If you own life insurance, you should review it periodically to make sure it is still performing as intended. Life is not static and neither are your life insurance needs.
The most obvious time to review your coverage is when you experience a significant change in your life. This would include such events as getting married/divorced, having a child, changing jobs/getting a promotion, buying/selling a house, and starting/selling a business. Any of these events could necessitate a change in coverage and/or a change of beneficiaries.
Although major life events can certainly indicate that a review is in order, a policy review can and should be performed regularly. The type of policy will determine how often a review should be performed. Generally, term insurance need not be reviewed as often as other types, but even term should be reviewed at least every few years.
All other types should be reviewed annually because of the non-guaranteed components. Interest rates, and in the case of variable life, the markets themselves, affect the non-guaranteed components of a life insurance policy.
Interest rates affect the dividend rate of a whole life policy, the crediting rate of a universal life policy, and the cap rate of an indexed universal life policy. Over the long run, the non-guaranteed portion of a policy has the potential to provide a greater benefit than the guaranteed portion, but it also has the potential to doom the policy to lapse, so it really must be monitored.
Another reason to periodically review your coverage is that from time to time, insurance companies do have financial difficulties. While seldom have policyholders actually lost money due to an insurance company bankruptcy, the psychic trauma of having limited access to funds is something to be avoided. Policy reviews can indicate if an insurer is experiencing financial difficulty.
A change in health can also be a reason to review your policy. If you have quit smoking or lost a substantial amount of weight, perhaps you can qualify for a rate reduction. And if your health has taken a turn for the worse, a policy conversion may be in order.
Doing well financially is another reason to review your policy. Perhaps the policy that you procured many years ago for family protection should now be owned by a trust to help with estate taxes.
Making sure the beneficiaries are correct is also a reason for reviewing the policy. While advisable to name a secondary beneficiary, that in and of itself doesn’t ensure that things will go smoothly.
If the primary beneficiary has died but the secondary beneficiary cannot locate the death certificate, that creates a problem. The insurance company has an obligation to pay the primary beneficiary once they’ve received proof that insured has died. In order to pay the secondary beneficiary, they need proof that the insured and the primary beneficiary have died.
If you have taken the time and trouble to procure a life insurance policy, it certainly makes sense to take a little time each year to make sure that it will still do what you want it to do.