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Life Insurance: When Life Changes, So Do Your Insurance Needs
September 5, 2017 | Amy Merrick; excerpted from Thrivent magazine
No matter where you are in life's journey, change is inevitable.
Life's big events are a great time to revisit your financial instruments, especially
Whether the event is joyous or not, your needs are changing.
Take the first step to being wise with your money and determine if you have what you want – and need.
7 key events to review your life insurance coverage
Joy of marriage and your plans for the future are looking bright and exciting as you embark on the journey together. Making plans for the future is just beginning. But what would happen to your dreams if the unexpected happened?
Nobody likes to acknowledge what could happen if a spouse dies, but it's something that couples need to consider.
Replacing lost income is the most obvious need that life insurance can help with. But there are other financial obligations you and your spouse might have, like:
- Credit card debt
- Mortgage or rent
- Paying bills
- Student loan debt
Having enough life insurance to pay off those bills and other loans could help a partner through a difficult transition.
2. Birth or adoption.
When a child becomes part of the family, there are other considerations that come into the mix. One is parents may want enough coverage that if one spouse were to die, life insurance can fund the family's current financial obligations and future needs such as staying in the home, paying for college and even paying off debt.
Another consideration is life insurance for the child. This can help protect your child's future insurability if some medical condition should arise later.
3. Job loss.
If you only have group life insurance coverage, you'll likely lose that with a
job loss. Even while unemployed, your insurance needs still exist. If you have individual
permanent life insurance, you may be able to use the cash value to help with ongoing
If you have no other life insurance coverage, term insurance may be an affordable option. It typically has lower premiums and can help bridge your coverage gaps.
Divorce is a very emotional time and your financial situation is changing. You still have individual needs and want to be sure you have the proper protection in place for your new situation.
If you have a child, divorced partners may share the responsibilities of caring for the child, and it could be difficult for one person to meet the full weight of those expenses if the other were to die.
Carrying life insurance coverage for a former partner might be a good choice to provide for the child's future if one parent should die prematurely.
Beyond the excitement of having
your first grandchild, think about what financial role you want to play in that
child's life. One option is to simply list your grandchild as the beneficiary on a
A second is to provide a monetary charitable gift or establish a trust to help provide for the child's needs such as college or other opportunities.
6. Approaching retirement.
Your insurance needs may be reduced as you near retirement because you may have fewer financial obligations like mortgages and loans, but that doesn't mean you should drop your coverage entirely.
There are many reasons why you might need life insurance in retirement. Consider what income will disappear if one spouse were to pass away, like Social Security benefits and the potential for the survivor's Medicare Part B benefit cost to increase. Life insurance may help the surviving spouse meet these financial challenges.
This milestone shifts the focus from replacing lost income to reducing taxes for a surviving spouse.
Single taxpayers reach higher tax brackets sooner than married couples. So if a
spouse dies, the surviving spouse could pay more income taxes and may have lower monthly
Social Security benefits. Cash-value life insurance at this point may provide some
supplemental income that is potentially income tax-free.
- Learn more about your life insurance options.
- Review your life insurance needs whenever there's a change in your family.
- Revisit all of your beneficiary designations for any accounts (retirement, savings, etc.) and make sure they're up-to-date.
- Talk to your financial professional to understand what the right coverage is for your needs.
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THRIVENT FINANCIAL IS THE MARKETING NAME FOR THRIVENT FINANCIAL FOR LUTHERANS.
The federal income tax treatment of life insurance is unclear in certain circumstances. A qualified tax advisor should always be consulted with regard to the application of law to individual circumstances.
This is a solicitation for insurance. A Thrivent Financial representative may contact you.