Life insurance can be a crucial component of financial planning, providing security and peace of mind for you and your loved ones. Like other elements of financial planning, as life circumstances change, your life insurance coverage should, too. Here are three key moments when you may want to update your life insurance policy.
Your family is growing
Having children is a transformative moment in any parent’s life, bringing with it a host of new responsibilities and financial considerations. One of these considerations may be ensuring that your life insurance coverage adequately protects your growing family.
With children, your financial obligations increase significantly. From childcare expenses to education costs, there are many needs to consider. New parents who already have life insurance may want to revisit their coverage to ensure that the insurance payout is enough to cover their new obligations.
If you don’t already have life insurance, becoming a parent can be a good time to get life insurance quotes. Term life insurance often makes sense for new parents. Term life offers coverage for a set number of years, so 20-year policies can cover you and your spouse until your children reach adulthood.
You take out a mortgage
Purchasing a home can be the most significant financial commitment you’ll make in your lifetime. It’s important to ensure that your loved ones can maintain the house and cover mortgage payments in the event of your passing. When you take out a mortgage, you may want to increase your life insurance to cover your family’s living expenses and ensure they can continue paying the mortgage.
The same goes for trading in your starter home for your forever home. And, as you pay down – or pay off – your mortgage and increase your home equity, your life insurance needs may change again. It’s crucial to periodically review your policy to ensure that it aligns with your current financial situation and provides adequate coverage to protect your home and your family’s future.
Your earnings increase
Career advancements and salary raises are cause for celebration. They’re also a time to think about your financial future. As your earnings grow, your lifestyle can change, and so should your life insurance coverage. A higher income often means a higher standard of living for you and your family. It’s essential to consider how your loved ones would fare financially if they lost your income unexpectedly. Life insurance can provide a financial safety net, ensuring your family can maintain their current lifestyle and meet their financial goals, even in your absence.
Increased earnings may also lead to additional expenses, such as larger mortgage payments, increased childcare costs, or more funding for your children’s education. Reviewing and updating your life insurance coverage regularly can help ensure that it keeps pace with your evolving financial needs and obligations.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
