It's no surprise that life events impact life insurance. Circumstances like getting married, starting a new job or having a baby may play a role in determining which policy is the best fit. They can also impact how well your existing life insurance policy is working for you.
If you have recently experienced, or are expecting to experience any of the following events, it's probably a good time for an insurance review.
8 life milestones that affect your life insurance needs
- Life milestone 1. Getting married
Life insurance can help provide for your spouse and children in the event of your death. It can also help accumulate the cash value you need to support your long-term financial goals. If you're getting married and saying “I do,” it's a good time to revisit your policy and find the best fit for your new family.
- Life milestone 2. Getting divorced
When transitioning from married to single, you need to confirm that your life insurance is transitioning with you. Getting divorced may mean you need to change the beneficiary, purchase a new life insurance policy, or make adjustments to ensure your children are provided for.
- Life milestone 3. Taking up an extreme sport
Regularly participating in extreme sports increases your likelihood of disability or untimely death. The fact is, the odds that a life insurance company may have to pay out on a policy sooner rather than later can be much higher for a person engaging in these activities. That means that you'll very likely pay more for your life insurance policy.
If you take up a new extreme sport such as skydiving, scuba diving, climbing, big-wave surfing and others, it's in your best interest to be open with your life insurance provider. Some insurance companies are more flexible than others when it comes to extreme sports, and there are a few that even cater specifically to extreme sports enthusiasts. If you're shopping for life or disability insurance, you'll also want to ask specific questions about how your extreme sports activity affects your policy, so you know about any exclusions up front.
- Life milestone 4. Having a baby
Childcare and college tuition are typically very expensive and the daily expenses involved with raising children can also add up quickly. When you have a baby, schedule a time to review your policy and confirm that your children's needs would be taken care of in the unfortunate event that you were no longer there to provide for them.
- Life milestone 5. Buying a home
When purchasing a home, refinancing, or extending the life of your mortgage, your life insurance policy may not be enough to cover the increased debt load. It's important to confirm that your policy will pay the balance that your loved ones would be responsible for in the event of your death.
- Life milestone 6. Investing in a business
Are you a business-owner? Substantial changes in the value of your business (for example, if you've invested in a new building or additional inventory) impact your life insurance needs. Be sure your family is protected from the cost of those investments. Also, if your business is highly reliant on a key employee or a business partner, ask your insurance agent about life insurance solutions to offset the potential financial risk of losing those people.
- Life milestone 7. Planning for retirement
While life insurance is designed for unexpected circumstances, permanent* policies can serve as a vehicle for supplemental income in retirement.
- Life milestone 8. Planning your estate
If you're concerned that your family may have to sell assets to pay the taxes on their inheritance, life insurance may be an option for you. In some circumstances life insurance can reduce the tax burden, while providing for your medical and funeral expenses at the same time.
Just like other financial tools, life insurance isn't a “get it and forget it” proposition. Schedule time on your calendar to review your life insurance policy annually and whenever you experience a major life milestone.
*Provided required premium payments are timely made.
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