If you're like many young people, or for that matter, older people, just the thought of life insurance is enough to make your eyes glaze over. However, if you have or plan to have a family, life insurance should play an important role in your overall financial plan. There are certain life events where you should reassess your life insurance needs.
Getting hitched is the perfect time to buy a life insurance policy. Life insurance proceeds can ensure your spouse will be able to pay the rent or mortgage and other daily living expenses if your income is no longer available. The younger you are when you purchase insurance, the lower the premiums. Likewise, divorce is also a time to reassess life insurance needs, as you and your spouse are each going your separate ways. If you decide to keep your policy in force after a divorce, you'll probably want to remove your ex-spouse as a beneficiary.
Welcoming a new baby doesn't just mean you'll be getting a lot less sleep. A new child also results in a significant increase in your household expenses, as well as a greater financial burden for your significant other in the event of your death. Life insurance can help to meet these expenses, allowing your family to maintain the same standard of living. You can also use life insurance to make certain there will be funds available for your kids' college educations if you're no longer in the picture.
As your career progresses and your income increases, your expenses are also likely to increase accordingly. That big promotion might mean a bigger home, a new car, or an overall upgrade in your lifestyle. The bad news is that you will also need to buy more life insurance to so your family can keep up with the bigger bills if you pass away. The good news is that you will now have more money coming in to pay for the additional coverage.
It might be hard to be believe now, especially if you have a house full of little ones, the time will come when all the birds fly away and it will be just the two of you again. At this point, your life insurance needs are likely to decrease. However, you might want to consider hanging on to your coverage if the premium is manageable. Life insurance can play an important role in estate planning, as your heirs will receive the insurance proceeds on a tax-free basis.
- Dynamic Graphics/Creatas/Getty Images