How Marriage, Children, Divorce, and Jobs Affect Life Insurance Needs
How do I adapt my insurance strategy as my life changes?
If you are still young and single, you may think that getting life insurance is not that important yet. But as life goes on, you get married or have kids, these important changes in your life are also the main key factors why you should consider getting one. Even the Insurance Information Institute, an industry-backed group, says: “In most cases, if you have no dependents and have enough money to pay your final expenses, you don’t need any life insurance.”
But then you enter a relationship and get married, buy a house, or have kids and you start to realize there are people who would suffer financial challenges if you die. How do different life events affect your life insurance needs? Here’s a few life events or situations that will make you think why you should be insured.
1. When You Get Married
When you get married, you share financial responsibilities with your spouse. When couples get married or become life partners, it’s likely that both work and contribute an income to the household. If one person dies, the other could get saddled with many financial obligations.
Proceeds from a life insurance policy would help the survivor maintain their lifestyle by paying for bills and debts, such as a mortgage, car loan, student loans and credit cards. A policy death benefit can be spent any way the beneficiary likes.
2. When You Have Children or Adopt a Child
When you have Kids and you love them, you should think about their future too! Every parent of a dependent child should have life insurance to protect them. If you died with a surviving spouse or partner, they could use the proceeds to pay for a child’s education or other expenses. And if you’re a single parent, life insurance would be an essential financial lifeline for a child after your death.
3. When you become a stay-at-home parent.
Be prepared in case the worst situation happens to you and you need to pay for child care. Being a stay-at-home parent one of the most demanding jobs in the world, but the cost of replacing that work is high. Don’t make the mistake of assuming that only primary breadwinners in a family need life insurance. According to Salary.com, outsourcing the work done by a typical stay-at-home mom would cost more than $162,000 per year. Be sure you have enough life insurance to pay for childcare and household help if a stay-at-home parent were no longer around.
4. When you Get Annulled or Divorced
If you end a marriage or partnership, it can be an emotional time. You’ll need to reevaluate your existing life insurance before a divorce gets finalized. Consider answers to the following questions:
Should I buy my own life insurance or have additional coverage?
Who will pay premiums for an existing life insurance policy?
Do I need to change my life insurance policy beneficiary?
If your life insurance lists an ex-spouse or previous partner as a beneficiary, they will receive the benefit when you die—even if you exclude them from your last will. So, don’t forget to review your beneficiary choices after going through a breakup.
5. When You Start A New Job
You should really consider Life Insurance when you start a new job. A good rule of thumb is to have life coverage at least five to ten times your annual income. However, this amount may vary depending on your financial situation and family needs.
Many employers offer low-cost or free life insurance in their group benefits package. However, typical employer-sponsored life insurance is only one or two times your annual salary. That may not be enough if you support a family. Additionally, workplace policies are job dependent, so if you leave your job, coverage ends.
You can purchase an additional life policy on your own, or you may have the option to buy supplemental life through your employer. Having an individual life policy makes sure you’d never have a coverage gap if you lost your job.
6. When You Become self-employed or Start a New Business
You should consider getting a Life Insurance while your business is growing or expanding. When you’re self-employed, you must provide your own benefits package, so don’t forget to purchase life insurance to protect those who depend on you. Starting a family business may be one of the most securing sources of income for your family but in the event that you pass away and the family can no longer run the business, at least they have your Life Insurance as a fall back.
7. When You Retire
Depending on your situation, having a life policy may help your heirs pay taxes and legal fees associated with your estate. Or if you have grown children and a surviving spouse or partner with enough of their own income, you may no longer need a life policy.
It is smart to reevaluate your life insurance and consult with a financial advisor when your retirement draws near. If you have a permanent life policy with a cash value, it may be a retirement income source that you’re ready to tap.
I know that death is the last thought that you may want to think about, but consider the future of your loved ones as well. You need Life Insurance to protect them. The takeaway is that if your surviving spouse, partner, children, parents, other dependents or business partners would be hurt financially after your death, you need life insurance to secure their future.