Why “Set It and Forget It” Life Insurance is a Risky Move: The Case for Regular Policy Updates
Life Changes—So Should Your Clients’ Policies
Life insurance isn’t a one-and-done transaction. Yet, many financial professionals see clients treat it that way. The reality? A policy purchased five, ten, or twenty years ago may no longer align with a client’s current financial reality. Whether due to marriage, children, divorce, or homeownership, failing to update coverage can leave families financially exposed. As professionals in life insurance, annuities, and long-term care, our responsibility extends beyond selling policies—we must ensure they remain relevant and effective over time.
The Hidden Risk of Outdated Coverage
Many clients assume once they have a policy in place, they’re covered. But here’s the problem:
Major Life Events Change Financial Responsibilities:
Marriage: A single-person policy won’t cut it when a spouse depends on that income.
Children: College tuition, childcare, and future security require increased coverage.
Divorce: Outdated beneficiaries and coverage levels can cause unintended consequences.
Homeownership: A mortgage is a long-term liability that insurance should account for.
Business Ownership: Buy-sell agreements and key person insurance must be reevaluated as a business grows.
Most Clients Are Underinsured
22% of policyholders know they don’t have enough coverage (Choice Mutual, 2023).
Only 50% of U.S. adults own life insurance, down from 63% a decade ago (LIMRA, 2023).
30% of Americans would face financial hardship within a month of losing a wage earner (Choice Mutual, 2023).
Outdated Beneficiaries: A Costly Oversight
One of the most overlooked (and dangerous) mistakes is failing to update beneficiaries. This isn’t just about making sure money goes to the right person—it’s about avoiding legal disputes, unintended payouts, and prolonged probate battles. Financial professionals should proactively review and adjust beneficiaries to:
Remove ex-spouses post-divorce.
Add new children or grandchildren as intended recipients.
Align policies with estate planning strategies to optimize tax efficiency.
Industry Standards Are Failing: Where We Need to Improve
Employer-Provided Life Insurance Creates a False Sense of Security
Many employees assume their company’s life insurance is enough, but these policies typically cover only 1–2x salary, far less than the recommended 10–15x salary for financial security.
Coverage is not portable—a job change or layoff leaves families exposed.
Agents Aren’t Proactively Reviewing Policies
Annual reviews should be a standard practice. Too often, professionals focus on new sales while neglecting existing clients.
Policyholders are rarely reminded to reassess their coverage, leading to underinsurance and outdated beneficiaries.
The Industry Prioritizes Initial Sales Over Long-Term Suitability
Too many policies are sold based on short-term affordability rather than long-term suitability.
Clients are often not educated about hybrid policies (e.g., life insurance with long-term care riders) that may better serve them as they age.
A Better Approach: How Financial Professionals Can Lead the Change
1. Implement a Structured Review Process
A proactive policy review checklist should include:
Coverage Assessment: Does the policy amount still meet the client’s financial needs?
Beneficiary Review: Are designations still accurate and aligned with estate planning?
Policy Type Evaluation: Is a term conversion, hybrid policy, or annuity addition appropriate?
Health & Lifestyle Updates: Can the client qualify for better rates due to improved health or quitting smoking?
2. Educate Clients on the Real Cost of Procrastination
Show clients real-life scenarios where outdated policies led to financial distress.
Use data-driven insights to highlight the financial gap left by insufficient coverage.
Explain how delaying updates costs more in the long run due to higher premiums as clients age.
3. Leverage Digital Tools for Engagement
Use automated reminders and CRM systems to schedule annual policy reviews.
Offer online policy checkups where clients can quickly assess whether updates are needed.
Provide personalized, data-driven reports that show coverage gaps and potential solutions.
Final Thought: Elevating the Industry Starts with Better Service
As financial professionals, our job isn’t just selling policies—it’s ensuring lifelong financial protection. That means shifting from a sales-first mindset to an advisory-first approach, where ongoing policy management is the standard, not the exception. Clients trust us to safeguard their families. It’s time we take that responsibility seriously.
What’s Your Next Move? Are you proactively reviewing your clients’ policies? How do you ensure coverage keeps up with life changes? Let’s raise the industry standard—share your thoughts in the comments or connect with us to discuss best practices for policy updates.
