We all know that throughout our lives, we experience a lot of changes. Whether these changes are good or bad, it’s important that your life insurance stays up to date. Your need for life insurance changes as your life changes. When you’re young, you typically have less need for life insurance, but that changes as you take on more responsibility and your family grows. Then, as your responsibilities once again begin to diminish, your need for life insurance may decrease. Check this site out to calculate how much you may need. Click Here
Life Insurance at Various Life Stages
Let’s look at how your needs change throughout your lifetime.
Footloose and fancy-free
As a young adult, you become more independent and self-sufficient. You no longer depend on others for your financial well-being. But in most cases, your death would still not create a financial hardship for others. For most young singles, life insurance is not a priority.
Some argue that you should buy life insurance now, while you’re healthy and the rates are lower. This is a valid argument if you are high risk for developing a medical condition (such as diabetes) age, most young people need a bigger take home paycheck. This money can be used for paying off student loans, credit cards and eventually investing. Investing while you’re young will allow you to get a head start in life, and freeing up the money you would otherwise spend on life insurance will allow you to do so.
You also need to carefully consider your debt, since people under thirty are prone to need cosigners for credit. If you have a mortgage or other loans that are jointly held with a cosigner, your death would leave the cosigner responsible for the entire debt. You might consider purchasing enough life insurance to cover these debts.
Funeral expenses are also a concern for young singles, but it is typically not advisable to purchase a life insurance policy just for this purpose, unless paying for your funeral would burden your parents or whomever would be responsible. Instead, consider investing the money you would have spent on life insurance premiums.
Of course, there always exceptions to these generalizations. If you have anyone who is dependent on you, you do want to purchase life insurance. Your life insurance needs increase significantly if you are the sole provider for a parent, grandparent or a child. In these situations, life insurance could provide continued support for your dependent(s) if you were to die.
Going to the chapel
Getting married might make you believe that you need life insurance, but surprisingly this is not always the case. Married couples without children typically still have little need for life insurance. If both spouses contribute equally to household finances and do not yet own a home, the death of one spouse will usually not be financially catastrophic for the other. If you are both healthy and live a low risk lifestyle, you may want to free up this money to save on a home, children or travel.
Once you buy a house, the situation begins to change. Even if both spouses have well-paying jobs, the burden of a mortgage may be more than the surviving spouse can afford on a single income. Credit card debt and other debts can contribute to the financial strain. Both of you should probably purchase a modest amount of life insurance to make sure either spouse could carry on financially after the death of the other. Losing your spouse is hard enough without also losing your home and income. At a minimum, it will provide peace of mind knowing that both you and your spouse are protected.
Again, your life insurance needs increase significantly if you are caring for an aging parent, or if you are a single parent. Life insurance becomes extremely important in these situations, because these dependents must be provided for in the event of your death. This is sadly not something to be taken lightly.
Your growing family
When you have young children, your life insurance needs reach a climax. In most situations, whether single or dual income, life insurance for both parents is necessary. (Previous post about adding a baby here)
Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly day-care and housekeeping expenses. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths.
Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for child care with the remaining income.
Moving up the ladder
Advancing career has big life insurance ramifications. For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It’s important to review your life insurance coverage any time you leave an employer.
Keep in mind that when you leave your job, your employer-sponsored group life insurance coverage usually ends, so find out if you will be eligible for group coverage through your new employer, or look into purchasing life insurance coverage on your own. You may also have the option of converting your group coverage to an individual policy. This may cost significantly more, but may be wise if you have a pre-existing medical condition that may prevent you from buying life insurance coverage elsewhere.
You should take the time to re-evaluate your life insurance on a regular basis. Make sure that the amount of your coverage is up-to-date, as well. The policy you purchased right after you got married might be inadequate, especially if you have kids, a mortgage, and college expenses to consider. Business owners will also have business debt to consider. If your business is not incorporated, your family could be responsible for those bills if you die.
Single again
If you and your spouse divorce, you’ll need to re-evaluate your life insurance. Divorce raises beneficiary and coverage issues. If you have children, these issues become even more complicated. While divorces have many components, life insurance is an essential point if you divorce. You may or may or not want your ex-spouse to be your beneficiary any longer, or you may need to up your coverage.
If you and your spouse have no children, it may be as simple as changing the beneficiary on your policy and adjusting your coverage to reflect your newly single status. However, if you have kids, you’ll want to make sure that they, and not your former spouse, are provided for in the event of your death. This may involve purchasing a new policy if your spouse owns the existing policy, or simply changing the beneficiary from your spouse to your children. The custodial and noncustodial parent will need to work out the details of this complicated situation. If you can’t come to terms, the court will make the decisions for you, which may be something you don’t want. It’s important that these discussions occur with your lawyer, insurance agent and financial advisor.
Your retirement years
Once you retire, and your priorities shift, your life insurance needs may change once again. If less people are depending on you, your mortgage and other debts are paid, and you have substantial financial assets, you may need less life insurance protection than before. But it’s also possible that your need for life insurance will remain strong even after you retire. For example, the proceeds of a life insurance policy can be used to pay your final expenses or to replace any income lost to your spouse as a result of your death (e.g., from a pension or Social Security). It’s also time to consider if you are leaving a financial burden on your children or spouse with funeral costs. Life insurance can be also used for other interests like paying estate taxes or leaving money to charity.
Final Note
No matter what stage of life you find yourself in, life insurance needs to be a consideration if not a necessity. Be sure to consult your financial team on what would happen in the event of your or your dependent’s death. While this can be a sad topic, it is crucial to the future of you and your children.
