At key points in your life, your life insurance needs change. The good news is that term life insurance is inexpensive and may be all you need. If you know about an upcoming life-changing event, you can get your coverage in place before it happens.
There life events are when you should review your insurance needs:
You’re getting married
When you get married, don’t you have the desire and responsibility to take care of your spouse financially? Life insurance is an important and inexpensive way to show your love. What a selfless gift! Your spouse may need life insurance, too.
You’re having children
A child brings joy as well as more more financial responsibilities. Both you and your spouse will likely need more life insurance. Since you have months of advance notice, you can both apply early. The insurance premiums then become part of your routine expenses, rather than adding a new cost. If you both buy from the same insurance company, you may get discounts for bundling.
If you’re thinking of buying a bigger home, factor in the additional mortgage. You’ll then be able to take advantage of volume discounts.
You’re getting divorced
If you get divorced, you may want to change your beneficiary designation to ensure the death benefit goes where you now intend. You can do this freely if your beneficiaries are revocable. You can’t change an irrevocable beneficiary without the consent of that beneficiary.
You’re changing jobs
Your employer may offer life insurance, which often provides coverage of one to two times your annual salary. When you leave your job, you lose this coverage. Your group benefits often give you the right to convert that insurance to personal coverage regardless of your health. The premiums will likely be higher than buying new life insurance but at least you’ll have protection as you shop around.
You’re buying a home
A mortgage substantially increases your liabilities. Having life insurance helps your family keep their home if you die. Getting coverage for your spouse is important, too. Some plans offer joint first-to-die coverage, which pays a tax-free lump sum when the first death occurs. This is usually cheaper than buying two separate plans.
Since life insurance often takes one to two months to be issued, apply before you start house hunting.
You’re going to retire
When you retire, life insurance from your employer usually ends so you might want to convert your group life insurance to personal coverage. You may need less insurance because you’re no longer working or you might need more insurance to supplement retirement income for your spouse or for estate planning.
The bottom line
When a life-changing event occurs, you should review your life insurance coverage and take the time to make changes. Another approach is to review your life insurance annually. It could be at the beginning of the year, during RRSP season, at tax time, or around your birthday. Your insurance advisor may not keep in touch with you regularly so it’s up to you to be proactive when life changes.
- Is Workplace Life Insurance Good Enough?
- How to Balance Buying Life Insurance with Investing
- A Primer on the Different Types of Life Insurance