Is a 20-year-term life insurance policy as valuable as it was 10 years ago?
The answer depends on whom it protects.
Time and significant life events can reshape life insurance needs. Coverage you pick up as a single 20-something renting an apartment probably won’t hold up well if you buy a home, get married and have children.
Failing to update your policy or take on additional coverage could leave your loved ones without important financial protection – just the kind of situation life insurance is designed to prevent.
Staying proactive is one of the best ways to avoid such a dilemma, said Brenda Silva, a life insurance specialist with AAA Northeast. She recommends looking at coverage needs once every three to five years and after significant life events.
Regularly conducting a needs analysis – examining factors including debt and final expenses – ensures your plan meets your current needs. It also allows you to gauge whether it’s time to take on a second or third policy, a move occasionally made by those who have longer-term plans.
Think about it like this: A 30-year plan for $100,000 would go further in the late 1980s than it would today. You could walk away from the plan in 10 or 15 years, but you’d essentially lose all the premium payments you’d made until that point.
Instead, some go with a second policy to complement the protection they’re already carrying.
Whether you’re buying your first policy or an additional plan, there are usually benefits to acting sooner than later. Premiums generally rise as you get older, as does the possibility of coming down with a medical condition that could bump costs or limit your eligibility for coverage.
To speak to a AAA insurance agent or get a quote, visit AAA.com/Insurance.