Life Insurance Needs at Various Life Stages

Naturally, your need for life insurance changes as your life changes. When you're young, you typically have minimal need for life insurance, but this changes as you take on more responsibility, and as you grow. Then later in life, as your responsibilities once again begin to diminish, your need for life insurance may gradually drop off. Let's take a look at how your life insurance needs might change throughout your lifetime.

Birthdays, school days
Childhood is typically a time of no worries, no cares, and no responsibilities. A child depends on others to take care of them, not the other way around. Although it would be tragic, a child's death would likely have no long-term financial impact on the child's surviving family members.  A child's death does however create one short-term financial problem for the family: funeral expenses.

With this said, it is very important to point out there is also no better time in anyone's life to purchase a  permanent life insurance policy than when we are young and healthy.  Imagine the long-term possibilities of obtaining, for your child, a substantial cash value permanent policy.  Because they are so young, the premiums would remain small and affordable throughout their lifetime, while the benefit would remain the same and last until the end of their lifetime.  And because of the cash savings feature of permanent life insurance you would also be providing both yourself and your child with available funds for educational needs, a down payment on their first home, and the like.  When your child, lets say graduates from college and is on their own, you could turn the policy over to them and they would begin making the premium payments themselves.  Remembering of course that these premium payments are low because you purchased the policy when they were young which guaranteed them lifelong coverage at a low rate.

Footloose and fancy-free
As a young adult, we become more independent and self-sufficient. We no longer depend on others for our financial well-being. But in most cases, your death would still not create a financial hardship for others. For most young singles, life insurance is still not a priority although some would say that you should buy life insurance now, while you're healthy and the rates are low. 

If you have a mortgage or other loans that are jointly held with a cosigner, your death would leave the cosigner responsible for the entire debt. You might consider purchasing enough life insurance to cover these debts in the event of your death. Funeral expenses are also a common concern for young singles.

Your life insurance needs increase significantly if you are supporting a parent or grandparent, or if you have a child before marriage. In this case, life insurance could provide continued support for your dependent(s) if you were to die.

Going to the chapel
Married couples without children, and who do not own a home, typically have some level of need for life insurance even if it's not a substantial need.  Once you have children or buy a house, the situation begins to change quickly. Even if both spouses have well-paying jobs, the burden of a mortgage may be more than the surviving spouse can afford on a single income. Credit card and other debt can contribute to the financial strain as well.

In order to make sure either spouse could carry on financially after the death of the other, both of you should probably purchase a modest amount of life insurance. At a minimum, it will provide peace of mind knowing that both you and your spouse are protected.

Again, your life insurance needs increase significantly if you are caring for an aging parent, or if you have children before marriage. Life insurance becomes extremely important in these situations, because these dependents must be provided for in the event of your death.

Your growing family
When you have young children, your life insurance needs reach a climax. In most any situation, life insurance for both parents is appropriate.

Single-income families are completely dependent on the income of the breadwinner. If he or she dies without life insurance, the consequences could be disastrous. The death of the stay-at-home spouse would necessitate costly daycare expenses. Both spouses should carry enough life insurance to cover the expenses that would result from their death.

Dual-income families need life insurance, too. If one spouse dies, it is unlikely that the surviving spouse will be able to keep up with the household expenses and pay for childcare, including educational needs, with the remaining income.

Moving up the ladder
For many people, career advancement means starting a new job with a new company. At some point, you might even decide to be your own boss and start your own business. It might not be your top priority, but it is important to review your life insurance coverage any time you leave an employer.

Keep in mind, you probably won't be able to keep any life insurance that was provided by your employer. If you're going to work for a new company, you might receive a comparable life insurance benefit. But if you're going into business for yourself, you'll need to purchase an individual life insurance policy.

Make sure the amount of your coverage is up-to-date, as well. The policy you purchased right after you got married might not be adequate anymore, especially if you have kids, a mortgage, and college expenses to consider. Business owners may also have business debt to consider. If you're business is not incorporated, your family would have to pay those bills if you die.

Single again
Unfortunately, divorce has become a fact of life in our society. You'll have to make many financial decisions during this stressful time, including the decision of what to do about your life insurance. Divorce raises both beneficiary issues and coverage issues. And if you have children, these issues become even more complex.

If you and your spouse have no children, it may be as simple as changing the beneficiary on your policy and adjusting your coverage to reflect your newly-single status. However, if you have kids, you'll want to make sure that they are provided for in the event of your death. This may involve purchasing a new policy and naming them as beneficiaries. The custodial and noncustodial parent will need to work out the details of this complicated situation. If you can't come to terms, the court may make the decisions for you.

The golden years
Once your children are grown, and your mortgage and bills are paid, your life insurance needs decrease.  However if you will be leaving a large estate when you die, your heirs may be stuck paying a hefty estate tax bill. Consider obtaining a cash value life insurance policy, because you don't actually know when you're going to die. Your heirs can then use the death benefit to pay the IRS. If the policy is held by a trust, the proceeds won't be included in your estate.