Some of life’s biggest moments—marriage, the birth of a child and retirement—are a time to celebrate. But local legal professionals say families should also remember that life-changing events mean changes in your life insurance coverage.
For many families, life insurance serves as a safety net—from income replacement following the death of a spouse to liquidity planning after the death of a business partner. Additionally, it is a convenient vehicle for estate and wealth transfers.
Life insurance should be obtained at a young, healthy age to qualify for a lower premium, then policy holders should be mindful of when it should be updated, says Steve Daiker of Bryan Cave. He and others agree that major life changes that warrant a change in your insurance include:
• MARRIAGE. Upon marriage, policy holders can add their spouse as the primary beneficiary, Daiker notes.
• NEW CHILD. Once kids are in the picture, the family breadwinners will need income replacement to care for them in the event of their death, Daiker says.
• LIFESTYLE CHANGES. As your income and standard of living increase, you also may want to heighten your policy, Daiker adds.
• DIVORCE. For divorce, policy holders will adjust beneficiaries and provide for any spousal alimony, says Leo MacDonald Jr. of Carmody MacDonald.
• RETIREMENT. More life insurance may be needed to prepare for health care, assisted living and funerals. Additionally, long-term care insurance can be purchased, according to Debra Schuster of Debra K. Schuster Elder & Disability Law.
• DEATH OF A SPOUSE. Ensure the breadwinner and the non-working spouse both have coverage to support the family in the event of their deaths, Daiker says.
• BUSINESS CHANGES. Significant events, such as a major growth in your business or the death of a business partner, can mean changes in coverage, Daiker notes.
• ESTATE TRANSFERS. Life insurance can cover major estate taxes, MacDonald says.
• WEALTH TRANSFERS. In addition, life insurance is a fantastic way of transferring wealth because it can be non-taxable, MacDonald explains.
• HEALTH CHANGES. Improvements in your health, such as a major weight loss or quitting smoking, may translate into lower premiums, Schuster notes.
Most important, families should plan ahead for these significant life events, so that life insurance coverage is there to bridge the gap. And when the time comes to make changes or request lower premiums, MacDonald recommends seeking a lawyer’s advice. “Attorneys will give an unbiased opinion, so they are another good resource beyond your insurance agent.”