Life Insurance at Various Life
Stages
Your need for life insurance
changes as your life changes
When you're young, you typically have less need
for life insurance, but that changes as you take on more responsibility and
your family grows. Then, as your responsibilities once again begin to diminish,
your need for life insurance may decrease. Let's look at how your life
insurance needs change throughout your lifetime.
Footloose and fancy-free
As a young adult, you become more independent
and self-sufficient. You no longer depend on others for your financial
well-being. But in most cases, your death would still not create a financial
hardship for others. For most young singles, life insurance is not a priority.
Some would argue that you should buy life
insurance now, while you're healthy and the rates are low. This may be a valid
argument if you are at a high risk for developing a medical condition (such as
diabetes) later in life. But you should also consider the earnings you could
realize by investing the money now instead of spending it on insurance
premiums.
If you have a mortgage or other loans that
are jointly held with a cosigner, your death would leave the cosigner
responsible for the entire debt. You might consider purchasing enough life
insurance to cover these debts in the event of your death. Funeral expenses are
also a concern for young singles, but it is typically not advisable to purchase
a life insurance policy just for this purpose, unless paying for your funeral
would burden your parents or whomever would be responsible for funeral
expenses. Instead, consider investing the money you would have spent on life
insurance premiums.
Your life insurance needs increase
significantly if you are supporting a parent or grandparent, or if you have a
child before marriage. In these situations, life insurance could provide
continued support for your dependent(s) if you were to die.
Going to the chapel
Married couples without children typically
still have little need for life insurance. If both spouses contribute equally
to household finances and do not yet own a home, the death of one spouse will
usually not be financially catastrophic for the other.
Once you buy a house, the situation begins to
change. Even if both spouses have well-paying jobs, the burden of a mortgage
may be more than the surviving spouse can afford on a single income. Credit
card debt and other debts can contribute to the financial strain.
To make sure either spouse could carry on
financially after the death of the other, both of you should probably purchase
a modest amount of life insurance. At a minimum, it will provide peace of mind
knowing that both you and your spouse are protected.
Again, your life insurance needs increase
significantly if you are caring for an aging parent, or if you have children
before marriage. Life insurance becomes extremely important in these
situations, because these dependents must be provided for in the event of your
death.
Your growing family
When you have young children, your life
insurance needs reach a climax. In most situations, life insurance for both
parents is appropriate.
Single-income families are completely
dependent on the income of the breadwinner. If he or she dies without life
insurance, the consequences could be disastrous. The death of the stay-at-home
spouse would necessitate costly day-care and housekeeping expenses. Both
spouses should carry enough life insurance to cover the lost income or the
economic value of lost services that would result from their deaths.
Dual-income families need life insurance,
too. If one spouse dies, it is unlikely that the surviving spouse will be able
to keep up with the household expenses and pay for child care with the
remaining income.
Moving up the ladder
For many people, career advancement means
starting a new job with a new company. At some point, you might even decide to
be your own boss and start your own business. It's important to review your
life insurance coverage any time you leave an employer.
Keep in mind that when you leave your job,
your employer-sponsored group life insurance coverage will usually end, so find
out if you will be eligible for group coverage through your new employer, or
look into purchasing life insurance coverage on your own. You may also have the
option of converting your group coverage to an individual policy. This may cost
significantly more, but may be wise if you have a pre-existing medical
condition that may prevent you from buying life insurance coverage elsewhere.
Make sure that the amount of your coverage is
up-to-date, as well. The policy you purchased right after you got married might
not be adequate anymore, especially if you have kids, a mortgage, and college
expenses to consider. Business owners may also have business debt to consider.
If your business is not incorporated, your family could be responsible for
those bills if you die.
Single again
If you and your spouse divorce, you'll have
to decide what to do about your life insurance. Divorce raises both beneficiary
issues and coverage issues. And if you have children, these issues become even
more complex.
If you and your spouse have no children, it
may be as simple as changing the beneficiary on your policy and adjusting your
coverage to reflect your newly single status. However, if you have kids, you'll
want to make sure that they, and not your former spouse, are provided for in
the event of your death. This may involve purchasing a new policy if your
spouse owns the existing policy, or simply changing the beneficiary from your
spouse to your children. The custodial and noncustodial parent will need to work
out the details of this complicated situation. If you can't come to terms, the
court will make the decisions for you.
Your retirement years
Once you retire, and your priorities shift,
your life insurance needs may change. If fewer people are depending on you
financially, your mortgage and other debts have been repaid, and you have
substantial financial assets, you may need less life insurance protection than
before. But it's also possible that your need for life insurance will remain
strong even after you retire. For example, the proceeds of a life insurance
policy can be used to pay your final expenses or to replace any income lost to
your spouse as a result of your death (e.g., from a pension or Social
Security). Life insurance can be used to pay estate taxes or leave money to
charity.
CornerStone Financial
Whether your
nest-egg is worth millions or thousands,
You and your
family deserve it more than the government....
We are here to help you with all of your
financial and insurance needs. Our skilled professionals are licensed with
over 100 top name companies and can help you gain a better understanding of the
concepts behind insurance including investing, retirement and estate
planning. There are literally thousands of products to choose from,
but we can help pinpoint what is best for you and your situation. Please
do not hesitate to contact us if you have questions.
Contact:
Eric Tuttobene
President/CEO
CornerStone
Financial
(615) 427-8780
IMPORTANT DISCLOSURES
The
information presented here is not specific to any individual's personal
circumstances.
To the extent
that this material concerns tax matters, it is not intended or written to be
used, and cannot be used, by a taxpayer for the purpose of avoiding penalties
that may be imposed by law. Each taxpayer should seek independent advice from a
tax professional based on his or her individual circumstances.
These
materials are provided for general information and educational purposes based
upon publicly available information from sources believed to be reliable—we
cannot assure the accuracy or completeness of these materials. The information
in these materials may change at any time and without notice.
