It’s easy for many of us to approach life insurance with a “I’ll deal with it later” or “set it and forget it” mentality and assume you have time to sort out the details of adequate coverage along the way. Still, life insurance can play a key role in financially protecting your loved ones if you die unexpectedly. The role protection plays in your financial plan often depends on your stage of life.
Here are some examples of when you might want to evaluate your life insurance options.
Young Adults Starting Their Careers As you settle into your first or second job and take responsibility for your own financial affairs, you’re likely balancing a myriad of priorities. These may include paying off significant student loan debt or managing the mortgage on a newly purchased home. In the event of your death, you could leave your loved ones on the hook for meeting your out-of-pocket financial obligations. A life insurance policy can help provide cash flow for your parents, siblings or other trusted beneficiary to manage your affairs without becoming a potential burden.
Newly married couples
As you build a life together with your spouse, chances are your individual financial responsibilities will blend, even if you choose to maintain separate bank accounts. If you die prematurely, your spouse can be drastically affected by the loss of your salary and additional expenses. Life insurance can help protect each spouse’s financial contributions, helping the surviving spouse continue without major lifestyle changes.
Parents of minors or young adults. For many Americans, the need for life insurance becomes paramount after the birth or adoption of a child. If you have or are considering starting a family, now is the time to evaluate your insurance policies, making sure you have enough coverage to meet your family’s day-to-day expenses, in addition to future financial goals. You may want to make sure your family’s regular living expenses over a period of years are covered, as well as education costs for the children and retirement savings for the surviving spouse.
Elderly people are approaching or in retirement
As you accumulate wealth or become an empty nester, your need for life insurance may decrease. Be sure to maintain enough coverage to protect your retirement savings. Once you retire, the need for a death benefit that provides an annuity or lump sum payments to the surviving spouse may become less important. Some types of life insurance policies may offer the flexibility to borrow against accumulated cash values to provide cash flow in retirement. Evaluate your coverage against what you expect to spend in retirement to see if these or other options might help your situation.
Those preparing to transfer assets Depending on the size of your estate, taxes may reduce the amount of assets you intend to pass on to your heirs after you die. Life insurance can be one way to protect the interests of family members and other beneficiaries. For example, you could purchase a death benefit policy that can provide liquidity to offset the impact of any taxes that would be due on your death. This can help survivors avoid being forced to sell assets to meet tax obligations.
Regardless of your stage of life or your financial situation, it is important to have insurance to provide for your loved ones. Make it a priority to regularly review your coverage and make sure it meets your family’s changing needs. If you’d like help evaluating your options, talk to an insurance professional and financial advisor familiar with your financial priorities.