Here’s what insurance advisors say you need at every stage of life

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What kind of insurance should you have at different stages of your life? When asked, financial advisors cited disability and life insurance as the most important types of coverage at any stage because they apply throughout our lives.

In addition, advisors discuss often-overlooked considerations for various times in your adult life. Here’s a look at some age-specific insurance tips, from your university days to your golden retirement years.

The insurance you’ll need for every stage of life

Here’s an overview of five life stages and the corresponding type of insurance recommended for each:

  1. single: Health, disability, renters, auto
  2. Young married: Add life and homeowners
  3. With college-aged children: Increase auto coverage for young drivers, add liability. Take advantage of employer FSA/125 plans. Gift a life insurance policy to your children.
  4. Empty slots: LTC or hybrid life and LTC policies
  5. pensioners: Medicare, with Medigap policies. No need for damage anymore. Long-term care insurance is very important. Life insurance required for the surviving spouse and inheritance for the heirs.

— Sally Mullins Thompson, CPA/PFS, CFP, Washington, DC

College days

“If you take out a private student loan … and that loan is cosigned by a parent and is not discharged after your death, then you need life insurance to cover the loan,” said certified financial planner David J. Haas, owner of Cereus Financial in Franklin Lakes, New Jersey.

Since the need is temporary, only for the life of the loan, term life would be appropriate, he said.

During work

“If you’re working, you almost certainly need disability insurance,” said Sean M. Pearson, CFP, associate vice president of Ameriprise Financial in Conshohocken, Pennsylvania. “Most large employers offer it as a benefit, but that doesn’t mean you have enough.”

A note about life insurance: The two main categories are usually called ‘term’ (insurance for a fixed period of time) and ‘permanent’ (insurance for an indefinite period of time; i.e. lifetime).

It’s important to understand your coverage, he said. Plans may cover total disability, which is defined as when the worker is unable to work, or they may only cover a situation where the worker is unable to perform part of a job or requires reduced work hours.

“For example, if you were earning $100,000 a year before your injury or illness, and after a change in your health, you can still perform a job that pays $40,000, but you are unable to continue in your current role, you may not be able to collect insurance,” Pearson said.

Family time

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When you get married and start a family, things get more complicated, said CFP Robert Fragasso, CEO of Fragasso Financial Advisors in Pittsburgh.

“If you have a mortgage and need two incomes and want to start saving for college, term life insurance would be a good fit until those debts are paid off,” he said. “For liabilities that arise after you pass, such as death taxes, buying out a business, or supporting a disabled child, you should look for permanent insurance.”

Long-term disability insurance is often overlooked at this stage, said Cereus Financial’s Haas.

More from Life Changes:

Here’s a look at other stories offering a financial perspective on life’s milestones.

“The younger you are, it’s most important because it covers a lifetime that you’re going to have, which is going to be in jeopardy if you become disabled,” he said.

Pearson said be sure to look into “carrying over” your disability coverage, or taking it with you if you take time off to care for a child or family member. “If a stay-at-home parent wants to return to work, but there is a healthy change during their time as a caregiver, that person may not be able to return to work as quickly or at the expected salary,” he noted. .

He is preparing for retirement

Preretirement is the time to plan for protection against chronic illnesses that may require care in retirement, Pearson said.

“There are more choices [at that age] … it can be cheaper if you plan early,” he added. “‘Early’ could be a married couple in their late 30s who don’t plan to have children and have extra cash flow after retirement savings, or [in their] the late 1950s, when education spending almost ended,” he said.

Your golden years

If you’re recently retired or in retirement, one option to protect yourself from outliving your money is a single-premium immediate annuity, Ivan Ilan said, founder on Aligne Wealth Preservation in Los Angeles.

This simple form of annuity requires a lump sum upfront, which is usually irrevocable, and pays you an immediate lifetime stream of income. (This contrasts with a deferred annuity, which begins payments at a future date).

It’s important to note that they don’t address inflation risk, he said.

“Annuities themselves aren’t evil — it’s all in the application,” Ilan said. “But there’s no free lunch — you’re essentially giving away this lump sum, but the cash flows can be significantly better than bonds.”

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