Life insurance policy may need to be updated

Sep 28, 2011

Families should discuss life insurance as a part of their future financial plan.

Life insurance is an important topic that families should discuss. Jill Boynton of said it is an essential part of financial planning for the future and it needs periodic updating.

"That policy you purchased years ago may have been the right type and amount for your situation," she writes, saying that it[']s a good idea to check how much coverage is needed and for how long. "But over time it’s likely your financial situation has changed. There are many reasons for taking a fresh look at your life insurance."

She said life insurance is important during working years, as it will help replace income and help family with loans if a premature death were to occur. Changes that may occur that cause a need to shift life insurance include getting divorced, birth of a child, retirement, an increase or decrease of assets and having grown children who no longer need support, according to Boynton.

AskMen's website said the most basic way to calculate life insurance is to replace the annual income until retirement. For example, a person who earns $40,000 a year and has 20 years until he or she retires, will need a life insurance policy worth about $800,000. 

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