When is It a Good Idea to Reevaluate Life Insurance Coverage?
MILWAUKEE, March 9, 2023 (Newswire.com) - Northwestern Mutual: Getting life insurance can be an important step toward ensuring financial security. Still, needs can change, and policyholders may want to reevaluate the amount of coverage they have at several points throughout their life. Several key milestones provide good chances to reassess or update live insurance coverage and beneficiaries.
Here are some times when it makes sense for policyholders to reevaluate their life insurance coverage:
Getting married (or remarried)
Marriage can signal the expansion of a family as well as the expansion of responsibilities. From the moment a couple gets engaged (and often before that), they start thinking about and planning their future together, including the risks and challenges ahead. This makes getting engaged or married an important time to revisit life insurance coverage, with spouses becoming dependent on each other's income. Getting married may mean changing the beneficiaries of an existing policy. It can also signal the start of new financial responsibilities, such as a mortgage, which can affect the amount of coverage couples should have.
Having a child
As families grow, responsibilities for the future take on more importance. Amid all the other financial planning involved in having a child, parents may want to discuss their life insurance coverage. Having a baby for the first time is often a reason to change or expand benefits. A parent's death can affect children in lots of ways, but the right life insurance coverage can provide financial security and some peace of mind.
Having a second (or third or fourth) child
Having a child is a major change in anyone's life, and each additional child brings new financial responsibilities. This could mean taking some time to review life insurance policies and needs going forward. With more potential beneficiaries to consider, parents may also need to reconsider the amount of coverage they have.
After a divorce
Just as getting married is usually a good time to reconsider life insurance coverage, divorce changes priorities in an entirely different way. The end of a marriage can be a chance to remove someone as a beneficiary from a term or whole life insurance policy, or to reevaluate benefits and adjust accordingly.
After a raise or promotion
Income is typically a factor in deciding how much life insurance coverage a policyholder chooses. This is why getting a raise or promotion at work is often a good occasion to reexamine life insurance coverage. Employees may want to ensure their coverage amount corresponds to their new salary. If the raise is significant enough, they may also consider getting a permanent life insurance policy, such as whole life insurance. They may also be able to convert an existing term life policy to a permanent policy.
After the kids move out
Parents who got life insurance when their kids were born may no longer have the same financial responsibilities. While this may seem like the time to get rid of life insurance coverage, it's possible new goals have developed. Parents who have a whole life insurance policy may want to consider keeping it to take advantage of the benefits the cash value of the policy can provide in retirement and ultimately the legacy that the guaranteed death benefit can create.
The primary purpose of permanent life insurance is to provide a death benefit. Using permanent life insurance accumulated value to supplement retirement income will reduce the death benefit and may affect other aspects of the policy.
Source: Northwestern Mutual