Life insurance can be an important part of your financial plan, helping your family pay the bills and save for the future if you die and your income stops. But your life insurance needs can vary a lot at depending on your stage of life — a young couple just starting out can have very different life insurance needs than a family with several children or a retired couple with an empty nest. And some of the old advice about when to drop your coverage has changed. It’s a good idea to reassess your life insurance needs at several key points throughout your life.
Starting out. Life insurance is important if someone is depending on your financially. If you’re single and just starting out, you may not need the coverage. But if you get married and buy a house, the insurance can be critical if your spouse relies on your income to pay the mortgage and cover other bills.
Having kids. The insurance becomes even more important after you have children and your expenses increase. This is when most people really discover the need for life insurance. The coverage can help support your children until they’re on their own, and is especially valuable when you’re young and haven’t built a savings cushion to help cover these expenses without your income. The insurance can also provide extra money to help your family start saving for future goals, such as college and retirement.
Even a parent who doesn’t earn an income should consider having some life insurance, especially when their kids are young, because the surviving spouse will have to pay for child-care expenses or may want to cut down on work to spend more time with the children. Life insurance can help give them that flexibility.
As your income and expenses increase. Don’t forget to reassess your insurance needs as your income rises, especially if your expenses rise, too. If you buy a new house with a larger mortgage, for example, make sure you have enough coverage for your spouse to continue to pay the bills without your income. Review your coverage every few years and after key life changes, such as when you buy a new house, have more children, start a new job, get married or divorced, or take on other new expenses.
Your kids graduate from college or leave home. When you first bought life insurance, you may have thought you wouldn’t need the coverage after your kids graduate from college or leave home. But you may still have people depending on your income at that point, especially if your kids move back home or you’re helping with their bills. If you have a child with special needs, you may need life insurance to provide support at all ages. And even if you’ve lived in your house for a long time, you may still have a mortgage if you refinanced to take advantage of lower interest rates and started the 30-year clock ticking again. This is also the time when most people reach their peak earning years and can ramp up their retirement savings. Depending on how much you’ve been able to save so far and how your investments have performed, the coverage can help your spouse save money for retirement if you die and your income stops. At this point, you may need a lot less insurance than you had when your kids were young, but you may still want to keep some coverage for the next several years.
After you retire. People generally assume they don’t need life insurance after they stop working, and that is often the case. But there are some situations where you may still need the coverage. For example, if you have a pension without a death benefit — or with payouts that would drop significantly for your spouse after you die — would your spouse still be able to cover the bills without that income? Also calculate how much money your spouse would receive in Social Security benefits after you die. The survivor’s benefits may be higher than the amount your spouse had been receiving on his or her own work record, but they’ll no longer continue to receive both spouses’ benefits. For more information, see the Social Security Administration’s Survivors Benefits page.
How to calculate your insurance needs: The procedure is similar when you reassess your life insurance needs at every life stage: Compare your family’s current expenses and future needs to the amount of income that will continue for your family after you die, and consider having enough life insurance to fill in any gap. A life insurance calculator, such as the one at Saturday Insurance, can help you run the numbers.
Schedule a free call with a friendly life insurance expert at Saturday. We can answer your questions and help you decide if life insurance is a fit for you.
Saturday Insurance Services, LLC (“Saturday” or “Saturday Insurance”) is a licensed, digital insurance advisor. All tools, quotes, and information provided by Saturday are for educational purposes only and based on the limited information, if any, provided by you. We urge you to consult with your financial and tax advisors before making any purchase decisions. All quotes and estimates are non-binding and are not to be construed as a guarantee you will be able to purchase insurance. Availability of insurance and final pricing is determined solely by our insurer partners and subject to their review and acceptance of a completed application. All product guarantees are subject to the claims-paying ability of your insurer.