When you were single, you may not have felt the need to get life insurance. Now you have a spouse (congratulations!) and perhaps children, too. But if you die, what will your dependents do?
Life insurance is a solution — if you’re insurable. The cost is low if you’re healthy because death is unlikely during your working years.
The life insurance you already have (if any) is likely too little to fulfill your family’s needs. You may be able to add a rider to your current coverage. If not, you can buy a new insurance policy.
If you have term life insurance (say term 10 or term 20), rates increase sharply at each renewal. You may be able to save money by getting new insurance with increased coverage to replace what you already have. But don’t cancel any existing insurance until you have new protection in place.
When buying insurance, your premiums are based on your current age. If you plan on having children, you may save by getting insurance now rather than after they’re born. Since insurance premiums are also based on your health, which is unpredictable, you may not qualify for affordable insurance later.
Here are items to consider:
Do you have enough coverage?
You won’t know if you have enough life insurance until you look at your new financial obligations and goals. Your spouse may need more coverage, too.
How will your needs change over time?
You need more life insurance when you have a mortgage and dependent children. As your children leave home and you pay off your mortgage, your insurance needs also usually decline.
Do you have cost-effective insurance?
Each insurance policy has administration charges. Buying one larger policy instead of several smaller ones puts more of your money towards protection rather than the insurance company’s overhead.
Term life insurance provides the highest death benefit for the lowest cost for temporary needs. Permanent life insurance provides coverage which lasts for life and is designed to be affordable over that timeframe.
Can you get discounts?
If you and your spouse buy insurance from the same insurer at the same time, you may get discounts. If you buy more insurance, you can get volume discounts. Paying insurance premiums monthly is easier for budgeting but generally costs more than paying annually.
Do you have the right beneficiary?
When you were single, you may have designated a sibling or a parent as a beneficiary. Now that you’re married, you probably want the proceeds to go to your spouse. You can get the appropriate forms to change your beneficiary through your advisor or directly from the insurance company.
You can also specify a contingent beneficiary to receive the proceeds if your primary beneficiary dies before you. If you have children, you may want some money to go to them. If they’re minors, you’ll need a trustee.
Note that you want to avoid making a beneficiary irrevocable because you then need that person’s permission to make a change.
Unsplash: Nathan Walker