Life Insurance: One Size Doesn't Fit All
Life is full of phases and milestones, and each one could change your coverage.
Whether you're starting a new job or retiring, single or just married, deployed by the military or leaving the service, buying a home or having a baby, each transition in your unique circumstances merits a financial re-examination.
"The right amount of life insurance will change as your life changes," says June Walbert, a CERTIFIED FINANCIAL PLANNER™ professional at USAA.
If you're single without kids, you may not need life insurance, but there are two reasons why you may want to buy some anyway:
- Insurability. Life insurance is something you have to qualify for — based on your health, medical history and other factors. "Buying coverage when you're healthy reduces the risk of being rejected later when your needs are greater," Walbert says.
- Price. Since age is a big life insurance pricing factor, people in their 20s have the opportunity to lock in a premium that's much lower than it will be later in life — especially when buying whole life insurance, which offers lifetime coverage and a premium that's guaranteed not to rise.
At this stage, the right amount often revolves around your financial obligations. Consider buying enough to pay off your mortgage, car loans, student loans, credit cards and whatever else you owe.
"It's hard to think of anything that sparks the urgent need for life insurance as much as having a child," Walbert says.
Without proper protection, the death of a parent can have disastrous consequences for children. Both parents, whether or not they work, should be covered.
New homeowners get plenty of offers to buy accidental death insurance that would pay off their mortgages, but it may be wiser to buy life insurance — which also covers deaths that aren't accidental.
Where alimony or child support is involved, it's important to insure the person who's responsible for making those payments. For greater confidence that the policy will stay in force, the spouse who is receiving support should be named the policy's owner.
While you're serving, Servicemembers Group Life Insurance (SGLI) is a good value. However, it stops 120 days after you leave the military, unless you swap it for a more expensive government option. If you're in good health, look for a better deal on an individual policy as you prepare for military separation.
Deployment is an event that should prompt a fresh analysis of your coverage.
As you enter retirement, consider keeping life insurance for final expenses, gifts and bequests, and to manage inheritance and estate taxes.
"Life is ever-changing," Walbert says, "and when those changes are big, it's time to review your life insurance to make sure it keeps pace with your life."