Did you know that your life insurance needs can vary drastically as your life changes? Most people understand that having life insurance is part of a responsible financial plan, but they are not aware that their needs can change over time. If you have found a policy that meets your needs and gives you peace of mind, you're not necessarily done. It is important to reevaluate your life insurance needs as they fluctuate during different life stages and compare this with the coverage included in your current policy.
For the new year, consider the following five different life stages and how they can impact your life insurance needs.
Getting married is a positive and exciting life event for any couple, but amidst all the party planning most couples do not stop to think how marriage could affect their life insurance needs. Getting married means that you are now working as one unit and your financial obligation now becomes a joint effort. Getting married does not directly affect your life insurance rates, but now that you have a spouse you can choose to purchase a policy together. Having a joint policy means that if one of you passes away, the surviving spouse can remain financially stable and maintain their current living standard in the absence of the deceased spouse. The surviving spouse is also in a position to use the death benefits to supplement retirement or a child’s education down the road.
2. Becoming a Parent
Becoming a parent is an equally amazing and terrifying experience. One moment you are an independent adult and the next you have a child who entirely depends on you. It is vital for you and your spouse to review your life insurance policy because it is not just the two of you, but you have at least one financial dependent. It is time to think about how your family would cope financially if something happened to either you or your spouse and you couldn’t work anymore.
When you have a kid, there are other factors that are important to consider such as the fact that kids can be expensive to raise. Also, child-rearing expenses, other than the basic, tend to rise with age. You should also keep in mind that college education can be expensive. As a parent, you should ask yourself whether your partner can handle these child-related expenses if you are suddenly not there.
3. Mortgage Protection
Your family home might be your most significant asset but also one of the most substantial financial responsibilities. For most families, mortgage repayments constitute their largest regular expense, and it is for this reason most people take life insurance policies. Life insurance can be an essential lifeline for the family especially when the primary earner in the family passes away.
4. Running a Business
If you are self-employed and run your own business, the chances are that you have made a substantial investment in it. If you have made an investment in the recent past such as purchasing a new building, it could change the value of your business. If this happens, the insurance limits are raised so that they can cover business debts that your family might be liable for if you passed on. If you didn’t have life insurance, they might be forced to liquidate some assets to pay off the debt.
If you and your spouse decide to divorce, it is crucial that you determine what happens to your life insurance policy. Divorce will raise two kinds of issues; beneficiary and coverage issues. If you did not have children during your marriage, the issue is as simple as just changing the beneficiary and adjusting your coverage, so it reflects your newly single status. If you had children, you simply change the beneficiary from your spouse to the children.
Most people are not aware of how their life insurance needs change as their lives change. It is essential that you adjust your policy depending on the stage of life you are in.
*Material presented is not intended as tax advice. For specific tax advice, please contact your own qualified tax professional.
Daniel S. Miller, Kaleb Robuck, and Marcus Taylor are investment adviser representatives of, and securities and advisory services are offered through, USA Financial Securities Corp. Member FINRA/SIPC. A Registered Investment Advisor located at 6020 E Fulton St., Ada, MI 49301. Milestone Financial Group, Inc. is not affiliated with USA Financial Securities Corp.