No matter how you feel about tax season, it’s a great time to check off some money to-do’s while you are focused on your finances. There’s the usual stuff you might think about like beefing up your emergency fund and paying off any nagging debt. This is also a great time to check in on your life insurance policy and make any necessary updates.
Tax season is a great reminder, sure, but there are other times in life when your life insurance might need a reboot, like getting married, buying a house or starting your own business.
Marriage, divorce and family
Life events are the ideal time to make sure your life insurance policy still works for you. When you bought your life insurance policy life likely looked a little different than it does now. Your money situation might be improved or you might be entering a new relationship that brings more financial responsibilities. Here are some of the most common reasons to update your policy.
What better time to update your life insurance policy than when you join your finances together with someone else. Make sure you have enough life insurance to provide needed cash to your partner if something were to happen to you. You also may need to update your beneficiaries to choose your partner or loved ones who would be most financially impacted by your death.
Having a baby
Welcoming a baby is another great reminder to check in on your policy. Whether you’re a stay-at-home parent, you’re both working, or you’re a single parent, providing cash flow or college funding in the unlikely event that something happens to you can be a vital piece of your financial plan.
While this event may not be a happy one, divorce prompts new questions about whether you need to keep your current life insurance coverage in place or decrease your death benefit now that you’re divorced. Some divorce decrees stipulate that you carry a certain amount of life insurance and that you name your ex-spouse as a beneficiary. Always make sure you check with your attorney before you make any changes to your life insurance policy.
Buying a house
Getting the keys to a new home is a pretty exciting day. Once all the excitement of moving in and housewarming parties wears off, the bills start rolling in for the mortgage, homeowner’s insurance and more. That’s just another gentle reminder to check your life insurance policy and make sure it’s up for the change.
Here are some questions to help you figure out if you need to update your life insurance when you buy a new home:
- Would your partner or spouse need help paying the mortgage payments with their salary if something were to happen to you?
- If you’re not in a relationship, who would inherit your house? Do you have enough life insurance to provide for their needs?
- Do you have enough life insurance to pay an existing mortgage amount plus college tuition funding for your children?
- Would your current death benefit provide enough cash to bridge the gap?
Buying a new house brings with it lots of unexpected expenses. You’re now responsible for repairs and updates to your home. While those costs can be expensive, not having enough life insurance to cover the mortgage if something were to happen to you could put your partner’s or family’s financial situation at risk.
Starting a new business
In 2018, 30.2 million entrepreneurs were running small businesses. With entrepreneurship on the rise, more and more people are waving bye-bye to their traditional corporate job to start their own businesses. If you’re counted in that number, it’s a good idea to make sure the life insurance you have in place is sufficient.
Updating your life insurance while starting a new business may seem counterintuitive as you’re trying to save cash. However, the first few months, even years, can be a trying time for a new startup. Not only do you have the expenses of getting your business up and running, but you might not be earning any profit or salary as well. This could leave your partner or family in a tough spot if something unexpected were to happen to you.
Make it a regular checkup
No matter what season of life you’re in, it’s always a good idea to make a note on your calendar to review your life insurance policy once a year. For one, double-check that your beneficiaries are up-to-date. Second, review your life insurance to make sure the death benefit will provide enough cash flow for your beneficiaries.
If you decide you need additional life insurance, you can buy a new policy or add a supplemental amount of insurance with a new policy. So why not add checking in on your life insurance as a financial to-do for this month?
Shannah Compton Game is a CERTIFIED FINANCIAL PLANNER® professional with an MBA and is the host of the award-winning podcast, Millennial Money, where she shares totally relatable and easy to understand financial advice that will actually make you want to talk about money.
Haven Life doesn’t provide tax, legal or investment advice. This discussion is intended as general education only. We encourage you to work with your own personal tax or legal professionals and your financial advisor. Opinions expressed by the author are their own and do not necessarily represent the views of Haven Life.