When it comes to life insurance, most families in the U.S. are under-insured. The gap between what they have and what they need is nearly $320,000*. The problem is that many people will purchase life insurance and then forget all about it. However, your finances will change throughout the course of your life, and so will your life insurance needs. What would have been an adequate policy for a single person won’t be enough coverage for a married, working parent with 3 kids. As you hit major milestones, it’s inevitable that you’ll need to revisit your insurance plan and modify your coverage as needed. The following list highlights 5 important times in life when you may need to update your life insurance or consider purchasing a new policy.
When you get married (or ideally before), you and your spouse should sit down and evaluate your life insurance needs and expectations, whether or not you both have an existing policy. The addition of a new spouse, or conversely the departure of a former spouse, means you will probably need to review your beneficiaries. If you have children together, it’s another important consideration for you both to ensure that there will be enough money to support your kids.
On the topic of children, the moment you start expanding your family is another key life event that should prompt you to update your life insurance. More than likely, you’ll need to think about increasing your coverage. You’ll want a policy that can protect your children’s financial future, taking their day-to-day needs and education expenses into consideration. You may also need to revise your beneficiaries at this time as well.
As your career progresses and you switch jobs, your life insurance options will probably change. You may have an employer-sponsored plan available to you. Depending on the company’s policy, it might behoove of you to look into supplemental coverage as well. If you received a salary boost with your new job, then you may need to increase your life insurance coverage to match.
If you’re part of a group life insurance policy provided through your employer, you will absolutely need to update your coverage once retirement comes along. No more employer = no more coverage. Whole life insurance can serve as supplemental income in your retirement, not to mention the financial support it will provide your loved ones in the event of your death.
Of course, as Benefit Consultants, we strongly urge you to review your policy each year at open enrollment. Any big changes in your finances should trigger a mental reminder to look over your coverage and see if any improvements are needed. Did you get a raise in the past year? Did you buy a house? Make sure your life insurance policy corresponds with your current financial situation.
If you’ve never updated your life insurance policy, one- we’re going to pretend we didn’t hear that, and two- it’s a good idea to re-evaluate now. Take a good look at your personal finances, your beneficiaries, and your stage in life and adjust your coverage to suit your needs. Life is always moving forward, and fortunately your life insurance has the flexibility to protect you and your loved ones at all stages.
*Source: Closing the Life Insurance Gap, LIMRA, 2015