Do Life Insurance needs change over time? In a word, yes. But such a short answer will leave you with many questions, so let’s explore this a bit further.
Life insurance is a product that is available, for the purpose of fulfilling your need to cover an “insurable interest”. Now, the definition of insurable interest is a bit vague and broad, but put simply, this means that you have some debt(s) you would like paid off, or someone, that you would like to provide for should you die.
Examples of insurable interests could include:
- Providing for your childrens’ college expenses
- Providing replacement income for a number of years for your spouse, children or loved ones
- Paying off a mortgage
- Paying off short term debts
- Providing retirement security for a spouse or loved one
- Providing funds to replace the services provided to the family by a stay-at-home parent
These are some typical examples. You might find other reasons to purchase life insurance protection that funds future needs of your loved ones or replaces the income that you provided.
When do “needs” begin?
Needs can arise at any age, as a matter of fact, many parents take out policies on their children at birth to cover funeral expenses should the child prematurely pass away. This coverage is, as you would expect, inexpensive as the likelihood of a child passing in the US today is very low.
For most, needs begin to pop up once you are of an age and maturity where you can take on debt. You might seek nominal life insurance coverage to pay off your debts and to cover funeral expenses so that you do not burden your family.
Do you think you have Life Insurance needs? Are you active and healthy? If so, you likely qualify for the best rates life insurers offer. We can give you a free, no-obligation quote with just a few data points and 60 seconds.
What life insurance product covers these needs?
This is a great question. For the vast majority, the least expensive, and simplest product to understand is Term Life Insurance. Term life, in a nutshell, requires that you pay a premium (annually, semi-annually, quarterly or monthly), in exchange for a coverage amount that pays your beneficiaries if you die. Term life is plain, vanilla, and simple to understand.
When would you need this type of product? Generally, with your first mortgage or upon marriage or engaging in a long term relationship. Now you have something, or someone, that you want to protect should the unexpected happen to you.
Do my needs change with time?
They sure do. Let’s say when you are 25, you take on a $100,000 mortgage. You might consider coverage to pay that off perhaps and leave the estate to an heir. Now let’s move on to age 28 and you marry. Now you have a spouse, and likely, you will combine incomes and create a lifestyle that requires both to be maintained. Your needs just went up.
At 30, you have just had your first child, and with this child, comes the expenses of raising them. CNN Money has placed that cost at $245,000 through college (if you expect to send them to a private university on your dime, expect to spend even more). The needs for life insurance have again increased.
At 35, you start your own business and take on a $400,000 business loan. You would not want the family to lose the business if you passed away, so you increase your coverage to pay off that loan.
At 55, the kids are likely grown and out of the house, the mortgage is almost paid off, you have created at least the start of a retirement nest egg, and your needs are now decreasing.
These are simply examples of how needs might change with time.
So do I get a new life product every few years?
You certainly could, but in my opinion, it might be better to look at your 10, 20 or 30 year plan, and purchase life insurance for the “high point” of need in that period. After all, you don’t plan to die, so if you do, you presently have no idea when that will occur. In my opinion, you need to insure for the greatest period of need.
“If you are active and healthy right now, and have been for some time, you are likely going to receive the best rates you can if you apply now.”
If you are active and healthy right now, and have been for some time, you are likely going to receive the best rates you can if you apply now. While term life insurance is one of the least expensive forms of coverage, the more health concerns you have, the higher the premiums will be for your coverage with term life insurance.
Why would I buy for my greatest need if I don’t really need all that coverage now?
The real benefit is simply this. Let’s say you buy a 30 year term policy. Should your health ever change in the 30 years, it won’t change your coverage, because you have a 30 year policy that does not change based upon your current health. Alternatively, if you purchase a new policy every 10 years to seek the perfect coverage amount for that period, you may have to re-qualify, and if your health has changed significantly, you could pay much higher premiums or be uninsurable altogether.
Being uninsurable during your greatest period of need, could leave your loved ones in a very vulnerable position if you passes away.
So in answer to the question
Yes indeed, life is filled with changing life insurance needs. Understanding your needs and insuring yourself appropriately is a smart decision. After all, the last thing any of us wants to do is leave our loved ones in a position where a GoFundMe campaign is their best option to cover their needs if we are gone.
Gaining coverage is a simple, 3 step process.
You can get a quote for 10, 15, 20, 25, or 30 years of coverage, and for amounts from $100,000 – $2,000,000 at mylifecovered.com. These quotes are without obligation. Be informed and understand the low cost of life insurance for fit and healthy individuals like you!