How to plan for changing life insurance needs through life

In an ideal world, a life insurance policy is something you buy just once. Knowing your coverage needs, you would choose the best policy for you and your loved ones, then leave it in place throughout the life of the policy — for up to 30 years (with a typical term life policy), or until you die (with a permanent life insurance policy), so long as you keep paying the premiums.

But as you know, we don’t live in the ideal world. (If we did, hot dogs wouldn’t come in packs of ten when hot dog buns come in packs of eight.)

That means your coverage needs might change over the years. (After all, even the shortest term life insurance policy is usually around ten years, and a lot can happen in a decade or so.) You might need more; you might need less. You might even not need any at all.

Why’s that? Because as you grow older, your responsibilities change. Your age, your health, your salary, your number of dependents, your financial obligations — all these will evolve over the years and decades to come, and each one plays a part in determining how much life insurance you should have.

Keep reading to learn how your changing life stages demand different coverage needs and how to navigate them.

Choosing the right term length and coverage amount

When purchasing a life insurance policy, consider your current and future financial responsibilities. A common rule of thumb is to obtain coverage that is equal to five to 10 times your annual income. This amount can vary based on your individual circumstances, such as existing debts, future financial goals, and whether you plan to have children or buy a house.

An ideal term length for your life insurance coverage is one that lasts until your dependents are no longer dependent.

For instance, if you have young children, you might want a policy that covers them until they become financially independent. If you’re married or in a long-term relationship, your spouse or partner likely counts on at least some of your income to help pay for everything from groceries to housing, so you’ll want coverage for those years when you’re earning a salary and/or paying off a mortgage.

Life insurance needs will naturally fluctuate as you navigate different stages of your life. Let’s look at each life stage to help you plan for your insurance needs.

Life insurance in your 20s

As a twenty-something, you’re likely at your healthiest and pose the least amount of risk to insurers. That means you can get a policy when your rates are at their most affordable. If you purchase a policy with level term premiums at this stage in your life, you lock in the amount you pay each month. This way, your premium costs the same at age 24 as it will when you’re 44.

If you aren’t married, and you don’t have children or dependents, it might not always be necessary to have a policy. If and when that changes, you can purchase a policy.

And remember: You can change your life insurance policy as your circumstances change. More on that below.

Life insurance in your 30s

As you enter your 30s, you might notice that your financial responsibilities are growing. According to the National Association of Realtors, the average first-time homebuyer in 2022 was 36 years old.

As you take on greater responsibilities, you should adjust how much coverage you have. Whether you’ve just bought a house, are planning to buy in the near future, or are paying off student loans, life insurance becomes more important — especially if you have loved ones who count on you for financial support.

Life insurance in your 40s

In your 40s, you’re likely reaching the peak of your earning potential. If you purchased a term life policy in your 20s, maybe it’s time for a new one. Perhaps you bought your original policy before you had children or when you made significantly less income. Or maybe you now have a mortgage, and paying it off after your death would bring financial hardship to the partner you leave behind.

Point being: If you haven’t already purchased life insurance, now is a good time to consider it. If you have, it’s a good time to revisit your policy, and determine whether it offers enough coverage to meet your current needs.

Life insurance in your 50s

By your 50s, your children might be adults, potentially even financially independent. You might be thinking about retirement. If you have fewer loved ones depending on your income or if you’ve paid down your mortgage, for example, you might not need the same coverage you once did.

That said, maybe those kids aren’t quite fully independent just yet. Maybe they have college tuition to pay. Maybe your spouse has downshifted their career, leaving you as the primary breadwinner. Maybe that mortgage still has a few years to go.

If you have life insurance already, and it suits your needs, great. But if you need more, you can still get it — just keep in mind that your age means it will cost more than it once did.

Life insurance if you have kids

No matter how old you are, raising children is expensive. If something were to happen to you, who would cover all those expenses? Life insurance can help provide financial protection for your loved ones if you die while covered, in the form of a lump sum death benefit that would go to your beneficiary. (Tax-free, by the way.)

For many people, having children is what inspires them to get coverage — and that’s true whether you’re in your 20s, 30s, or beyond.

How to buy more life insurance

When it comes to life insurance, you don’t want to have too much or too little. The potential implications of an inadequate policy can be stressful, whereas too much coverage can leave you paying more than necessary in premiums.

If you’ve determined you need more coverage than your current policy provides, you can apply for a supplemental policy to cover the new amount, and keep your existing coverage to preserve the lower rates from when you were younger.

You can use an online life insurance calculator to estimate your needs. If, for example, you calculate that you’ll need a $1 million benefit and your existing policy only pays $600,000, you can apply for a $400,000 policy to supplement it. This is a simplified explanation, so if you’re considering this, here’s a more detailed guide on how to increase your life insurance coverage. (One important thing to know: You’ll likely need to take a new life insurance medical exam.)

How to decrease the value of your life insurance policy

In some cases, you might find that your life insurance coverage exceeds your needs. It’s better to ask your insurer to lower the value than it is to cancel your policy and purchase a new one.

Because, again, you’ll likely pay a higher rate for coverage, because you’re older. And you’ll likely need to take another life insurance medical exam. Many policies let you adjust your coverage at least once during the life of said policy.

The process will vary by insurer, so you’ll want to reach out directly for the details. If you decide to reduce your life insurance coverage, make sure the new amount can meet your future needs.

Let Haven Life help at any stage of life

As you journey through life, your life insurance needs will evolve. Your coverage should align with your financial responsibilities and goals.

Whether in your 20s, 30s, 40s, or 50s, life insurance can provide the peace of mind that your loved ones will be financially protected, now and in the future. We’re here to help you find the life insurance policy that best fits your lifestyle and financial needs. Get a free online insurance quote to determine how much coverage might cost.