Life Insurance is never fun to buy. But it’s still necessary!
Because life insurance is something most people dread to buy, it is very tempting to just skip the whole thing. It can be especially daunting since life insurance policies can get complicated in a hurry. But putting it off can leave your family, spouse or other loved ones facing a mountain of bills and financial obligations without the benefit of your income. Understanding how to go about assessing your needs and matching coverage to them can be equally daunting.
Here’s one solution. Put yourself into one of the following age brackets and follow the guidelines to simplify the issue.
High demand years: 25 to 35. This is the time you need life insurance the most. While your list of obligations at this stage may vary, in most people’s lives it’s usually a long one: mortgage, kids’ college fund, car payments and retirement planning to name a few. What’s more, many people at this stage in their lives are still building their assets and are far from having enough to cover costs in case of a catastrophic loss of income. The bright spot here is that that cost of insurance at this age is very reasonable since death is less likely, hopefully. You’ll want to cover the obligations listed above, all your debt and replace your income as much as possible within your current budget. Term insurance, or a combination of term and whole life, are a good choice here.
Need wanes, but doesn’t disappear: 35 to 55. Insurance still plays a role in your “pre-retirement years,” but it’s starting to get less important. By the time you hit these years, especially if you had a financial plan when they were younger (and followed it), you should be seeing your liabilities shrink and your assets grow. Yahoo! Thus, the need for life insurance is reduced. For example, your mortgage balances are starting to fall as the loans have been paid for years now. Meanwhile, college savings plans and retirement plans are well on the way at this point as well. Most people in this stage in their lives should have the term/permanent policies in place that were set up while they were younger.
Beware! That’s not to say there’s no need for life insurance in this age bracket. Individual situations will differ but some things to consider are: a vacation home, or second home, additional children, including adopted children, financial support for an aging parent or loved, monetary help for grandchildren, and of course, a financial legacy for the family.
Life insurance turns into something else: 55+. When you get within 10 years of retirement age, or do actually retire, life insurance becomes less necessary for protection. The biggest financial risk shifts from death, to the odds of needing long-term medical care. Typically, by the time you get into your 50s and 60s, your kids are working, homes are paid off and most expenses drop. However, rising medical costs could pose an exception. At this point, you might choose to skip life insurance, and instead put those premiums toward a long-term care policy to protect yourself from the costs of a prolonged period of assisted living.
There’s a quick look at how life insurance needs change as you go through the different phases of your life. With the right planning and understanding of how life insurance fits into your plan, it can be one of the easier things in financial planning to manage.
The professionals at Freedom Insurance are here to help. Contact us today for answers to all your insurance questions!
Freedom Insurance Agency
(410) 795-2000
