Whether you’re single, married, embarking on a new career or newly retired, life insurance is an important tool to keep in your financial toolbox no matter the life stage that you’re currently in. Consider how your life insurance needs will change throughout your lifetime:
Young Adult Life
As a young adult, you no longer depend on others for your financial well-being. For most young singles, death would still not create a financial hardship for others, making life insurance a less-than-high priority.
Some would argue that you should buy life insurance now, while you're healthy and the rates are low. This may be a valid argument if you are at a high risk for developing a medical condition later in life. It’s also important to consider the earnings you could yield by investing the money now instead of spending it on insurance premiums.
In the event of your death, loans that are jointly held with a cosigner would leave them responsible for the debt. In this case, purchasing life insurance to cover these debts is ideal. Funeral expenses are also a concern for young singles, but it is not advisable to purchase a life insurance policy just for this purpose—unless paying for your funeral would burden whoever is responsible for the expenses.
Additionally, life insurance needs increase significantly if you are supporting a parent or grandparent or if you have a child before marriage.
Marriage
Married couples without children typically have little need for life insurance. If both spouses contribute equally to household finances and do not yet own a home, the death of one spouse will usually not be financially catastrophic for the other.
Once you buy a house, the situation begins to change. Even if both spouses have well-paying jobs, the burden of a mortgage may be more than the surviving spouse can afford on a single income. Additionally, credit card and other debts can contribute to financial strain.
To ensure either spouse can carry on financially after the death of the other, both should consider purchasing a modest amount of life insurance. At minimum, this will provide peace of mind knowing that both you and your spouse are protected.
Your Growing Family
When you have children your life insurance needs reach a climax. In most situations, life insurance for both parents is necessary.
Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly childcare and housekeeping expenses. Both spouses should carry enough life insurance to cover the lost income or the economic value of lost services that would result from their deaths.
Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for childcare with the remaining income.
Moving Up the Ladder
Whether you’re starting a new job or starting a new business, it's important to review your life insurance coverage.
Upon leaving a job, your employer-sponsored group life insurance coverage will usually end. Confirm if you will be eligible for group coverage through your new employer or look into purchasing life insurance coverage on your own. You may also have the option of converting your group coverage to an individual policy—this may cost more but may be wise if you have a pre-existing medical condition that may prevent you from buying coverage elsewhere.
Ensuring the amount of coverage is up to date is also important. The policy you purchased after you got married may no longer be applicable—especially if you have kids, a mortgage and college expenses to consider. Business owners may also have business debt to consider. If your business is not incorporated, your family could be responsible for those bills if you die.
Divorce
Your life insurance will change after a divorce, as it raises both beneficiary issues and coverage issues.
Spouses without children may only need to change the beneficiary on the policy and adjust coverage to reflect the newly single status. Spouses with children will want to make sure that they are provided for in the event of your death. This may involve purchasing a new policy if your spouse owns the existing policy, or simply changing the beneficiary from your spouse to your children. The custodial and noncustodial parent will need to work out the details of this complicated situation. If you can't come to terms, the court will make the decisions for you.
Your Retirement Years
Upon retirement, fewer people may be depending on you financially, your mortgage and other debts may have been repaid and you have substantial financial assets—meaning you’ll need less protection than before.
With that said, your need for life insurance may remain strong even after you retire. For example, the proceeds of a life insurance policy can be used to pay your final expenses or to replace any income lost to your spouse as a result of your death (e.g., from a pension or Social Security). Additionally, life insurance can be used to pay estate taxes or leave money to charity.
For expert advice in developing your long-term wealth plan, rely on a member of Busey’s Wealth Management team. We work closely with you to develop a personal, comprehensive plan that will help meet your goals and objectives through each phase of the wealth management process.
Contact us today.