7 times in life when it's important to adjust your life insurance policy

February 14, 2022

Sure, you have life insurance now, but did you know you should review it every so often, and especially during certain life events? Over the years, your life may change, and you may need more or less coverage than you originally purchased.

Here are seven significant life events that are also a good time to review your life insurance policy—or get new coverage if you don’t already have a policy now.

(Already past some of these milestones? We encourage you to spread the word to your adult children and loved ones. The more they know, the sooner they can get the coverage they need.)

You’re getting married or combining income with a partner

It’s exciting to commit to someone you love and promise to care for them throughout life. But as you take this important next step, consider your finances. If something were to happen to one of you, would you be able to get by financially? For example, could your salary alone cover:

For many couples, the answer is no.

That’s why getting life insurance or adding onto your current policy is smart as soon as you get married and start relying on one another financially. Younger couples in their 20s and 30s may want to consider term coverage, which can offer financial protection for the next 20 or 30 years. If both people in the relationship are relatively healthy and young, they may be able to purchase a policy at an affordable price.

Older couples who marry should reevaluate their life insurance too. Even though a policy may cost more in this stage of life, it’s worth getting quotes. Depending on your age and financial needs, an older couple can:

In short, there are many options for couples, but the best path forward depends on your age, financial needs, and goals. If you have questions or need a recommendation, we suggest calling a trusted financial advisor or one of our licensed insurance representatives.

You’re adding a new baby or adopting a child

Growing your family can be one of the most joyful times in life. But it’s also a major responsibility. Whether it’s your first baby or fourth, whenever your family grows, you should reevaluate your life insurance.

You’ll want to make sure you have enough insurance to:

When you have children, life insurance isn’t something to skimp on. Sit down, run the numbers, and make sure you have enough coverage to continue living comfortably with your kids.

You’re buying a home and taking on a new mortgage

Mortgages are a tremendous financial responsibility—and costly too. Many couples rely on both incomes in order to pay their monthly expenses, including their mortgage, home insurance, taxes, and repair expenses. But when one income is no longer there, it can be hard to afford a home.

Help ensure your family can continue living in your home by purchasing a life insurance policy. If you’re single, get life insurance to avoid passing mortgage debt to an heir or foreclosing. Remember, if no one is there to continue making your mortgage payments or to take responsibility for the home, the bank will take over and foreclose.

Either term coverage or a whole life policy can help avoid these problems and take the financial burden of your home off of loved ones.

You’ve finished paying for your children’s college tuition

If your children are grown and have graduated from college, give yourself a big pat on the back. We know the job of a parent is a lifelong responsibility, but you’ve just surpassed a major financial milestone.

In this case, you may be able to reduce the amount of life insurance coverage you carry. After all, you don’t have college tuition hanging over your head. That said, you’ll still want to make sure you have enough coverage for:

We recommend talking to a licensed insurance representative or a financial advisor to find out if it’s wise to reduce or change your policy.

Your salary is changing at your job

Whether you just got promoted or you took a job with lower pay, you should reconsider your life insurance policy when your salary changes. If you change companies, you probably can’t take any company-sponsored life insurance coverage with you either.

Look at what you’re making now and if you have employer coverage. Then decide if it’s time to increase or otherwise change your policy. Depending on your financial needs, you may be able to save some money on your coverage, especially if you’re making less and downsizing.

You’re starting a new business or selling one

Business owners: don’t forget to evaluate your life insurance needs too. If you’ve taken on a business loan, it’s important to make sure it can be paid off if you pass away. Otherwise, your loan (and business) is at risk for defaulting and going under.

Many lenders even require that you carry life insurance before giving you a loan. Insurance is a way for them to guarantee the loan will be paid back, no matter what happens in the future.

You’re retiring from your career

Welcome to your golden years, when you no longer have the responsibility of paying for college, and your children may be financially stable. Despite careful financial planning and saving, remember that life insurance is still important during this stage of life.

In fact, life insurance can be a smart way to supplement the savings accrued in a 401(k), a pension, and social security benefits. A whole life policy can accrue cash at a higher rate than most IRAs and offers important tax benefits. When a spouse or partner passes away, many IRAs require that a beneficiary receive all of the funds within a certain amount of time. This can force someone into a higher tax bracket, making them pay more than expected in taxes. On the other hand, life insurance benefits are usually income tax-free.

The bottom line: it’s worth adding life insurance to your retirement plan. It’s a smart financial supplement that can offer advantageous tax benefits.

You’re starting over in life

There are many reasons that life may suddenly (and radically) change. For example, perhaps your spouse or partner has passed away, or you’re getting a divorce and remarrying. Either way, when life pivots in another direction, it’s important to reevaluate your insurance.

For example, if your spouse passes away, you may want to consider buying your own policy—even if you receive death benefits from your spouse. Here’s why:

If you’re getting a divorce or remarrying, and particularly if you have a blended family, take a look at your life insurance. You may want to increase the policy to help cover family members and new financial responsibilities.

When in doubt, evaluate your life insurance frequently

Life can change pretty quickly. In a few short years, you may have new and unexpected financial responsibilities. If you have a policy now, don’t just tuck it away, never to look at it again. Instead, review the paperwork each year and make sure you’re still on track for protecting your loved ones if anything should happen. It’s worth taking the extra time. 

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