As you move through different phases of your life — marriage, family, career, retirement — you’ll find your need for specific insurance coverage may come and go. But when it comes time to provide for your family’s financial stability, you’ll want to make sure you know it.
If you’re not sure when to purchase life insurance, here’s a list of three points in your life when it is especially important.
Raising a Young Family
Raising a family is a life-changing experience. As any parent knows, there’s a lot of pressure to provide for the needs of your children both now and in the future. Life insurance during this time of your life can provide you a welcomed peace of mind. It’s a relief knowing that should something happen to you, your family will be protected financially.
How much and what kind of policy works in this situation, though? For many young families, cost is an important consideration.
A permanent life policy could protect your family and help you build wealth with an investment savings plan. But the premiums are higher, thanks to these life-long, guaranteed benefits.
With lower premiums and terms from 5–30 years, a term life policy is a great option for many young families. Your family is protected while your children are young and while you are in the early stages of your career, before your savings has had a chance to add up.
Saving for Retirement
Young families aren’t the only ones who can benefit from life insurance. Another point in your life when a policy makes sense is during your middle-age years. You may have the benefit of a higher-paying position, some savings, or even added income streams, say from a spouse or investment.
But there could still be some financial obligations you want to prepare for: having access to liquid funds to settle taxes on a family farm, making sure your spouse will be taken care of past retirement, even having savings to pay for expensive medical treatment while you are still alive.
These days, insurance policies have a wide array of options and applications. While the income replacement of a primary earner is one of the main benefits of life insurance, savings and estate planning are also valuable options to consider.
Locking in Premiums
Another consideration for when to buy: your age. Each year as we age, the probability of dying increases. Life insurers considering such risk when providing coverage. This means that waiting to purchase coverage later in life will cost more than buying the same policy now.
For this reason, many insurers offer long-term permanent policies with level rates, averaged out for your life expectancy. A younger person can purchase coverage that seems to cost more upfront but maintains a level premium as they age. In retirement, the premium is still the same rate, and much lower than if the same customer waited to buy that coverage.
If you know you’ll need a permanent policy for estate planning later on, you could save a significant amount on your premiums purchasing coverage now.
When You Don’t Need Coverage
It’s important to remember that not everyone needs coverage and that you may only need life insurance during certain points in your life. And these points can come and go.
Writing for Forbes, Rick Kahler put it this way:
“Many people don’t need to worry about outliving their life insurance, because they outlive their need for life insurance.”
Here are some points in your life when carrying life insurance may not be necessary:
- You have accumulated significant assets and multiple income streams. If you or your spouse were to die unexpectedly at this point, your family would be able to care for themselves.
- Your children are all grown, out of school, and living independently.
- Your estate is less than seven figures, meaning you won’t owe estate taxes upon your death.
- If you will owe estate taxes, you now have enough liquid assets in bank accounts and securities to cover the bill.
If you find yourself in these situations, you may have outlived your need for life insurance. If you have a permanent policy, you may be able to take part of your investment savings elsewhere or be refunded part of your premiums. Another option may be to consider another beneficiary, such as your favorite charity.
Deciding whether you need life insurance isn’t a question you can answer for today and then forget about. You can benefit from coverage while raising your family or saving for retirement, but then not need coverage at other points of your life. You may also want to purchase coverage sooner rather than later to save yourself on premiums in the long run.
If you already have insurance, it’s important to check in regularly with your broker or financial planner. As your life changes and your needs change, your insurance needs may change as well. Your planner can help you prepare for the future while meeting your needs for the present.