Life Insurance Planning
There are many life insurance planning stages that affect your need for life insurance. It's important to consider these stages and how life insurance plays a role while developing your overall financial plan. You may be surprised at how often your life insurance needs change.
Read the life stages below to find out when you need life insurance and when you should reevaluate your needs.
Life Insurance Planning Stages
Whether you're trying to get pregnant, pregnant or a new parent, you need life insurance. The truth is, the financial responsibility arrives before the baby does. Life insurance will be the single most important purchase you make to protect your child's financial future.
Married couples share financial obligations. It's important that after the honeymoon, you sit down with each other to create a sound financial plan that includes life insurance. Make sure you each have enough life insurance to cover the loss of your individual financial contributions if one of you were to die unexpectedly.
One of the biggest reasons people buy life insurance is to cover the cost of their mortgage. If you died today, would your surviving spouse or family members have the means to cover the cost of your mortgage or even pay it off completely? Other costs to consider include maintenance, utilities, unexpected repairs and property taxes. A sufficient life insurance policy would allow them to keep the house you bought together.
Taking On Debt
Taking on debt increases the need for life insurance. Whether it's old debt, new debt or upcoming debt, you need a life insurance policy that will cover outstanding balances, especially if a loved one is a co responsible party on a loan, credit card, etc. Make sure when you're creating your overall financial plan, debt management and life insurance is a large part of it.
When your income increases, so does your need for life insurance. Why? Because when you have more money coming in, your spending habits tend to rise. Additional life insurance coverage will allow your family to maintain their new financial situation and standard of living. Remember, experts suggest have a life insurance policy that is 10 to 20 times your annual salary.
Caring for Aging Parents
If you're financially responsible for aging parents, think about how they would survive financially if you died prematurely. If they can't afford the cost of healthcare, housing or long term care, make sure those expenses are calculated into the total face amount of your life insurance policy.
Life insurance can protect your business. That's why it's important to reevaluate your life insurance policy every time your business changes. Some examples include, becoming more profitable, acquiring more debt or hiring key employees.
Changes in Marital Status
If you lost a spouse through death or divorce, it's a good idea to reevaluate your life insurance needs. In fact, you may not need as much life insurance coverage anymore. But if there are children involved, remember, they're your number one financial obligation. Never reduce your life insurance coverage without knowing that your children are financially secure. In addition, if you've been remarried, it's important to make sure you change your life insurance beneficiary and make sure your existing coverage satisfies your new spouse's financial needs.
Planning for College
Protect your children's college plans with life insurance. Think of life insurance as a risk management strategy. Even if you're not around to see your children go off to college, it's important that your life insurance policy is adequate enough to help them with the cost of housing, tuition, books, etc.
Planning for Retirement
Life insurance should be a large part of your overall retirement plan. A sufficient life insurance policy will provide financial support for your surviving loved ones who may not be able to live solely on your retirement savings. A retirement plan without any life insurance is just a savings plan that dies or becomes disabled when you do.