When Should You Change Your Life Insurance?
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If you have chosen to take a proactive step in your end-of-life planning, life insurance plays a vital part in this process. As you begin to decide how you want your life celebrated, your financial situation will also play a part in how you leave certain things behind. Provided below is some guidance on how and when to review your life insurance needs and the best ways to use your policy to fulfill your wishes.
As you begin to plan your own funeral, an important piece of this puzzle is determining how exactly you plan to have your assets left behind to your loved ones. Because life insurance acts as a security blanket in the case of a death, the money from your policy will be left behind to whomever you listed as the beneficiary. This tax-free lump sum of money is known as the death benefit and is a crucial amount of money so that your family can continue to live comfortably even after you have passed.
When should you adjust your plan?
Knowing when to change or adjust your plan is an important step in securing the well-being of your family, even if you aren’t there to provide for them. Listed below are some milestones to keep in mind when reviewing your policy:
● Getting married: Chances are that you will combine your finances when you get married, and this can leave your partner dependent on the income you provide to maintain their lifestyle.
● Having a child: As your family grows, so will your insurance needs. Having a child who is financially dependent on your income means that you should have adequate coverage should you pass away unexpectedly. Although many employers offer life insurance as a benefit, this often isn’t enough coverage including expenses such as future college costs.
● Purchasing a home: Because buying a home also usually means that you are taking on a mortgage, this is a debt that can last years. Avoid leaving this burden behind for your family by adopting a policy that lasts as long as your mortgage.
● Starting a business: Whether you have a partner or your business is the major source of income for your family, having a life insurance policy will ensure that the business can continue to run even after you are gone.
As these are bigger life events, you might also want to talk to a life insurance expert every few years to re-evaluate your plan and ensure that you have proper coverage. It would be in your best interest to periodically check-in to make sure that you are not overspending on a policy and are still obtaining the lowest rates possible based on your current age and health.
What does this mean for your end-of-life expenses?
Because life insurance is a way to leave a legacy behind for loved ones, there are a few key considerations as you plan your end-of-life celebration.
For starters, you will want to make sure that you have correctly identified who should be listed as the beneficiary of the policy. As the policyholder, you are the only person able to make changes to the beneficiary, which is why it’s critical that this information is always up to date. This ensures that even in the case of an unexpected passing, your money is properly left behind with the right person. Similarly, you will want to openly communicate with family and tell them who the beneficiary is in order to avoid confusion and ensure that your wishes are filled.
Remember that if you don’t have any major debts or anyone directly financially dependent on you, you may even consider dropping your policy completely if you are in the later years of your life. This can allow you to leave money behind in different ways, including being able to set more money aside for your funeral planning expenses.
Remember that life insurance needs will vary from person to person, but securing the proper amount of coverage is an important part of your end of life considerations and financial legacy.