Your life insurance is not a one and done purchase. Your circumstances and commitments change as your journey through life evolves. These changes could lead to gaps in your coverage – and most policyholders fail to realize how these changes alter their insurance needs.
The policy you purchased years ago may have been the best solution at that point in time, but purchasing a home and increasing the size of your family could affect that policy.
You’re putting your family at risk when you fail to do a policy checkup. Here are seven life events where you need to reevaluate your insurance needs to protect your dependents.
1. Securing a mortgage
Buying a house will be your biggest life investment. You need to make provisions to have the mortgage paid off if you die early – especially if you’re the primary income earner in the home. Coping with death is a challenge by itself. Your spouse and dependents shouldn’t have to cope with financial burdens on top of the emotional burden of your passing.
Your banker may suggest life insurance when you purchase the property, but it’s always wise to shop around and compare quotes in order to get the best price for your coverage.
2. Getting married
Marriage involves a lot of new responsibilities. Your spouse won’t be able to keep up with all the financial commitments you’ve taken on if you’re not around.
Joint policies pay out once – after the first death. This leaves the bereaved survivor without coverage, and it might be difficult to secure affordable coverage at this stage in life. Find out if the joint policy will pay out after the second death and determine whether you’ll be able to afford the payments if your partner is not around to help out.
3. Having children
Raising children is a very expensive undertaking. The costs have increased by more than 50 percent in the last decade. Education accounts for almost 48 percent of the cost of raising children.
Without life insurance, your dependents may not be able to afford the costs of college if you’re not there to provide. Review your policy after your first child arrives especially if you’re only insured for a small amount. Purchase sufficient coverage to cover the costs of child care, schooling, holidays, and whatever else your dependents might need.
A bigger home means a bigger mortgage. Increase your life insurance coverage to pay off the new loan if needed. A term life insurance policy lasts for a specific period. Extend the coverage to match the life of your mortgage and ensure that it provides sufficient cover for the amount of the loan.
5. Inheritance planning
Life insurance is not limited to paying off your sizable debts if you die. It will also help your family with day-to-day expenses when you’re not there to bring in a salary.
When you have life insurance, your beneficiaries will receive the money quickly without having to wait until a probate is granted. If you have a large estate, placing the policy within a trust will also remove the policy amount from the rest of your estate, which will be subject to inheritance tax.
6. Changing employers
Do you have group life insurance from your employer? If you’re employed, your beneficiaries will receive a generous pay-out if you’re covered under the employer’s ‘death in service’ benefit. The lump sum payment is usually one to four times your annual salary and will remain in effect as long as you’re employed.
If you change jobs, you might need to get your own life insurance policy. Always check the terms of your old and new employment before you request a quote.
Your lender may tell you that you need to get life insurance for an SBA loan. Perhaps you need to cover a key person in your company or secure a collateral assignment. There are many situations where business life insurance is needed.
8. Improved health
Smokers pay more than non-smokers. But if you give up smoking, you should tell your insurer to reduce the cost of your coverage. You’ll have to wait at least 12 months after quitting before your request is considered, but the savings are worth the effort.
Whatever your life insurance needs, make sure you comparison shop to get the best coverage for your needs at an affordable price. No matter if you’re buying cheap term life or a more expensive whole life policy – an independent agent from Life Insurance Blog can find you the best deal.
Originally posted 2013-09-16 19:05:18.