How to review & adjust your term life insurance coverage

When you bought term life insurance, you took an important step toward safeguarding your loved ones financially. Reviewing your coverage periodically is a great way to help keep them protected as circumstances in your life inevitably change.

Here's what to consider as you revisit your coverage—and when to do it.

It's ideal to review your term life insurance contract at least annually, but life can be busy. You may forget to check on it, even if things have happened that may prompt a need to adjust your beneficiaries or coverage. The most important times to review your term insurance coverage are these three:

Life's biggest joys and sorrows often have major financial implications. Getting married, bringing a child into your family, losing a job and other life events may affect your coverage needs.

To avoid unwanted gaps in coverage, revisit your life insurance needs at least a few months before your existing contract ends. If you own a business, still have dependent loved ones or owe significant debts, you may want to renew your coverage or purchase a new contract.

Your term life insurance may include a provision that allows you to convert term to permanent coverage within a certain time period—typically no later than the end of your initial term (the level-term period).

Your contract also may allow you to keep your coverage in force beyond the level-term period. However, when you reach the renewable period, premiums generally increase significantly and will continue to increase every year thereafter. During the renewable period, you won't be able to convert term coverage to permanent.

Opportunities like these generally don't require new medical underwriting, so you don't want to miss the chance to update your coverage before these deadlines pass—especially if your health has declined.

Reviewing your coverage starts with identifying the role term life insurance currently plays in building your financial house. Not sure how to evaluate life insurance policies? Consider these factors:

• Death benefit. Do you have enough coverage or do you need to increase coverage for your beneficiaries?

• Term length. Does the term length you selected still make sense? Is it too long? Too short?

• Beneficiaries. Who would receive your contract's death benefit if you passed away tomorrow? Do those people still rely on you? Do you need to change the percentage each beneficiary would receive, add or subtract beneficiaries or change contingent beneficiaries?

• Riders. Could you access a portion of your contract's death benefit during your lifetime if needed and under what circumstances? Can you renew your contract when the initial term ends?

One or more of these areas may need adjusting if your life has changed since you took out your contract.

Should I convert my
term life insurance?

If your contract offers this opportunity, it's important to consider
it before it expires.

Learn more about term to permanent life insurance contract conversions.

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One simple method for determining your life insurance needs is to multiply your remaining working years by your annual income. This method estimates the future income your survivors would lose if you died prematurely. You also can use Thrivent's life insurance calculator to get an idea of your needs.

Certain life events may prompt you to reevaluate your coverage amount. If you need to adjust your term life insurance coverage to account for a new dependent, career shift or any other life change, you might give some thought to these aspects so your updated contract can meet your needs for years to come.

You'll typically pay less money for more coverage the younger and healthier you are. Buying more coverage than you think you need when you have the chance can be as cost-effective as waiting and getting additional coverage later.

You can have more than one insurance contract, and some people use two or more smaller contracts with different lengths to match different needs. This laddered coverage strategy can be a strategic way to protect your loved ones rather than getting a single large contract.

As you're reviewing your term life insurance, you may realize you want or need to keep the policy going. One reason it's important to be aware of this before your existing contract ends is you may have options that don't involve getting all new quotes or undergoing exams. Here are two ways to extend term coverage:

• Renew. If your contract is renewable, you'll have the option to buy the same amount of coverage one year at a time after your initial term ends. You won't have to requalify medically, but your premiums likely will increase each year.

• Convert. If your contract is convertible, you'll be able to turn part or all of your term coverage into permanent coverage without need to requalify medically. Compared to term, permanent coverage costs more but has additional benefits, including cash value accumulation and an extended death benefit.

Read more about renewable and convertible term life insurance contracts.

Term life insurance is a flexible option that you can adjust as your personal and financial needs shift. By reviewing your contract when your life changes, before conversion deadlines and before your term expires, you can feel more confident knowing you’ve done your best to provide for your loved ones.

A Thrivent financial advisor can talk through your options and help you make changes to your coverage.