Adult life brings with it various transitions that are exciting but also make you reset priorities. Typically, these changes are turning points that result in seeking out ways to establish financial security – both for yourself and your loved ones. Term life insurance is a responsible option to ensure financial care of the people who depend on you most, no matter which life stage you are embarking on.
Not sure when you need term life insurance? The following milestones are key moments to revisit your need for a policy.
When You Graduate From College
College graduation is one of the biggest transitions into adulthood. Once you enter the workforce, life shifts to take on a host of new responsibilities. Buying life insurance may seem like a distant second to things like paying rent, but it’s still worth considering. Why? Because the majority of college grads now leave school with a significant amount of student debt, which can be left to your family or co-signer to continue paying off if you die.
If you have a federally funded loan, you’re in the clear: if you die, the loan is automatically canceled and the debt is discharged by the government. However, private loans are a bit different. If you have private college loans, you’ll want to look closely at the lender policies and see if your loan debt is discharged in the event of your death and, next, where they collect the debt from – your estate, co-signer, spouse, etc. If your private lender’s death discharge policy falls into the latter category, you may want to consider purchasing a term life insurance policy to protect your loved ones’ from having to pay off an unexpected loan.
If you decide to shop for a term life policy now, you’ll likely have a very low monthly premium, since you’re young, healthy and without dependents.
When You Get Married
Marriage comes with a host of new choices, from deciding which set of parents to see at Christmas to choosing your first home. There’s also a laundry list of new financial decisions (combined checking accounts? filing joint tax returns?) and buying life insurance policies is high among them. Once you embark on a life with someone, you have the responsibility of making sure your partner is financially cared for if he or she were to suddenly lose you. Plus as a couple, you often take on additional expenses, like a larger home and a second car, meaning your spouse could be left in a difficult financial situation if you were to die suddenly.
If both you and your spouse work (including full-time parenting), you may want to explore purchasing individual policies. A good rule of thumb when shopping for term life insurance as a newly-married couple is that each of your policies should be enough to replace your earnings and your share of living expenses for at least five years.
When You Have A Baby
The arrival of a new baby is one of the most important moments to consider buying life insurance. You now have a dependent in your life – someone whose entire future depends on you. It’s necessary to make sure that this little person, and your spouse, will be financially secure if you were to die suddenly.
The question to ask at this time isn’t “should I buy life insurance,” but rather “how much do I need?” In determining the right amount of coverage, you’ll want to take into account factors like your salary and projected income, your lifestyle and costs of living, and your child’s anticipated education costs. You’ll also want to make sure the term length will last until your child is at least 18, or until he or she graduates from college. Even if you have an existing policy, it’s a good time to assess whether you have enough coverage, for a long enough term.
Being Smart About Your Financial Future
These milestones aren’t the only times in life to reconsider your financial situation, but they’re certainly some of the biggest ones that transition your thinking from “me” to “we.” While it’s easy to put off decisions like purchasing a life insurance policy in the midst of a major life change, doing so will be a positive step toward ensuring peace of mind and financial security for the people closest to you.
Check out step 2 of our Term Life Insurance 101 to learn more about life situations where you may need life insurance.