Life insurance is a simple way to provide financial assistance to those who depend on your income if you pass away. Regardless of age, financial position, or family size, everyone can benefit from a life insurance policy, and it can also be an investment for some if used properly.
How much you need will vary depending on your situation, with some needing just a burial policy and others needing more to help pay off debts. There are some specific situations where it would be a good time to purchase a life insurance policy or review your death benefit.
When Do You Need Life Insurance? Key Milestones to Consider
While the main purpose of life insurance is to provide financial support for those who depend on your income, there is no black and white answer as to when you might buy life insurance. Certainly, some life events or milestones will trigger a higher need for a life insurance policy.
You Are Older Than 26 Years Old
In the eyes of life insurance carriers, the day you turn 26 is when you may want to obtain your life insurance policy. If you are on your parents’ policy and turn 26, you are no longer eligible for coverage under their policy.
Life insurance is rated based on your health characteristics and age, so purchasing a life insurance policy around the age of 26 is advisable since it will be more affordable then. Once you age and your health is impacted, the underwriting process can be tiresome and cause you to pay higher premiums.
If you are 26 or younger, you may not think you have as much of a need for life insurance, but that is not necessarily the case. You likely have some sort of debt, whether it’s a car loan, credit card, or student loan. Unfortunately, these debts are not always forgiven when someone dies, so having a policy that will help your family pay off these debts is beneficial.
You Got Married
Many people who get married combine their finances or at the very least split their responsibilities in some way. If one of you is not working or one spouse makes significantly more money than the other, a life insurance policy is necessary.
Typically, debt will increase after people get married because they continue to complete milestones like buying a house, having a child, and other things that impact their finances. Because you are starting a family, even without kids, your spouse is financially responsible for all of your debt, so providing a death benefit to them if and when you die helps unburden them in that time of need.
You Plan To Have or Adopt a Child
The cost of raising and educating a child can be extremely high. Parents often purchase life insurance to ensure that they will be able to provide for their children in case of an emergency. Life insurance is a sensible investment for both parents.
Even if one parent stays at home, it is still important to have a life insurance policy for each. In the event of the death of a stay-at-home parent, there is no loss of income, but a loss of valuable services, such as daycare and other childcare costs, which must otherwise be paid for. It is critical to remember all of these possible scenarios.
Many life insurance carriers have a child rider option, which will give a small death benefit if the unthinkable should happen. On the flip side, having insurance on your child is also recommended and can be done without purchasing a separate policy. While not enjoyable to think about, it is essential to be realistic and plan for these financial risks.
You Have Taken Out a Sizable Loan, Such as a Mortgage or Car Loan
Loans are another situation in which you could consider a life insurance policy or review the coverage you currently have to make sure it is enough. After buying a home, you may want to purchase life insurance. Life insurance could help you pay off your mortgage if you die, leaving your loved ones to foot the bill. This is a great time to buy a term life insurance policy that is usually 20 or 30 years, and the death benefit should be enough to pay off the loan completely.
The same can be said for a car, personal, or even a student loan. Again, this is a great time to look into a term life insurance policy, as this can usually match the length of the loan or be very close to it.
You Have Financial Dependents
On top of supported spouses and children, sometimes you end up having to support an elderly parent or any other dependent in your care who depends on you financially.
If you have dependents that are financially dependent on you, even if they can take care of themselves otherwise, you might want to have a life insurance policy in case something happens to you. If your spouse or another family member has to take over caring for those dependents and you die without life insurance, the financial burden could be overwhelming.
You Lead a High-Risk Lifestyle
Whether you are an adrenaline junkie or have a job that is considered high-risk like climbing telephone poles or window washing, it would be a great time to consider life insurance.
Someone who works in an office at a desk all day is unlikely to be killed at work. However, someone working at extreme heights or in a mine would be at high risk and therefore should have life insurance for their families.
Think again if you think you have enough life insurance because your employer provides it. If you change jobs, chances are you can’t take that policy with you. The downside to this depends on your health and age; you could have to pay higher premiums if you wait to get your policy when you no longer have it through your employer.
Another thing to consider when leading a high-risk lifestyle is your chance of disability is also higher than those who don’t. Life insurance with a disability rider is an excellent way to plan for this possibility.
What You Need to Buy Life Insurance
Now that you have decided to purchase life insurance, what are the next steps?
You will need money to pay the premium, the patience to complete an application, and time for health examinations if they are required. Sometimes a nurse can come to you and will do a basic physical and take blood. Not all policies and carriers require this, so be sure to know what to expect when applying.
Make sure you shop around because not all policies are the same, and not all insurance carriers provide the same riders and coverages. Exclusions will vary from carrier to carrier. Some even exclude those who skydive.
Once your application is submitted and any required exams have been completed, the underwriting process begins. Coverage will begin once you are approved for the policy and accept the final offer. Be sure to read the fine print as there is often a waiting period for certain instances, like suicide.