One of the constants you should be aware of is your insurance. It is most likely the last thing on your mind as you transition through your milestones, but these life changes can absolutely impact your insurance needs now and in your future.
Marriage: Generally, the first transition in life is living with a partner, whether in marriage or common law. Both of you should be covered for life insurance to help the other manage if anything were to happen. The basic amount would be five times your annual income, plus mortgages and debt. This is a simple formula to ensure your partner isn’t left at a disadvantage.
Having children: You now have the responsibility of providing for your children financially. If something happens to you, you want to make sure they have a secure future after you’re gone. A life insurance policy will make sure that happens. If you are looking at protecting them for a shorter amount of time, then a term life policy would fit both the time you want coverage for, and your budget. If you are looking to take care of them for years to come, or provide a legacy, you may want to consider a whole life policy.
Purchasing a home: Although there is a type of policy called mortgage insurance, it really isn’t the best option when buying a home. Mortgage insurance is only underwritten at the time of death, meaning there is the possibility of having paid for it for years without any benefit. Having a life insurance policy minimizes the risk for lenders. It means the mortgage will continue to be paid should something happen to the owner, and your family will remain safe in their knowledge that they will not have to sell the family home.
Paying off your mortgage: This also impacts your insurance needs. If you have additional life insurance to cover the mortgage, now may be the time to decrease the amount, as you will no longer need to cover the house. Never decrease or change a policy unless you have spoken to an advisor first.
Getting a divorce: A divorce can be one of the toughest events to have to endure in life, however your insurance needs will drastically change because of this. If you are receiving child support, you will want to make sure you continue to receive this should your ex pass away unexpectedly. Having a life policy as part of your divorce ensures the continuation of support in this event. If you were to end up being the sole provider for your children, then having a life insurance policy of your own will protect your children from financial hardship.
Retirement: Although you may assume you no longer need life insurance at this point in your life, if you still have debt, or you care for a disabled child, you should consider coverage. If you are not covered, you may find at this age, the price is considerably higher. This is why it is so much better to maintain a policy from a young age.
As your life changes, and you encounter new events, your insurance needs will also change. Be proactive in keeping your family protected from financial distress.