New Chapters, New Coverage: When to Update Your Life Insurance
Life doesn’t stand still—and neither should your life insurance. As you move through different stages of life, your financial responsibilities, loved ones, and future goals all evolve. That’s why it’s important to review and update your life insurance regularly—especially during major life milestones. Here are some of the most common life events that should prompt a second look at your coverage:
Getting Married:
Marriage is a significant life event that often means merging finances, building a life together, and relying on each other. Having life insurance as newlyweds is essential because:
Financial Protection: If one spouse passes away unexpectedly, the surviving partner may struggle to maintain their lifestyle or cover shared expenses on a single income.
Debt Coverage: Many couples enter marriage with individual or shared debts. Life insurance can ensure these debts don’t become a burden for the surviving spouse.
Future Planning: As you begin to plan your life together, life insurance provides a foundation for financial security, allowing you to make long-term plans with confidence.
Affordable Premiums: Purchasing life insurance early in your marriage often means lower premiums, as you’re likely younger and healthier.
If you haven’t updated your life insurance since saying “I do,” now’s the time. You may want to:
Add your spouse as a beneficiary
Increase coverage to reflect shared debts and future plans
Consider a joint life insurance policy
Growing Your Family:
Whether you’re expecting your first child or adding another to the bunch, parenthood is a big financial commitment and the importance of life insurance increases significantly. Income Replacement: Life insurance can replace lost income, ensuring your children’s needs are met even if a parent is no longer there to provide.
Education Costs: The death benefit can help cover future education expenses, which can be substantial. For example, four-year public in-state college students pay around $10,940 per academic year on average.
Childcare Expenses: If one parent stays home, life insurance can cover the cost of childcare if that parent passes away.
Long-term Security: Life insurance provides peace of mind that your children will be financially secure, even if you’re not there to provide for them directly.
Life insurance helps ensure your children are taken care of no matter what. After having a baby, consider:
Increasing your death benefit to cover childcare, education, and living expenses.
Naming a legal guardian and updating your beneficiaries.
Exploring a policy with living benefits or cash value to support future needs.
Buying a Home:
A mortgage is likely one of the biggest debts you’ll take on. Life insurance can help your family stay in the home if you’re no longer around. When you purchase property, it’s smart to have:
Mortgage Protection: Life insurance can cover outstanding mortgage payment which helps prevent your family from losing their home due to financial hardship.
Additional Expenses: Beyond the mortgage, life insurance can help cover property taxes, utilities, and maintenance costs associated with homeownership.
Preserving Your Investment: The substantial investment you make in your home, including closing costs, inspections, and renovations, can be protected with adequate life insurance coverage.
Peace of Mind: Knowing that your family can remain in their home without financial stress provides invaluable peace of mind for homeowners.
Starting a New Job or Earning a Raise:
A new income level often means a higher standard of living—and possibly more financial responsibilities. It’s a good idea to reassess your coverage to match your current income and lifestyle goals.
As your career evolves, so should your life insurance coverage:
Income Fluctuations: A new job or promotion often means a change in income. Adjusting your life insurance ensures it aligns with your new financial situation.
Employer-Provided Coverage Gaps: If you’re changing jobs, there may be a gap in coverage between leaving one employer and starting with another. Personal life insurance can bridge this gap. Employer-provided coverage is often limited and may not follow you if you leave.
Supplementing Workplace Benefits: Employer-provided life insurance is often limited. As your career progresses, you may need additional coverage to truly protect your family’s lifestyle.
Business Protection: If you’re starting your own business, life insurance can help protect your business partners or provide funds to keep the business running if something happens to you.
Divorce or Relationship Changes:
It’s not fun to think about, but life changes—sometimes unexpectedly. If you’ve gone through a divorce or ended a long-term relationship, it’s good to check:
Beneficiary Updates: Ensure your policy reflects your current wishes regarding who should receive the death benefit.
Coverage Reassessment: Your financial obligations may change after a divorce, potentially requiring more or less coverage.
Child Support and Alimony: Life insurance can guarantee these payments continue even if the paying ex-spouse passes away.
Financial Independence: For newly single individuals, life insurance provides a safety net as they navigate financial independence.
By considering life insurance at each of these milestones, you’re taking proactive steps to protect your loved ones and secure your financial legacy, regardless of what life may bring.
Taking On Debt or Starting a Business:
Big financial moves—like launching a business or taking on student loans—should trigger a life insurance review. You want to make sure those obligations won’t fall on your loved ones if the unexpected happens.
Business Continuity: If you’re starting a business, life insurance can provide funds for your partners to buy out your share, ensuring the business continues without disruption.
Debt Protection: For substantial debts like student loans, life insurance can prevent cosigners from being burdened with the responsibility if you pass away unexpectedly.
Collateral for Business Loans: Some lenders may require life insurance as collateral for business loans, making it an essential part of your business planning.
Key Person Insurance: If you’re a vital part of your new business, key person insurance can help the company survive financially if something happens to you.
Nearing Retirement or Becoming an Empty Nester:
As you approach retirement or become an empty nester, your life insurance needs may change:
Downsizing Considerations: While downsizing your policy can free up funds, be cautious. According to a 2023 National Association of Realtors report, 29% of homebuyers 55 and older moved to downsize.
Final Expenses: Keeping some coverage for final expenses can relieve your family of financial stress during a difficult time.
Legacy Planning: Life insurance can be an effective tool for leaving a financial legacy to your children or grandchildren.
Policy Conversion: Converting a term policy to a permanent one can provide lifelong coverage and potentially accumulate cash value.
Debt Evaluation: Assess any remaining debts, including mortgages. The average mortgage debt for millennials is $261,484, which may still be significant as you near retirement.
Healthcare Costs: Consider maintaining or adjusting coverage to account for potential long-term care or healthcare expenses in retirement.
Remember, any changes to your life insurance in retirement should be carefully considered. Once you reduce or cancel coverage after retirement, it’s typically permanent and cannot be increased later.
When in Doubt, Review Annually
Even if you haven’t hit a major milestone recently, reviewing your policy once a year is a smart habit. It only takes a few minutes, and it ensures your coverage still fits your life today—not your life five years ago.
Need Help Updating Your Life Insurance?
Whether you’re celebrating a new baby, buying your dream home, or just curious if yourcurrent policy still makes sense, we’re here to help. Our team can walk you through your options and make sure your coverage grows with you.
