When a person hears the word “audit,” it almost immediately brings to mind the panic and fear of a call from the IRS. A life insurance audit, however, is a comprehensive study of your existing coverage to make sure it still fits your needs.
Back in your parents' or grandparents' day, they might have purchased a life insurance policy, put it in a file and only thought about it when the bill came for the annual premium or when the insured passed away. And that was usually fine. Today, however, policies are a more complicated financial tool that needs to be monitored -- much the same as any other assets you hold in your portfolio. The goal is for your life insurance policy to be there for your beneficiaries when they need it most. That is not the time you want them to be surprised, so it's vital to perform a policy audit on an annual basis and take any corrective action that is necessary.
The audit itself is about more than just the policy. This is an annual opportunity to review your plan and identify any gaps in your coverage resulting from any occurrences from the previous year. It allows you to address any lifestyle changes and answer such questions as:
Is the policy's original goal still valid?
What type of policy do you have?
Are the original beneficiaries still valid?
Is the ownership structure of the policy still correct?