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The primary purpose of life insurance is to ensure you have enough capital to provide adequately for your family when you are not able to provide for them. An unexpected death can have numerous economic repercussions on a family, some perhaps you may not have thought of. There are some major things you should consider in life insurance planning.
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Expenses. Everyone recognizes the need to replace a lost income and provide for children’s education, but many forget potential expenses like death-related costs (probate, legal and accounting fees), the expense of hiring housekeepers and other service workers, the possibility of a former stay-at-home spouse needing additional schooling to return to work or the potential need to care for aging parents.
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Inflation. Coverage adequate to meet essential needs today may fall woefully short in a decade or two. It is prudent to initially buy some ‘excess’ coverage and then review your coverage periodically.
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Lifestyle Changes. Your family’s life insurance needs will change as your financial situation and lifestyle changes. We suggest that everyone reviewing their policies in the event of major life changes, such as a marriage or divorce, additions to the family, purchase of a new house or paying off a mortgage. It is important that you make certain your protection continues to keep pace with your needs. At a minimum, you should have a professional review your circumstances at least every five years.
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Life Expectancy. Your life expectancy has two important characteristics which influence the way insurance companies price their policies. The first of these characteristics is that the probability of death rises with age. The second is that the probability of death eventually becomes a reality. In other words, insurance companies want to figure the average amount of time you will have to pay on an insurance policy before it is time for your beneficiaries to collect on that policy.