Signs That It Is Time to Review Your Life Insurance Coverage
As your life changes, so may your need for life insurance. To help ensure that your coverage stays in sync with your changing needs, it is important to review it periodically, as well as when major changes occur in your life. Here are a few events that typically signal the need for a life insurance review.
Getting married. Life insurance may be the furthest thing from your mind when you are planning a wedding. But as you begin your life together, take a moment to consider what might happen if one of you dies unexpectedly. Would the surviving spouse suffer financially without the other person’s income? If they would, it is time to consider purchasing life insurance.
Life insurance can help the surviving spouse maintain the lifestyle the two of you built together by providing the cash payout that might be used to pay living expenses and pay off debt.
If you already have a life insurance policy, be sure to review your beneficiary designations and your coverage in light of your new marriage.
The arrival of a child. The birth or adoption of a child is not only a cause for celebration, is it also a signal to review your life insurance coverage. Will your current coverage provide enough cash to cover child-rearing expenses if you were to die prematurely?
A 2017 report by the USDA estimates that higher income families spend $450,000 raising a child to age 18 (assuming a 2.2% annual rate of inflation). That number includes expenses such as housing, child care, food, transportation, health care, and clothing. It does not include college. Add in the cost of college and the overall expenditure may rise to well over a half-million dollars.
Keep in mind that $450,000 is simply an estimate, and the amount you spend may be significantly different. Generally speaking, child-rearing expenditures increase as household income increases and expenses are higher for families living in urban areas, particularly the Northeast.
To help ensure that there will be adequate funds available if your family ever needs them, it’s a good idea to review your life insurance coverage with your insurance professional whenever a new child arrives. Your insurance professional can help you estimate the coverage you may need to protect your growing family’s financial security.
New home or mortgage. Whenever you finance or refinance a home that you share with your family, be sure to consider whether they could afford to stay in that home without your income. If it looks unlikely, consider increasing your life insurance coverage so that the policy’s proceeds are sufficient to cover the mortgage, as well as other expenses your family may need help meeting.
A salary increase. A bump up in your pay often results in a bump up in lifestyle- and may indicate the need for additional life insurance coverage. If you don’t adjust your coverage as your lifestyle changes, your family may one day find themselves struggling to cover living expenses with the proceeds from a policy designed for leaner times.
Starting a business.When you start a business, it’s a good idea to put a plan in place that protects your family and business if you die prematurely. Life insurance can help provide that protection in certain scenarios.
For example, if you have a business loan, life insurance can help provide the cash needed to pay off the loan.
If you are seeking financing, you may be able to use a life insurance policy as collateral so the bank knows the loan will be repaid if you die.
If you have business partners, life insurance can help protect the business in the event that one owner dies by providing cash to the surviving owners to purchase the deceased owner’s share of the business from his or her heirs.
Please contact us or your insurance professional for help determining whether you have the appropriate life insurance coverage for your needs and financial objectives.
With offices in Rutland and Williston, Vermont Copper Leaf Financial develops a customized wealth management plan designed to integrate every aspect of your financial life. Our approach is to provide clarity and calm amidst the chaos. Where there is uncertainty we look for facts. We call our approach evidence-based investing. Call us today at 802-536-1805 to schedule a strategy session and begin building your road map to financial success.
Article published in October 2020 edition of Eye on Money. If you would like to be added to our mail list please email firstname.lastname@example.org.