Life insurance is the one aspect of financial planning that no one ever wants to discuss. When you’re discussing your retirement savings with your financial advisor, you’re dreaming about your worry-free retirement, when you’ll have nothing to do but kick back and enjoy the fruits of your labor. When you’re discussing life insurance, you’re envisioning something a lot less lovely.

While some might associate life insurance with doom and gloom, it truly doesn’t have to be an unpleasant topic. In fact, sometimes life insurance allows you to enjoy the cash value during your retirement, depending on the policy you choose. One of the most important decisions when it comes to life insurance is when you take out your first policy. The purpose of life insurance is to protect your family financially, but choosing when to take a policy involves taking a thorough inventory of your current financial situation, in addition to considering what could happen if your loved ones could no longer depend on your income. Here’s what you should consider when deciding to get life insurance.

Why Timing is Important for Life Insurance

In most cases, life insurance is cheaper when purchased by a younger person than it is when it’s purchased by a senior citizen. The younger you are, the more affordable your policy will be. This is because it’s in the interest of the insurer that you don’t pass away shortly after you obtain your policy. The younger you are, the less likely it is that this will happen.

Most young people rarely think about investing in life insurance. Sometimes this is for legitimate reasons, such as the fact that they don’t yet have a family or dependents who will need financial protection in the event of their death. However, oftentimes younger people who are indeed responsible for a family will put off obtaining life insurance simply because they assume it’s something that you don’t need to worry about until you’re older. Young parents and heads of households can get much better rates if they look into obtaining a policy sooner rather than later.

An important thing to note about life insurance is that preexisting conditions and the state of your health can and will impact what policies and rates are available to you. Your health will very much be a factor when it comes to being approved for a life insurance policy, in addition to what rates you can expect to pay.

Key Stages to Consider When Getting Life Insurance

There are some key life milestones that serve as good reasons to obtain life insurance. Here are important times in your life where you should start thinking seriously about getting a policy. While every individual family’s needs may be different, these are generally the situations where it’s worth having the conversation about how to protect your growing family.

Starting a Family: Protecting Dependents

Starting a family is one of the most exciting and meaningful times in a person’s life. When you’ve just welcomed a new baby into the world, the last thing you might want to think about is the possibility of a tragedy. However, this is truly one of the most important times to think seriously about getting covered. If something were to happen to you, life insurance can be the difference between your dependents being able to thrive or being left to struggle financially. Remember, you are eligible for cheaper premiums when you’re young, so it’s really the optimal time to get life insurance.

Buying a Home: Covering Mortgage and Long-Term Debt

Another important thing to think about is what would happen if you were unable to contribute to your monthly mortgage payments and whether or not your partner would be able to shoulder the burden alone. If you’re purchasing a home, it’s a smart idea to consider a policy designed to cover your mortgage payments in the event of your passing. This will protect your partner from losing their home were such a situation to occur.

Marriage: Financial Security for Your Spouse

Another time to consider life insurance is when you get married. While it makes sense why you may not be thinking of life insurance at this time, really consider what life would be like for your partner in the event of your passing. Grief can be a true burden; indeed, the loss of a spouse is one of the hardest moments in a person’s life. Your life insurance policy would allow your spouse to take time off from work to process their loss without having to worry about finances. It will also ensure that they can enjoy the same quality of life they previously did on a single income.

Career Milestones: As Income and Assets Grow

Many young families don’t seek out a life insurance policy because their current earnings and assets wouldn’t entitle them to coverage that would justify the premiums. However, if your financial situation has markedly improved over the past few years, it might be time to start seriously thinking about life insurance. It’s understandable why individuals who are struggling or living paycheck-to-paycheck don’t seek out life insurance, but once you’re in a position where you’re comfortably earning a good living and your assets are growing, it’s a good time to begin the process.

Retirement Planning: Ensuring a Secure Future

While it’s ideal that you invest in life insurance when you’re young, it’s still not too late to think about it as you approach retirement. Life insurance can ensure that your family enjoys a good quality of life beyond what your savings or benefits may be able to provide for them. It can also be a way to ensure you leave something extra for your children and grandchildren.

Financial Considerations for Life Insurance

Life insurance can be the difference between your loved ones continuing their quality of life or struggling to make ends meet in the event of a tragedy. However, there are several important financial considerations to make when it comes to deciding on which type of life insurance is right for you and your family’s needs. Here’s what you need to know.

