Experts recommends the best time to purchase a life insurance policy is when you’re young. However, the life insurance you purchased at 25 is not the same policy you need at 45. Updating your life insurance policy to accommodate lifestyle changes is important to ensure your life insurance is adequate at every stage of life.
Studies show that approximately three-quarters of those who have life insurance do not have adequate coverage levels for their current stage of life. It is important to review your policy during the following life changes to ensure that your coverage is sufficient for your new needs.
When you get married and commit yourself to taking care of another person, it’s important that you can contribute financially even if you pass away. Although most newlyweds bring in two incomes, they also bring in two sets of debt and ownership of more things.
Most childless couples do not need extremely high levels of term life insurance coverage, but enough to make sure your significant other is financially covered to take care of debts and assets in the event of a sudden death.
According to a survey by Trusted Choice, one-third of families with a newborn child haven’t updated their life insurance to accommodate their growing family. A child brings on a slew of both immediate and future expenses, so it is important that those with children increase their life insurance policy to cover the cost of raising their children in the event they pass away. Even if you only have small children, it’s important to have enough life insurance to cover large expenses such as college tuition and wedding expenses.
Death or Divorce
Just as getting married requires life insurance changes, so does getting divorced or widowed. If you don’t have any children, you may be able to reduce your life insurance, but if you have children or other dependents you may need to increase your coverage to cover additional expenses on one salary instead of two.
Chances are, you’re making more money at 45 than you were at 25. Your life insurance should match your current lifestyle and salary levels. Studies show that nearly 65 percent of the affluent in the U.S. lack adequate life insurance coverage. Your life insurance should be 7-10 times their annual household income.
In addition to your salary, lifestyle changes in habits and hobbies may also require an increase in life insurance. If you decide to take up scuba diving, or base jumping, it might be a good idea to reexamine your policy. In addition, if you have changed professions or hobbies and no longer fly planes or rock climb, your term life insurance rates will likely be lower now.
Also keep your company apprised of changes in your physical well-being. If you have lost a significant amount of weight or quit smoking, your rates are likely to go down.
Even as you get older and near retirement, it’s important to maintain substantial life insurance coverage. When considering adequate life insurance levels, consider your children or spouse and their future needs. Even though your children may be grown and on their own, and your spouse may be able to live comfortably on your retirement savings, the future may bring financial trouble, health costs, or other circumstances which would benefit from life insurance proceeds.
By Matt Reynolds - Google+