When Should I Get Life Insurance?

Insurance exists to protect against loss. In the case of life insurance, you are protecting loved ones from the financial loss that may occur if (and when) you die. While you don't need a reason to get a life insurance policy, it makes sense to review your coverage or look into getting a policy.

Marriage

If you are getting married, look into a policy. Many married couples see life insurance as way to protect your assets as you build a life together and purchase a home, start a family and save for retirement. Your premiums will be lower if you purchase a policy when you are younger. Be sure to review your coverage as you get older and your needs change.

Home Purchase

Most people are looking at a long-term commitment when they buy a home; mortgages are 15 to 30 years. If you are purchasing a home, look at having a life insurance policy that covers the mortgage if you die before it is paid off or the house is sold. Many people consider a term insurance policy, which is less expensive and can cover you through the entire mortgage period. Term insurance is not permanent -- it can't be renewed when the term ends, and a new term policy will cost you more based on your age. There is no cash value in term insurance. Also consider permanent policies such as whole life, which has a more expensive initial premium but covers you for life and builds cash value.

Children

This is when most people begin to think about life insurance. While you may not want to think of your children growing up without you, it is even harder to think that they will not have the financial resources your income provides. Life insurance protects your children as they grow and can ensure funding for a college education. Once again, consider term or permanent insurance depending on what you can afford and how long you you want coverage.

Estate Planning

So the mortgage is paid off and the kids are out of college. Many people think there is no need for life insurance once they have passed these milestones. At this point in your life, life insurance is less about protecting against your untimely death and more about providing a legacy for subsequent generations. This is a time to look at life insurance as a wealth-building strategy because it passes on to heirs tax-free. As you look at the assets you will leave to your beneficiaries, use life insurance to cover possible estate transfer taxes. You can also fund college educations for your grandchildren. Life insurance is how the Rockefeller family protected its assets and grew them over generations. You don't need to start with millions to do the same.

References

• Which Life Insurance is Best