Any major life event should trigger a review of your life insurance to make sure it aligns with your new situation.
If you’re experiencing one of these notable events, consider reviewing your policy now, and if you’re not sure why you need to do a review or aren’t even sure what constitutes a significant milestone, here are five for you to think about:
When you purchase your first house, it’s probably the biggest financial commitment you’ve made so far. If either you or your spouse dies, the surviving partner will need to replace the other’s income to be able to pay the mortgage and maintain the same lifestyle.
And if you decide to buy a more expensive house—with a larger mortgage--in the future, you’ll need to review your life insurance once again.
Some changes to your financial condition prompt you to make adjustments to your life insurance coverage. The loss of a job might make whole life insurance prohibitively expensive, so you switch to term life to lower your premiums. A substantial increase in pay, on the other hand, would require more insurance to replace your paycheck if you die.
If you are fortunate enough to come into a large amount of cash—selling your business or property--you may not need as much life insurance.
When you retire from your job, that group insurance policy that your employer paid for you stays behind. You will still want to protect your family if you die, so you’ll need to determine if your retirement savings are enough to provide that security. If not, you’ll need to look at replacing at least some of the lost coverage.
The most important trigger for a life insurance review is time. You can’t predict the future, yet insurance is meant to protect you against future risks. The best way around this is to re-evaluate your situation every two years and make adjustments to your coverage based on that. If you always wait until a major trigger prompts you, it might be too late because changes in your health may have rendered you uninsurable.
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