Many people buy life insurance when they are young, perhaps when getting that first good job, but then never review it again. This is a mistake! Although there can be many reasons that your need for life insurance may change, there are some key events in life that can indicate the need for more or less life insurance coverage.
An article in US News and World Report last month highlighted several of these notable events:
- Marriage: Some couples wait until they either have children or purchase a home to think about life insurance but this overlooks some key liabilities. Marriage creates a union in finances and each person is now exposed to the total liabilities as well as the assets of the couple. Usually, two incomes are being used to finance a certain lifestyle and consideration must be given as to what would happen if one of those incomes suddenly disappeared.
- Children: The birth or adoption of children immediately creates financial commitments. These can range from making sure that a surviving spouse can raise the children with just one income to providing for higher education down the road.
- Home Purchase: Most people get this one because it is such a large financial commitment and you want to be sure that a surviving spouse has enough money to continue ownership of the home. What is sometimes missed, however, is when the second or third home is purchased. Often the new home is more valuable than the last and the mortgage is even higher. It is important to review life insurance at each new purchase or refinance to make sure there is still enough coverage.
- Starting a Business: When a person starts a business they often max out their resources and credit in order to get the fledgling enterprise off the ground. That simply means that if the person were to suddenly die, a surviving spouse or perhaps business partner would be left unable to move ahead without a significant amount of cash. In addition to coverage for a spouse, there are specialized policies for business partners to protect each other from disaster.
- Over 50(ish) and Retirement: As they age, people often find themselves as “empty nesters” when the house is paid for, the kids are gone and college is no longer a worry. This is a time when life insurance can be reviewed and either decreased or possibly shifted to another type of coverage. Usually, the need for extremely large amounts of coverage has passed. At this time a person might do away with large term policies and perhaps look at either Long Term Care policies or Final Expense policies.
With regard to life insurance, every person’s situation is unique. Just because a co-worker or relative carries a certain amount of coverage, that has absolutely no bearing on how much you should carry. Any change in your financial or personal life can signal a review of your life insurance, but the times mentioned above should be your minimum benchmark. If you want to review your insurance, you may find my ebook Do You Really Need Life Insurance can be of great help.