There are certain things that we know to do on a regular basis. It’s likely that you will go to the dentist about every six months. There’s also the annual physical. And then of course you know that you need to change the oil in your car about every 3,000 miles. But did you know that there are also times when you need a life insurance review?
Actually, there are at least seven times – consider the following:
1. Upon Taking Your First Job
When you graduate from college, you’re transitioning from student to wage earner. That creates an increased need for life insurance.
When you were a student, your life insurance was primarily to pay for final expenses. But now that you have an income, it may become necessary have life insurance to replace lost wages. And there’s also the fact that you may have certain debts, including student loan debts, that you may want to have paid off the event of your death.
2. Any Time You Get a Promotion at Work
Any time you get a promotion at work, at least one that involves a substantial increase in pay, having a life insurance review should be automatic. This is because the increase in your income means you will have even more wages that will need to be replaced upon your death. It is even possible that the promotion could involve certain higher risks, such as a significant amount of foreign travel, making the need for coverage even greater.
3. Marriage
When you get married, you suddenly have someone who is now dependent upon your income. Even though your spouse may have been self-supporting prior to getting married, lifestyle tends to expand upon marriage, and your spouse will likely need a cushion in order to enable him or her to readjust to life without you.
4. The Birth of a Child
In addition to the fact that a child is dependent upon your income, each child that you have creates a certain set of financial obligations. This will not only include paying for the child’s support at least until the age of 18, but there’ll also be education expenses, especially college. You may also want to have a certain amount of money to provide to each child upon graduation or marriage, to help them get off to a good start in life.
Unless you have a substantial amount of financial assets to cover these obligations, increasing your life insurance will be the most effective way to make it happen.
5. Buying a Home
It’s not so much buying a home that causes the need for a life insurance review, but rather the mortgage that’s attached to it. At a minimum, you should want to have enough life insurance so that your mortgage will be paid in full upon your death. Simply eliminating the monthly mortgage payment will go far in helping your loved ones to survive financially.
You should also have a life insurance review any time you trade up on a home. For example, since it is likely that a move from a $250,000 home to a $500,000 home will be accomplished with larger mortgage balance, you’ll need to adjust your life insurance provision to make sure that this obligation will be covered upon your death.
6. Starting a Business
You should want to have a life insurance review upon starting a new business for all the same reasons that you would for getting your first job or a substantial promotion. But it’s not necessarily the prospect of higher earnings that should motivate the review.
Starting a business often creates a subset of obligations related specifically to the business. For example, the business may require that you have certain debts, involved either in start up or expansion of the operation. You may also have one or more partners, which may require a life insurance policy in order to buy out your share of the business upon your death.
This type of life insurance is often referred to as buy/sell agreements, in which life insurance is used to ensure continuation of the business. In reality, what’s happening is that your surviving business partners are paying your family from the life insurance policy in order to buy out your share.
Such a policy serves two purposes then, to enable the business to continue for the benefit of your business partners, but also to provide additional financial resources for your family.
7. At Least Every Five Years
If you haven’t had a life insurance review in the past five years, then you should consider having one as soon as possible. Even if none of the above events take place, it’s still a good idea to review your policies every few years to make sure that you have adequate coverage.
Sometimes you can get so caught up in the events of the moment when you’re going through major changes in your life, that you simply forget to check the impact on your life insurance. It can leave you with inadequate coverage for your new situation. As well, you may come to a time in your life when you may find that you don’t need quite as much insurance as you actually have. But you won’t know unless you check periodically.
If you’re going through a major change, or haven’t had a life insurance review in at least five years, this is a good time to have one now. Get in touch with a good life insurance agent, and make sure that you have the right coverage for whatever your circumstances are right now.
