How to review your life insurance policy every year

Review each life insurance policy once a year, ideally on or near its anniversary. Check four things: whether the coverage still matches your needs, whether the beneficiaries are right, whether the policy is on track financially, and whether the insurer is sound. Most reviews take under an hour and catch the problems that cause real harm: a lapse, an outdated beneficiary, or a policy that has quietly stopped working.

Our annual life insurance policy review checklist condenses these steps into a printable list.

Step 1: collect the paperwork

Gather the policy contract, the latest annual statement, any notices about changes, and your beneficiary forms. For term policies, note the expiry date and whether it has a conversion deadline. If you cannot find the policy, see how to find a lost life insurance policy. Keep copies where your family can find them; see where to keep your policy and who to tell about it.

Step 2: does the coverage still fit?

Life changes the amount you need. Recalculate after any of these: marriage or divorce, a new child, a home purchase, a raise or job loss, a paid-off debt, a business started or sold, a parent you now support, or retirement.

• Re-run the How much life insurance do I need? or the The DIME method for sizing life insurance. See How much life insurance do I need?.
• Include employer coverage, but note it usually ends if you leave the job. See is life insurance through work enough?.
• If you are underinsured, consider adding a policy instead of replacing the old one; see can you have more than one life insurance policy?.
• If you no longer need the coverage, look at the options before cancelling; see how to cancel a life insurance policy, and when not to.

Step 3: confirm the beneficiaries

This is the check that most often prevents a family dispute. Confirm that your beneficiary designation names the right primary and contingent people, that spellings and percentages are correct, and that no one has died, divorced you or turned 18 since the last update. A beneficiary form generally overrides your will. State law may revoke an ex-spouse's designation at divorce, but not always and not for employer plans governed by ERISA; see divorce and your ex as beneficiary: revocation-on-divorce laws. Changing the form is simple; see how to change your life insurance beneficiary. If you named a minor, review naming a minor child as life insurance beneficiary.

Step 4: check that premiums are being paid on time

A policy that lapses protects nobody. Confirm:

1. Which bank account or card pays the premium, and that it has not expired or closed.
2. That the premium matches the contract. A higher number than before means a rate change, a policy lapsing risk, or a premium that was not guaranteed.
3. The grace period and who gets the lapse notice. Many states let you name a third party to be notified; see life insurance grace periods and lapses.
4. Whether automatic payments are set up. The SOA's 2021 study of post-level term policies found that policyholders paying by automatic draft lapsed less often.

Step 5: look at the policy values

This step depends on the type of policy.

For any flexible permanent policy, request an how to request and read an in-force illustration every year or two and read the guaranteed and current columns. A cash value that fell this year even though you paid the planned premium is a warning that needs an answer from the insurer. If you have taken a policy loan, check the balance. Interest accrues, and an unpaid loan can exhaust the policy; see life insurance policy loans: how they work and what they risk.

Step 6: check the riders and the ownership

Confirm that the riders you pay for are still useful, for example a child term rider after the child is grown, or a waiver of premium rider you still need. Make sure the owner and insured are who you think. A policy owned by a trust or a former business partner needs special care; see policy owner vs insured: why it matters.

Step 7: check on the insurer

Look up the insurer's current financial strength rating from AM Best, S&P, Moody's or Fitch, and find out whether the company has been sold or has transferred your block of policies; see when your life insurance policy is sold to another company and closed blocks: what happens to policies a company stops selling. A ratings downgrade is not a reason to panic, but it is a reason to read about the company. For the safety net, see state life and health guaranty associations. Most policyholders will not need it, but a large policy may exceed your state's limit.

A hypothetical review

Say a 48-year-old with a 20-year term policy, a small universal life policy and a workplace benefit sits down on the term policy's anniversary. She finds that her ex-husband is still listed as beneficiary on the universal life policy, that the term policy has eight years left while her youngest child is 6, and that the UL account value dropped $900 this year. She files a new beneficiary form, decides to buy a second term policy to cover the years after the first expires, and asks the insurer for an in-force illustration of the UL policy. In an hour she has fixed three problems.

When to review more often

Do not wait for the anniversary after a major event: divorce, a death in the family, a new child, a large inheritance, a change in tax law that affects an estate plan, a notice that your insurer will raise charges, or a serious health change.

Key takeaways

• Review each policy once a year and after any major life event.
• Check four things: the coverage amount, the beneficiaries, whether the policy is financially on track, and the insurer's condition.
• Out-of-date beneficiary forms and lapsed payments cause the most preventable damage.
• For universal and other flexible policies, request an in-force illustration regularly and find the projected lapse age.
• Keep the policy and a short summary where your family can find them.