Have you ever considered if your life insurance coverage may be too little or too much depending on your stage of life? Your life insurance needs are very different when you are starting a family and when you have just retired. The policy you bought when you were young and single will most likely not have the right amount of coverage when you start your family. When your kids go off to college, life insurance needs may change again. When you retire, you may be able to drop your life insurance coverage altogether.
Essentially, you need life insurance when someone depends on you financially. This is the reason life insurance needs change over your lifetime. The key is to reassess your life insurance coverage when your family reaches certain milestones. Here are a few guidelines to help you assess your life insurance needs.
Young and Single
When you are young and single, you probably don’t need life insurance. Most likely no one is depending on you financially and your death would not create a hardship for others. For most young people, life insurance is not yet a priority. However, there are financial advisors who would encourage buying life insurance now while you are healthy and the premium rates are low. This may be a smart move if you are at a high risk of developing a medical condition later in life that would disqualify you from obtaining life insurance.
Just Married
Now that you are married, life insurance becomes more important because your spouse is financially tied to you. In a two-earner household, to make sure you could carry on financially after the death of your spouse, both should probably carry a modest amount of life insurance. It will provide peace of mind knowing that you are both covered. If you find yourself caring for an aging parent or other family member, your life insurance needs will increase significantly because these dependents must be provided for in the event of your death.
New Parents
Now is the time to increase insurance coverage to cover the cost of raising the kids, including college. Single-income families are completely dependent on the primary breadwinner. The death of this person would be disastrous without life insurance. And don’t forget to purchase life insurance for the stay-at-home parent too. Hiring a “Mary Poppins” to take care of the house and watch the kids can be expensive!
Empty Nesters
With the kids out of the house and on their own, you may not need as much life insurance. The need remains critical, however, if you are married and still working. It may be many years before you retire and having that protection could be a lifesaver in the event of an untimely death.
Retired
This is the stage where you may need minimal or no life insurance at all. You may want to carry enough to cover any debts and to be certain your spouse would be protected financially. But if you have no debt and have substantial financial assets, the need for life insurance diminishes. As you get older, the premiums will continue to increase and carrying life insurance may not be a wise financial decision. On the flip side, you may need to continue to carry life insurance to replace lost income from a pension or Social Security and help pay for final expenses and funeral costs.
I hope these guidelines are helpful as you assess your life insurance needs at every stage of life. Are you carrying adequate amounts of insurance for the life stage you are currently in?
