Your life insurance policy was designed to provide financial protection for your family after your death, when the loss of your income has a drastic impact on their ability to maintain their current standard of living. Life insurance policies are not the kind of product you buy and forget about. Instead, you need to continually update your policy after big life changes, including a move. (To learn more, read Life Insurance: How To Get the Most Out Of Your Policy.)
TUTORIAL: Intro To Insurance
Updating Administrative Information After a Move
The first thing you must do is update your address and bank information once you move. You need to make sure that the policy premiums continue to get paid, as a late payment could result in a lapse. If your health has changed since you first took out the policy, then a lapse could spell disaster.
You also want to make any appropriate changes to your beneficiaries. As your children age you may want to make them primary beneficiaries with your spouse. Additionally, divorce, separation and remarriage (things that often precede a move) may create a change in who your primary and contingent beneficiaries should be.
Adjusting Your Death Benefits
Your death benefit amount may no longer be appropriate once you move. If you purchased a new home and have increased the amount of your debt, then an increase in death benefit is needed. If you have downsized and reduced your debt, you may want to decrease your death benefit or surrender any supplementary term policies.
Debt isn't the only consideration in your death benefit. Before you reduce the benefit on your policy, consider all the uses your family may have for the death benefit including paying college tuition, funding retirement plans and replacing your income.
Taking Out a New Term
A new home may mean a higher debt for a longer period of time than your current policy protects you against. If you've taken out a new 10-year mortgage, then your old term policy, which expires in 10 years, will not allow you sufficient coverage. Adding another term policy may be a good, affordable solution.
The Bottom Line
It is important that you look at your entire financial picture as a whole and consider the entire financial future of your beneficiaries when you consider making changes to your life insurance policy. In the same vein, it's important that you look at these pictures when you consider making no changes. Adjust your life insurance policy so that the benefits adapt to your new obligations and you can ensure that your beneficiaries get what they need after you're gone.