As your life changes, so does your need for life insurance. When is the right time to buy more life insurance? Anytime you experience a major change in your life.
Some of the more obvious examples include:
When you get married
When you are single, life insurance is mostly optional. Generally speaking, there is no one who is dependent upon your income and financial resources for survival. Once you get married that changes. There is a person in your life now who will be relying on your income and financial resources – at least partially. And that gives rise to the need for life insurance.
It is sometimes thought by newly married couples that the need for life insurance doesn’t increase with marriage. This is especially true if each spouse has an income, and particularly if the person you’re marrying is making at least as much as you are, or even more. But other factors take hold in a marriage, and that’s where the need for life insurance enters the equation.
Even though your income typically rises as a result of marriage, your living expenses – and your lifestyle preferences – usually increase as well. For example, you may move from a small apartment to a larger one, or you may move from an apartment to a house. You may decide that for the house that secondhand furniture is no longer acceptable, and decide to replace it with brand-new stuff. And on the strength of being in a two income household, you may each trade up to more expensive cars – each complete with its own loan payment.
All of that lifestyle expansion will also increase the need for life insurance. In the event of your death, your spouse may no longer be able continue living in the lifestyle that you will grow accustomed to as a couple.
Anytime you have a child
The arrival of your first child – or even a second, third, or fourth – further increases the need for life insurance. In fact, you should consider adding a new life insurance policy with the birth of each child.
At a minimum, you’ll need to leave your family with a sufficient amount of financial assets that they will be able survive for the first few years after your death. Making some sort of a provision for college for each child is also highly recommended.
And beyond increasing your own life insurance with the birth of each child, you may also need to consider purchasing an individual policy for the child.
When you start a business
This is an insurance generating event that most people don’t think about. But when you start a business, you are typically taking on a variety of financial entanglements, that can increase your family’s burdens in the event of your death.
One obvious example is business loans. Your family may be able to sell your business in the event of your death, but doing so will be much easier if any loans owed by the business are paid prior to sale.
There may also be certain obligations, such as long-term leases that will need to be settled. Having a life insurance policy that will cover the known obligations of your business will make selling or closing the business much easier for your survivors. You’ll need this coverage over and above basic life insurance that you will maintain for the purpose of caring for your family in the event of your death.
Any time you take on a large debt
Any large debt you take should also be an automatic life insurance trigger. This is particularly true of mortgages and student loans, since the amount of both is much larger than other forms of debt.
Having a life insurance policy that is tied your mortgage will enable your family to live in their home for the rest of their lives mortgage-free. That may not give them money to spend on living expenses, but it will remove what is probably the biggest single expense in the budget. That will give them a fighting chance at survival even if your other life insurance provisions are not as large as they need to be.
Any time any kind of significant change occurs in your life, you should always seriously explore the possible need for additional life insurance.