Budgeting For Premiums

Life insurance is a long-term commitment. When you’re budgeting for which policy is right for you, you’ll need to factor in two things. First, you’ll need to consider what kind of coverage you need to fit your family’s needs and your financial goals. Coverage refers to the scope of the payment that your dependents will receive in the event of your passing.

Typically, higher coverage is the result of higher premiums, which is the money you pay into your policy. Premiums may be paid on a monthly, quarterly, or yearly basis depending on your plan. While larger coverage is obviously always going to be the goal, you don’t want to enroll in premium payments that will create a financial burden for you. It’s crucial that your premium payments are something that you can easily afford without straining yourself. Deciding on what premium is within the scope of your family’s budget can often be best achieved with the help of a financial advisor.

How Life Insurance Fits Into Long-Term Financial Goals

Many people view life insurance as some sort of emergency strategy; it’s something you invest in to protect yourself in the event of the unspeakable. However, life insurance is better viewed as a part of your long-term financial plan, no different than any other financial tool like an IRA or a 401(k). Life insurance is a way to ensure that your family continues to enjoy the income that you provide even when you’re no longer able to earn it.

Depending on your policy and how much value you accumulate, you may actually be able to utilize some of your policy’s cash value in the event that you become ill, encounter an unexpected financial emergency, or simply need more money to live during retirement. This varies from policy to policy, but your financial advisor can help you choose a policy that allows for this access if it’s a priority for you.

Term vs Whole Life Insurance for Different Life Stages

Term life insurance offers the lowest premiums of any type of life insurance, but you are only covered for a set amount of time and your policy does not accrue any cash value. Whole life insurance comes with much higher premiums, but you will be covered for the entirety of your life.

Many people write off term life insurance as a waste of money; after all, on a short term plan, you may spend ten years paying into a policy from which you will never enjoy any benefits. However, by this logic, everyone should pay the bare minimum when it comes to health or car insurance. While your family will hopefully never need to utilize your term life insurance policy, in the event of the unexpected, it can be what keeps your loved ones afloat when they no longer have your income on which to depend. Furthermore, you can sign up for a convertible term life insurance policy, which will give you a time frame in which you can convert your term life insurance to whole life insurance. This is a wise option for young professionals who may not yet have a high income or valuable assets, but who expect to in the near future.

Whole life insurance is typically a good choice for high earners or those who have a lot of assets. Whole life insurance doesn’t always just protect your family, either. Some whole life insurance policies can benefit your business in situations where employees depend on you for their livelihoods. Indeed, policies can be customized to suit your specific needs and unique situation. Whatever your needs might be, whole life insurance is a way to enjoy a higher cash value over time. In many situations, whole life insurance can be a smart way to cover estate taxes and costs associated with transferring assets after your passing. Life insurance benefits are generally not taxed as income, which can make whole life insurance a good way to ensure your children and grandchildren are taken care of without having to worry about a major tax burden.

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When to Delay Life Insurance?

At Fidelity Life, we believe that most people can benefit from whole or term life insurance. However, it would be very much a lie to say that every single person needs it. If you are young, single, and renting, you may likely not be a candidate for life insurance. When thinking about whether or not you’re a candidate, it really comes down to one question: If you were to pass away, would anyone be financially burdened by your absence? Obviously your loved ones would be emotionally burdened by the loss of you, but if there’s no one who would struggle financially from that loss, then you may not need a policy.

However, there are situations where even those who have people who depend on them might not be good candidates for life insurance, at least not at this time. If you are unemployed, in a large amount of debt, or struggling to pay your bills, the burden that a premium would create may eclipse the benefit that coverage could provide.

During times of financial hardship, life insurance probably isn’t a priority. However, it’s important to remember that life insurance helps prevent your loved ones from inheriting debt and provides a financial safety net. It may still be worthwhile to explore lower cost options, including shorter term, more affordable policies that can provide peace of mind while you take steps to increase your income, reduce your debt and work on building your savings.

When it comes to financial planning, life insurance is typically going to be the final step in your long-term strategy. Some steps to take while considering life insurance are creating any sort of savings account, along with investing in a retirement plan such as an IRA or a 401(k). Of course, if you’re dealing with a lot of consumer debt, it should be a high priority that you pay it off if you’re trying to get your finances in order.

