When do I need to update my life insurance policy? (2024 Update)

It’s tempting to think of life insurance as a financial product that you buy once and forget about. In actual fact, nothing could be further from the truth.

Few things in our lives remain the same forever. When life changes, so too should your life insurance policy.

But when exactly should you update your life insurance cover?

In this article, Acumen Financial Partnership provides practical life insurance advice to help keep your policy up to date and fit for purpose.

What is considered a ‘life change’ for insurance

It’s highly unlikely that your first car and home will be the ones you drive and live in respectively through to retirement.

Things change. Lifestyles evolve. Needs and expectations alter with age and experience.

Starting a family, greater managerial responsibility, relocations and renovations are among the many major life events that shape our financial outlooks.

Your life insurance cover should also adapt to suit your situation.

Far from being a one-off solution, life insurance is there to be tweaked as and when necessary.

Whilst the terms of your policy may have been ideal at the time of purchase, they won’t necessarily remain suitable over the duration of such a long-term investment.

The harsh reality is that if you fail to keep your insurance cover up to date, your dependents may not receive adequate protection when they need it most.

Reasons for changing life insurance policies

The message that we hope you’re receiving loud and clear here is that you shouldn’t be afraid to amend your life insurance cover to suit your changing requirements.

It’s a sensible idea to review the terms of your life insurance policy every 12 months to ensure it still provides your dependents with enough protection.

You may not need to change anything at all. However, if any major life events, such as those listed below, occur then you would be well-advised to speak to your provider or a financial adviser to review your life insurance cover.

1. House move or remortgage

Moving to a bigger home or remortgaging will inevitably increase your debt. In such cases, you should seek to increase your cover accordingly to ensure your dependents are well-placed to pay off your new mortgage.

2. Paid off mortgage

On the flipside, you may find yourself in the fortunate position of paying off your mortgage sooner than you expected. In which case, you can reduce your amount of life insurance cover and cut down your premiums.

3. Growing family

There are few greater joys in life than welcoming a new child or grandchild into this world. With every new addition you may want to revisit your life insurance policy to ensure it protects the entire family.

4. Rising property value

Your children may have to pay 40% inheritance tax (IHT) if your estate is worth more than £325,000 although this threshold rises to £500,000 for children and grandchildren if you have a family home to bequeath.

As your home’s value rises, you may want to increase your life insurance cover (and make sure it is written in trust) to reduce the IHT burden of your dependents.

5. Divorce

Following a divorce, you may not want your life insurance to pay out to your former partner. Most providers allow you to change the beneficiary on your policy but bear in mind this may require their written consent.

6. Bankruptcy

Sadly, financial problems can sometimes be so serious that bankruptcy is inevitable. However, do make sure you get proper advice on any life assurance policies that you want to keep hold of.

There is a short period of time during which you can “buy back” the life assurance policy from the Trustee in Bankruptcy.

If you don’t act quickly, the Trustee in Bankruptcy will get to keep the proceeds of a policy which was set up to protect your family.

7. Health changes

If you have whole life insurance, your insurer will likely insist on reviewing your premiums regularly after the first few years of locked-in premiums.

In this case, you’ll need to provide up-to-date health information with every subsequent review. If your health changes in any way, you may need to pay higher premiums.

Conversely, if you have level term life insurance your premiums are guaranteed to remain the same over the term of your policy. You pay a fixed amount regardless of changes to your health, which you generally don’t need to declare.

However, there are some circumstances when you might want to voluntarily inform your insurer of health changes.

For instance, if you’ve made positive lifestyle changes, such as giving up smoking or losing a significant amount of weight, which you’ve maintained for at least a year, your insurer may agree to decrease your premiums accordingly.

Find out more about life insurance.

How to change life insurance

Many, but not all, insurance providers will allow you to change the terms of your life insurance cover after you’ve purchased it.

Check your policy documents carefully or speak to your provider directly to find out whether you can make any changes.

All is not lost if you can’t. You can buy additional cover to supplement your existing policy or you could replace the old policy with a new one and then cancel the original plan.

Do make sure the new policy is in place before you cancel the original plan! This can sometimes lead to a better deal.

Life insurance advice from Acumen

Such decisions require careful consideration, and Acumen is here to assist with straightforward and impartial life insurance advice to support your decision-making process.

For more information about our life insurance services, or to arrange a consultation with one of our experienced advisers, please contact us today by calling 0151 520 4353 or email us at [email protected].

NB: This blog was first published on 30 October 2021 and has since been updated to provide the most accurate and up-to-date information available.