews


Have you ever made a $400,000 mistake?  How about a $3 million dollar mistake? In my time as a financial planner, I have witnessed more than one life insurance mistake happen.  Most of these failures where preventable, with the cause of error coming from a failure to review a life insurance policy or strategy.  A few simple mistakes resulted in the loss of $400,000 - $3 million in life insurance benefits and other financial considerations to policy owners and beneficiaries. 


What happens after a Life Insurance mistake?  

When a mistake of this magnitude is discovered during a financially challenging time or after someone has passed, the realization of the loss is devastating.  The impact on financial confidence, financial behavior and discipline can be emotionally catastrophic. Sometimes the fall out of these events can extend further.  Dividing families, destroying professional relationships and impairing friendships.  The consequences to beneficiaries who may be fully or partially dependent on life insurance proceeds can force major changes in lifestyle and alter life goals forever.    


How can you avoid or reduce your chances of making such a big mistake?  


Review your life insurance strategy and life insurance policies.  Inform professional you work with; such as, your financial planner, estate planning attorney, accountant, life insurance agent and those who may be dependent on your income or life insurance proceeds.  


Consider the following actions: 

1) Review your life insurance policies with your financial planner once every two or three years to confirm they still create value for your financial plan and beneficiaries are in line with your expectations.   


2) Establish automatic payments for life insurance or reminders to pay your premium(s).  If needed, ask the insurance company to send a copy of your bill to a family member or professional to make sure you do not miss a payment.  Once a policy has lapsed, it is typically impossible to recover the benefit without getting a new policy.  If you are much older now or your health has changed, the new premium for the same amount of benefit could be more. (think 20% - 400% more).  If your health has changed drastically or you are suffering from a chronic illness, you might not be able to get a new policy at all.  

3) Make sure to update your contract information with the life insurance company as your life changes. Confirm they have your current address, email address and phone number.  Also update the contact inform of your beneficiary(s) with the insurance company. 

4) Review the beneficiary designations and make sure they match your Estate Plan and Financial Plan.  Your life will change, and your beneficiary designations will most likely change as well.  

5) Make sure everyone listed as a beneficiary is available to receive the benefit, and it will not impair their financial plan.  (Example - If someone is disabled and receiving state / federal benefits, receiving a life insurance benefit directly, might impair their care plan and/or disability benefits.)    

 6) Ask your financial planner if there are new market options, offerings or policy improvements to consider since purchasing your life insurance policy.  Sometimes you can pick up additional riders with a new policy that will further protect your financial plan.  Some insurance companies now offer life insurance policies with long term care riders, chronic illness riders and other enhancements that enable you to utilize the death benefit while you are still living.  


Changes that could warrant revising your current policy or searching for a new policy. 

1) Your health has improved or declined. 

2) Income has increased or decreased more than 20%. 

3) Family size changes, or additional family members who are dependent on your income.

4) Planning on starting a family.   

5) Desire to leave a legacy or inheritance for family, special needs child/children, charity, or community.  

6) Family has fewer members who are dependent on your income. 

7) You are within 10 years of retirement. 

8) Life insurance premiums are starting to increase annually. 

9) You are concerned you might have an estate tax issue, or your net worth is now at a level that will generate an estate tax obligation.

10) You take on a large debt or liability, such as a home mortgage or business loan.


Click Here to Schedule a life insurance review meeting today. 

Where else can I read up on life insurance?  

Most life insurance searches and articles are heavily influenced by marketing efforts of major insurance companies.  Below are a few articles and resources that can help you understand how to think about life insurance in a more personal context. 

LifeHappens.Org - educational resources, definitions, calculators and perspective on life, disability and long-term care insurance. 

Consumer Reports Article 2021

Life Insurance and Divorce 

Test Your Life Insurance Knowledge

When Life Insurance Becomes Taxable 


Cash Flow Based Financial Planning 

Sterling Edge Financial provides current and ongoing financial advice by way of Cash Flow Based FInancial Planning. Our financial planning recommendations, strategies and solutions are provided on an individual basis to our client's specific opportunities, constrains, challenges, personal values, financial behavior, financial capacity and needs.  

Our mission is to empower our clients to make more informed financial decisions.  We know our clients have hundreds of financial questions, concerns and ideas that warrant detailed discussion, clarification, examination, discovery and evaluation before a worthy and valuable recommendation or strategy can be considered or proposed. 

If you are not a client of Sterling Edge Financial and would like to learn more, schedule an initial consultation or complete a Financial Wellness Survey today.