It is often recommended to get life insurance when you are younger, but what if you do not buy enough coverage early on and later become wealthier or have a bigger family than you imagined? What options should you consider and when should you start planning?
If you need more life insurance coverage as your family grows, buying an additional policy is often the solution. Most people will have life events occur which prompt the need for more life insurance, such as a growing family. And there is no reason not to apply for another life insurance policy to make up for the coverage your family needs. I often find couples I work with who have small starter policies in place. After evaluating their needs, it is often determined they are under-insured, and they want more coverage. Term insurance is a great option for families looking for the lowest cost coverage that provides protection for a certain amount of years. If the couple is looking for a permanent life insurance plan, there are options such as universal life and whole life insurance products to explore. As for the timing of the life insurance purchase, the younger and healthier you are, the lower the premium because you are less of a health risk to the insurance company. That is why if you need the coverage, the best time is right now.
Why is group life insurance not necessarily the best way to go? What are the downsides with group life insurance?
Group life insurance is a great benefit to have from an employer. However, group life insurance has a couple disadvantages, such as, amount and portability. In terms of amount, group life insurance coverage often equates to 1-2 times annual salary, and most people need much more coverage than that for their family and/or estate. If you leave your current job to go to a new company or start a new career, the coverage does not necessarily go with you. Group plans also have rising premium cost. Whether it is annually or every 5 years, the cost of insurance goes up and it is not always covered by the employer. I recently helped a couple lower their insurance cost by applying for individual policies because over the policy term, it would be cheaper to have an individual policy.
What approach should people take to avoid being under-insured when it comes to life insurance coverage? How often should they review and how should they determine an ideal amount of life insurance coverage?
The approach people should take to avoid being under-insured when it comes to life insurance coverage is to have their plan reviewed at least annually. Life events and changes happen over the years and if you stay on top of your coverage needs, you will always have adequate coverage. There is no ideal amount of life insurance, nor rule of thumb. Everyone has a different need and desire for coverage. Working with an experienced financial advisor or insurance professional who can provide a life coverage analysis is the best way to know if you have the right amount of coverage for your family and estate.
This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.