How to Reassess Your Life Insurance Needs Over Time

Life is a series of ups and downs, especially when you factor in outside economic forces that aren’t always within our control. While the you of ten years ago may have been struggling under the weight of consumer debt or without a family that needed financial protection, the you of now may have dramatically different financial circumstances. Furthermore, your family may be growing, which means that your current life insurance needs should provide protection for a lot more people than it did a few years ago. The purchase of a new home or a sudden new source of income can also change the policy that you and your family need.

However, reassessing your life insurance needs over time isn’t always prompted by major life changes. Sometimes, even routine changes to your financial situation might be a good reason to reassess what you need from your life insurance policy. If you obtained a term life insurance policy that allows you to convert it to a whole life insurance policy, be sure to take the time to consult with a financial advisor before this option expires. While the cost of whole life insurance premiums may have been outside your financial scope when you initially took out the policy, an advisor will be able to help you determine whether or not this is still the case.

There may also be situations where your monthly premiums are becoming burdensome when they’d previously been manageable. In this situation, it’s best to talk to a financial advisor who can help you to find a policy that suits your budget more appropriately.

Consulting a Financial Advisor

Navigating the world of life insurance can be tricky, especially when you aren’t sure which policy is right for you. Luckily, a financial advisor can help you to not only properly assess your finances, but determine which policy is perfect for you and your family’s needs.

Importance of Seeking Professional Advice

People who are financially literate will often assume that they can make these decisions on their own. However, it’s a misconception that those who seek professional financial advice only do so because they’re clueless about finances. In reality, even people with a lot of knowledge about the world of finance will seek the help of a financial advisor. The usefulness of having a second opinion and a second pair of eyes to go over your finances cannot be understated.

For example, the recommended amount of coverage that you should seek when it comes to term life insurance can vary dramatically depending on who you ask. Some personal finance publications will recommend 10-12 times your annual income as a general rule of thumb, but this isn’t always going to be the right course of action. An individual with a high-earning spouse may come to the conclusion that the lower premiums associated with a policy that offers coverage five times their annual income makes more sense for their situation.

Furthermore, many people assume that they aren’t appropriate candidates for whole life insurance because they aren’t high earners. While it’s true that those who seek out whole life insurance are generally in a place where they’re financially comfortable, it’s not the case that this is a policy reserved only for the very wealthy. Some people might think they don’t earn enough to justify the expense, but aren’t factoring in all of their assets appropriately, or underestimating how the cash value might benefit them in retirement. A financial advisor can help you to make the right choice for you and your family.

Tailoring a Life Insurance Plan Based on Individual Needs

Life insurance policies can be tailored to fit specific circumstances. When you work with a financial advisor, the goal will be to determine which policy is right for you based on not only your current financial situation, but your long-term financial goals. Determining which life insurance is right for you isn’t just about figuring out which premiums you can afford in order to obtain the bare minimum, but figuring out how life insurance can benefit your long-term goals for the financial health of your family.

Protect Your Family’s Future

No young professional who’s just begun the journey of creating a family wants to think about the worst case scenario. However, the fact of the matter is that creating a safety net for your loved ones is crucial. In the event of a tragedy, you don’t want to leave your family to deal with a financial burden during a time of grief. When you take out a life insurance policy, you protect the people you love and obtain peace of mind.

Even if you consider yourself a personal finance buff, talking to a financial advisor is always a great idea. The right financial advisor can help you to take inventory of your income and assets and determine the right policy for your current situation and your long-term goals. In situations where it’s needed, they may be able to tailor a policy that suits your family’s unique needs.

While life insurance might not be a topic of conversation that’s a hit at parties, it’s an essential part of financial planning for any young family. By obtaining a life insurance policy sooner rather than later, you’ll not only enjoy lower costs, but ensure that your young family’s future won’t be threatened in the event of the unexpected. At Fidelity Life, we want to help you to find the right policy for your family and your financial future. Call us at 1-877-673-1410 to speak to one of our licensed agents and get a quote today.

At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible. We encourage you to speak with your insurance representative if you have additional questions and make sure you read your policy contract to fully understand your coverage.