Life insurance is a financial instrument that can make sure your family does not bear financial shocks in your absence. At every stage in your life, life insurance needs will change, which means it cannot be a one-time decision to buy insurance. You cannot adopt a ‘fill it, shut it, forget it’ attitude. You need to review your life insurance needs regularly to ensure that you are adequately insured and your financial dependents are well covered for.
A good way to re-evaluate your life insurance requirement is to check your insurance needs at different stages in life. For instance, you should reconsider life insurance when you marry, have a child, buy a home or even when your income goes up significantly. Basically, every time your financial responsibilities and liabilities increase, you need to review your life insurance needs. Here are some instances when you must reconsider your existing life insurance cover and act accordingly:
Life stage: Significant life changes like birth, marriage, death or divorce call for a recheck of your life insurance needs. At each of these instances, there is a financial impact concerning you and your dependents. So, when a child is born, you need to increase your insurance cover and, when the children get married and are settled, you should reduce it.
Liabilities: While buying a house is creating an asset, doing so with a loan is taking on liabilities. Make sure you increase your life insurance cover when you are taking a loan for a house or business. A proportionate increase in life cover for the period of servicing the liability will see you through.
Retirement: Ideally, when you retire you have no financial obligation, which means you should not have any life insurance in this phase. However, if you have a spouse who may need money apart from what you have saved for your life in retirement, continue a policy so that the spouse would be financially comfortable in your absence.
Career shifts: Every time you have a sizeable increase in your income, you should check your life insurance needs. Most often, rising salaries also indicate rising expenses, which will continue even in your absence. To make sure your financial dependents are taken care of; review your life insurance every time you have a career shift.
