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Refreshing Insights

Unlike buying insurance for your car or house, obtaining life insurance can come with added emotional stress. Insuring an inanimate object, after all, pales in comparison to insuring the life of someone you love or that of your own.

Life insurance forces you to consider the security of your family in the midst of what would be an inevitably difficult time of loss and grief. The process for obtaining coverage can be emotionally charged, requiring you to broach a difficult topic and answer deeply personal questions about your family history and physical health.

Many individuals believe that once they finally get through the emotional hurdles and actually purchase life insurance that it’s a done deal and doesn’t need to be revisited. However, as you go through various phases of life, things change, and so should your life insurance. Here are five major milestones and life events you need to keep in mind.

1. Marriage

In addition to saying yes to the dress and making decisions about who gets invited to the wedding ceremony, updating your insurance coverage should also be added to your to-do list when getting married. Life insurance can help ensure that a spouse is taken care of financially and can pay the bills. It is also helpful in situations where the main breadwinner dies, leaving a spouse who earns a significantly lower salary or doesn’t work outside the home to cover expenses. For blended families, the importance of providing financial security in the event of one parent dying is even more significant.

Many young couples will start off with a term life insurance policy that has level premiums set for a period of time — usually 10, 20 or 30 years. It’s more affordable and easy to buy, yet can provide protection to ensure a surviving spouse has enough income while coping with the loss of a loved one.

2. Divorce

Divorce is cause for reviewing your life insurance policy as well. It’s not uncommon for life insurance policies to have an ex-spouse listed as a beneficiary simply because the husband or wife forgot to update their policy once the couple separated. This can be cause for some legal complications if it’s not taken care of.  

Some state laws automatically revoke an ex-spouse’s potential benefits once a divorce is final, leaving the proceeds to a secondary beneficiary. If no one else is listed, any funds go into the estate of the person who passed away. This provides some protections for current spouses but can still create a major headache when trying to sift through all the documentation that needs to be handled upon someone’s death. It’s always best to update your life insurance policy to include your current beneficiaries.

Additionally, your needs and financial responsibilities change with divorce. Children’s living arrangements are one consideration that comes to mind. Also, you may have taken on the house with 100% of the mortgage.

3. Having Children

Life insurance doesn’t always top the list of must-haves when starting a family, but it’s an important consideration when looking to protect your child’s future. Along with having kids comes a whole new level of financial responsibilities. As it pertains to life insurance and the loss of a spouse, the family may have additional expenses such as day care, but only one income to support what once was covered by two incomes. This may also be a time to consider longer-term insurance needs using permanent insurance.

While budgets for extra insurance are often tight, considering long-term post retirement needs may make sense at this time. Although never a replacement for retirement savings, this type of policy sometimes accumulates cash that can often be used as a rainy day fund in retirement.  

Though the practice is sometimes considered unconventional, some parents purchase a life insurance policy for their children. Many parents will purchase a policy to cover final expenses, including medical bills. Less common, but still important, is thinking about future insurability. In the event your child experiences a serious illness, it could restrict him or her from qualifying for life insurance coverage as an adult, so providing coverage early on mitigates this risk. Many parents or grandparents purchase a policy with this in mind. 

4. Buying a Home

Typically, a new home means higher mortgage payments in addition to other added expenses. It’s important to revisit the terms and limits of your life insurance policy as you accumulate more debt — including car payments, credit cards, etc. — to make sure your family has enough to pay expenses. Sadly, it’s not uncommon to hear stories of loved ones who had to sell a home after the death of a spouse because they couldn’t keep up with the payments.

5. A New Job

A new career opportunity usually brings with it a more lucrative salary and, over time, a family becomes accustomed to a higher standard of living. When your income changes, it’s a good time to evaluate your life insurance coverage to help make sure your family can get back on their feet in the event you die prematurely.

Many employers offer life insurance as part of their employee benefits package. While a nice perk, the amount of coverage is usually minimal and doesn’t go very far. Most experts suggest not having it be your only source of life insurance and supplementing it with a more robust option.

When life changes, so should your life insurance. Helping to alleviate financial burdens in the midst of unspeakable grief is one way you can provide for your loved ones even after you’re gone. No matter where you are in life, McClone’s risk advisors can help you understand which type of life insurance you need to protect your family and financial wellbeing. Get in touch today.


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A collection of articles from the McClone team with the helpful knowledge and insights to ensure your organization is well protected.