A life insurance policy is part of financial planning. Life insurance is there to help ease the financial trauma that comes with the loss of a spouse, parent, or partner. As you encounter different events in your life, you may need to review your policy and make changes. Here are five life events that may impact your life insurance needs.
1. Marriage or Partnerships
When you have a spouse or a life partner, both of you are likely to contribute to the household. If one dies, your financial obligations pass to the other. With a life insurance policy in place, your loved ones may use death benefits to continue their lifestyle and take care of bills and debts.1
2. Children
When you have children, you become responsible for the care of another person. Raising children is not inexpensive. It is estimated that American parents pay on average $272,049 to raise a child for 18 years.3 Life insurance funds help your spouse, partner, or designated guardian provide your children with some support if you pass away.2
3. Home Purchase
When you purchase a home, your monthly expenses are likely to increase. A mortgage is a substantial debt. If your spouse or surviving partner does not have the means to pay for it, they might lose their biggest asset. You may need to update your policy so that your beneficiaries have enough to cover the home expenses that your income would normally cover.2
4. Job Change
When you change jobs, you may need to look at your life insurance needs. Inquire about any life insurance policy offered by the company. Often these policies are smaller and meant to cover funeral expenses, but some companies provide options to purchase higher policies at a discounted rate. You also need to make sure your life insurance policy amount aligns with your new income. On average, your policy should be at least five times your annual income.1
5. Retirement
Retirement is another time you may need to review your life insurance needs. A financial professional may help you determine your life insurance needs as you move to this next stage in your life. If you have invested in a life insurance policy with a cash value, retirement might be a good time to draw from it for extra income.
You may also want to look at your current finances and the expenses that may arise after your death. You may want a policy to cover the costs of final arrangements, legal fees, and taxes associated with your estate so that your surviving family does not have to cover the cost. If you have enough savings to cover these expenses, you may decide to cancel your life insurance policy if it is not needed.1
Life insurance policies are essential for providing financial assistance for those you love. As your life changes, so may your insurance needs. If you experience any life changes, it may be time to review your life insurance.
Footnotes
17 Life Events That Affect Your Life Insurance Needs, Coverage.com, https://www.coverage.com/insurance/life/life-events-that-affect-life-insurance/
2Major life events that can affect your life insurance, New York Life Insurance, https://www.newyorklife.com/articles/events-that-can-affect-your-life-insurance
3The Cost of Raising a Child in the United States
https://www.investopedia.com/articles/personal-finance/090415/cost-raising-child-america.asp
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. For information about specific insurance needs or situations, contact your insurance agent.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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