More than 70 percent of Canadians have life insurance policies in place. But most people don’t know that their coverage needs change over time.
When you first purchase life insurance, you’re looking at your financial needs at that moment. But what happens if your finances change? Would your coverage be enough to meet those needs?
Probably not, but there’s good news! You can reevaluate your life insurance policy at any time.
But there are some situations where you should reevaluate those coverage needs no matter how recently you bought the policy.
Watch for these situations and call your insurance agent to check on your coverage as soon as they happen:
You Get Married
Getting married is exciting. But there’s more to it than celebrating with your loved ones. It requires accepting more responsibility, compromising, and working with your spouse.
And that increase in responsibility also means your life insurance needs are changing. You’re no longer supporting yourself alone. You’re supporting your spouse, pets, and children (if you have them).
Think about what would happen if you pass away suddenly. Would your spouse have enough money from their job alone to make ends meet? Would they be able to cover funeral costs and last-minute medical expenses?
If not, it’s time to reconsider your coverage limits. And it’s best to do it together.
Ideally, both you and your spouse should increase coverage limits on life insurance policies after you get married. This way, you’re on the same page and can discuss your concerns as a team to find the right coverage limits for your needs.
You Buy a House
Buying a house is a huge commitment that comes with increased financial responsibility, bills, and maintenance costs. And without enough life insurance coverage, your loved ones would be responsible for covering the mortgage and other associated costs.
Increasing your coverage limits so your family can pay off the remaining balance of the loan is always a great idea. This makes adjusting to your passing easier.
It’s best to reevaluate your coverage anytime you buy a new home, even if you’re downsizing. Remember, just because you buy a smaller house doesn’t mean it’s worth less than your larger home.
That change in value can have a huge impact on the size of your mortgage and the financial strain your loved ones would face should you pass away.
You Pay Off or Increase Your Debt
Debt is a major problem. In fact, Canadians carry more than $599 billion in credit card, personal loan, and other consumer debts alone!
That’s why more people actively focus on getting out of debt. It frees up money to invest in your future. But it also means you should reevaluate your life insurance policy.
Your beneficiaries can use the payouts from your policy to cover any existing debts that they inherit after your death. If you don’t have debt or have paid down the majority of your loans and credit cards, you may be able to lower your coverage limits. This can save you money on premiums each month.
On the flipside, if your debt level’s growing, you’ll want to increase coverage limits. Yes, that means you might pay more in premiums each month.
But if you pass away unexpectedly, your loved ones can use the policy to pay off those debts in full. This means less financial liability for them and can spare them the added stress of assuming responsibility for your debts.
Income Goes Up for Your Household
Getting a raise is exciting. It means more money to pay for essentials, better opportunities to save, and gives you more breathing room each month.
But it also means your family might start to rely on that higher income.
What would happen if you pass away with that higher wage? Would your loved ones have enough money to maintain their lifestyle without your income?
If not, it’s time to reevaluate your life insurance coverage. Increasing your coverage limits when you get a pay raise helps reduce the risk of your loved ones having to adjust their lifestyle when you’re gone.
The increase in coverage limits may cost a little more than your initial policy, but the benefits far outweigh any potential costs.
Becoming Your Own Boss
Becoming your own boss is exciting, but it also means you’re in charge of overseeing the entire operation. Think about what would happen to your business if you weren’t there to run it.
Chances are, the business would see a financial slump at least if you weren’t there to keep things running smoothly. In fact, businesses see as much as a 60 percent loss in sales when the founder dies.
Reevaluate your life insurance as soon as you go into business for yourself. Your family, business partner, or successor can use the payout from the life insurance policy to help keep the business running without interruption.
This preserves your legacy for years to come.
But it also means your life insurance coverage will have to be large enough to support both your loved ones and your company. And the need is immediate.
Planning for Retirement
Believe it or not, life insurance is an integral part of every well-rounded retirement plan. Permanent or whole-life insurance plans work as a type of investment portfolio.
A portion of your insurance premiums goes to a fund that grows and earns interest over time. When you retire, you’re allowed to withdraw from the cash value of your policy.
This is an excellent way to supplement your retirement savings and dividends from other investments. Should you die unexpectedly, your policy will still pay out to your beneficiaries, just like regular coverage.
But that’s not the only reason to reevaluate your coverage needs when retirement planning. It’s about leaving a lasting legacy for your family.
Larger policies pay out more money to your beneficiaries. By increasing your coverage limits, you’re investing in your family’s future, their wealth, and their wellbeing.
The Death of a Spouse or Partner
Losing a loved one is always difficult. When your spouse passes away, the full brunt of financial responsibility rests squarely on your shoulders. But it also puts the fragility of life into perspective.
Anything can happen at any time. Making sure you prepare your loved ones financially is the best and smartest thing you can do, especially if you have young children.
Reevaluating and increasing life insurance coverage helps ensure that their needs get met even when you’re not there.
Becoming a Caregiver for a Loved One
As parents age, they’ll need assistance and it’s not uncommon for adult children to become caregivers for elderly parents.
This is a wonderful way to show how much you love your parents. But it also puts certain stress on your finances. You need to provide for them in addition to yourself and your immediate family.
By reevaluating your coverage as soon as you become a designated caregiver, you’ll set them up for a better quality of life if anything happens to you.
The funds from your life insurance policy can go to your parents’ retirement care when you’re not there to oversee it.
And they can get used however they need to be without restriction. This means medical treatments, living expenses, entertainment costs, and even private in-home caregivers are easier to pay for if the need arises.
You Lose Coverage Through Your Work
Many employers offer life insurance coverage as part of your benefits package. And that coverage may end if you leave the job or get fired.
Reevaluating your coverage when you’re starting a new job or lose your coverage from your old position is a great way to stay protected. You can even purchase life insurance through a private company to supplement your employer-sponsored plan.
The Original Policy Expires
Term-life insurance is the most common and affordable type of coverage out there. But it only lasts for the number of years specified by the policy itself.
Once the policy expires, you’re no longer covered. You’ll need to renew your coverage or buy an entirely new policy.
And it’s the perfect time to reevaluate your coverage limits.
You’ll already need to buy a new policy. So, why not look at your current financial situation, the needs of your loved ones, and any other factors that might have changed since you bought the original policy?
The new policy will fit your current needs better than the original insurance plan. And
You’re Worried About Your Coverage
You don’t need a reason to reevaluate your life insurance coverage. In fact, you can reevaluate those coverage limits at any time for any reason.
If you’re worried that your current coverage limits aren’t enough or you just want to increase the amount of your policy, you can. It’s up to you and the only limit is your budget.
Purchase Life Insurance Tailored to Your Needs
No two people have the same life insurance needs. And that means you’ll need to find a policy that offers terms and coverage limits that fit your unique financial situation.
Let our experts help you purchase life insurance policies that fit your budget and your lifestyle. Contact us or get a free quote and get the coverage you deserve at a price you can afford.