Skip to main content
Toggle Menu of ADA WebSites
ADA Websites
Toggle Search Area
Toggle Menu

Tips for Refreshing Your Life Insurance Portfolio

Woman sitting at a table looking at her laptop and writing in a notebook
Dental Practice Success logo

Many of us are facing loss and uncertainty as the COVID-19 pandemic evolves and impacts our lives and businesses. As we react to this unprecedented health crisis, the importance of being financially prepared for whatever the future may hold is reinforced. Now more than ever we encourage you to review your insurance coverage to make sure it is up-to-date and adequate for your needs. I’ve identified three areas that can help ensure your insurance and financial records are current and well-structured to help protect your interests and that of your heirs.

Periodic policy and beneficiary designation reviews

Life insurance is a financial product that doesn’t always get the attention it deserves. Some people may purchase a policy and then forget about it, thinking they have tackled that task and can now cross it off their list. However, if you own insurance coverage, you should be certain to conduct thorough, periodic reviews to help ensure adequate insurance protection and to improve financial planning.

Many people may also forget to update their beneficiary designations on insurance policies and financial records as life events unfold, such as marriage, divorce, the birth of a child or even death. Before they know it, years pass and the designations are outdated. Consider taking some time to review and make any necessary updates to your beneficiary designations.

Refreshing tips:

  • Conduct a thorough policy review to update mailing and billing addresses, contact information, premium frequency, stored payment cards or bank accounts, beneficiary designations, collateral assignments and coverage amount.
  • If there isn’t time to conduct a thorough policy review, at a minimum be sure to verify your current beneficiary designation and any collateral or absolute assignments of your coverage on record with your insurer.
  • When changing a beneficiary, it’s important to always obtain the appropriate forms from your agent or the insurer and confirm your new beneficiary designation has been properly recorded.
  • Additionally, take the time to update your beneficiary designations on all your financial accounts including personal banking, college savings plans, 401(k) retirement plans, IRAs, and any investment accounts to ensure they are current.   

Transfer of ownership

Did you know that transferring all incidents of ownership in a life insurance policy may not change the underlying beneficiary designation? The transfer of ownership includes the right to change a revocable beneficiary, but unless the new owner exercises that right, the beneficiary designation remains as it was when the policy ownership was transferred.

Refreshing tips:

  • If you’re contemplating a transfer of ownership that necessitates a change of beneficiary, one approach is to first designate the new beneficiary at least one day prior to the transfer of ownership. Keep in mind that once ownership is effectively transferred, you will no longer have the authority to make policy changes including beneficiary designations.  
  • If ownership has already been transferred but you’re unsure whether you accomplished the necessary beneficiary change, suggest the new owner exercise his or her authority under the policy to verify and, if necessary, update the beneficiary designation.

Collateral assignments

What becomes of an old collateral assignment attached to a life insurance policy once the underlying loan is paid in full? Often, purchasers don’t give it a second thought after closing, let alone five or 10 years later at the end of the loan.

Here’s what you need to know about the effect of a collateral assignment on life insurance and why it’s so important to ensure the lender releases its security interest as soon as reasonably possible after payoff:

  • The beneficiary’s interest under a life insurance policy is subordinate to that of a collateral assignee (a lender or other entity). This means the lender is typically in a superior position in the event of a claim.
  • When an outdated collateral assignment remains attached to your life insurance policy at the time of your death, payment of benefits could be delayed while your beneficiary works with the lender to obtain a release. Some insurers may elect to make payment jointly to the assignee and beneficiary leaving it up to the payees to negotiate settlement and provide appropriate releases to each other.
  • The original assignee may have sold the loan after closing or merged with or been acquired by another institution, which can complicate the situation and delay payment.  

Refreshing tips:

  • Timely release of a collateral assignment can be accomplished with minimal effort at or near loan payoff by requesting a release from the assignee at the time final payment is made.
  • If several years have elapsed since payoff, one rule of thumb is to check in with the agent or insurer to confirm whether an assignment still exists and, if necessary, initiate the release process.
  • Taking one of these simple steps can help to ensure a hassle free claim experience for your beneficiary.

In today’s environment, we are all too familiar with uncertainty and avoidance of risk.  We encourage you to take a few moments and consider updating your insurance and financial records to ensure they are current and meeting your needs.  You’ll be glad you did!

About the author

Head shot photo for article author Gina GoodreauMs. Goodreau is second vice president of Specialty Insurance Markets for Protective Life Insurance Co., which administers the ADA Members Insurance Plans issued by Great-West Life & Annuity Insurance Co. Exclusively available to ADA members, these insurance plans include life, disability income protection, office overhead expense and supplemental medical. For information about the insurance plans, visit the website. Protective Life does not provide legal, tax or investment advice. Please consult your own financial professional.