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Do I really need more Life Insurance? 4 Life Events that Should Make You Review Your Current Needs.

I’m recently married and it’s made me take stock of my current insurance coverage.    Part of that process involves reviewing the beneficiaries on my existing insurance policies.  Thinking about what would happen to my husband and parents if I were to meet an untimely misfortune is far from heartwarming, but as a financial advisor, I know I need to take these steps now to relieve some of the stress that could be caused in that event. Life’s biggest moments are usually filled with other priorities and immediate needs, but it’s important to pay attention to the not-so fun items that could help protect your family.  Here’s a list of some life events where I strongly urge you to review your insurance needs:

You’ve just tied the knot
With the wedding now over and hopefully all expenses paid for, you now have the rest of your lives together to look forward to.  Even though this is one of the happiest times in your life, you never know what’s around the corner and preparing for the ‘what if?’ scenario is advantageous in protecting your loved ones.  Things such as final expenses, outstanding debt as well as income replacement should be considered, especially if your partner depends on you financially.  You might already have enough coverage through work but it can’t hurt to run the numbers for some piece of mind.

Purchasing your dream home
Purchasing a new home not only adds an asset to your balance sheet but also a liability until your mortgage is fully paid off.  This can result in a large monthly payment that either you or your partner might not be able to make alone.  Increasing your insurance coverage would allow your partner to pay off the remaining mortgage balance.  Alternatively, they could invest the proceeds and create a stream of income to meet monthly payments so that your partner is not forced to move from the home.

You’ve welcomed the birth of a new baby
This to me is the most important life event where you really need to assess your insurance needs as well as your estate planning.  As we’re all very aware, having children isn’t cheap.  The cost of clothing, diapers, childcare and education expenses keep rising and in the event of a tragedy, you or your spouse could be left both emotionally and financially devastated.  When determining the amount of coverage necessitated, these factors as well as loss of income should be included in your calculations.  Ensuring that your family is taken care of financially in your absence is worth looking into.

Job circumstances have changed
How would leaving a job, receiving a substantial pay raise or entering into retirement affect you?

–    If you are leaving a job, review your existing policies to see if they are portable. Often times they are not, as you probably have group life insurance.  When entering new employment, there is normally a qualifying period that must be completed before you are eligible for company benefits.  If you have large outstanding debt or other responsibilities, you might consider getting insurance to cover this period.
–    Receiving a substantial pay raise likely leads to a higher standard of living.   It’s worth re-running your loss of income calculation and make changes to your coverage as needed.
–    Hopefully by retirement you have the mortgage paid off and minimal outstanding debt. When preparing for retirement, it’s important to make sure that loss of either your Social Security or Pension income will not impair the ones you’ve left behind.  Life insurance could bridge a gap if necessary.

There are some great online tools that can help you calculate your insurance needs.  If you find that you do have a shortfall, first I suggest speaking with your employer and exploring the cost of increasing your coverage with them.  We frequently encourage folks to consider this option first because typically an employee doesn’t need to provide evidence of insurability, although that can vary depending on the amount of insurance needed.

It is always worth shopping around to see if there are other options that better suit your needs.  Remember that if you increase your insurance coverage via a plan through work, then your coverage may not be portable. You may also need more insurance than your employer-sponsored plan offers.

If you feel that you would like a further review of your insurance needs and how they fit into your long-term financial plan, please contact your financial advisor.

Megan Logee, ChFC® serves as Senior Financial Advisor at StrategicPoint Investment Advisors in Providence and East Greenwich. You can e-mail her at mlogee@strategicpoint.com.

The information contained in this post is not intended as investment, tax or legal advice. StrategicPoint Investment Advisors assumes no responsibility for any action or inaction resulting from the contents herein. Megan’s opinions and comments expressed on this site are her own and may not accurately reflect those of the firm. Third party content does not reflect the view of the firm and is not reviewed for completeness or accuracy. It is provided for ease of reference.