The days are growing a bit longer and warmer, and the change in season sparks childhood memories of chasing fireflies, playing outdoors with neighborhood friends and longing for the last school bell of the year. But while spring is fun for kids, it’s often a time of change for adults: college students are looking toward graduation and their first “real” jobs, wedding plans are being made, babies are on the way and some families anticipate moving to new homes.
All of this activity makes right now a good time to review your insurance coverage to ensure it’s keeping pace with your life. After all, most Americans are on autopilot when it comes to their health care benefits options: 89 percent press the easy button by choosing the same coverage year after year.1 With that in mind, here are some things you should consider when mulling your evolving life insurance needs:
Pomp and circumstance
If you’re single, you may believe you have little reason to enroll in life insurance. But consider that an analysis of U.S. Census Bureau data by the Pew Research Center shows that one out of five adults between the ages 25 and 34 lived in multi-generational households in 2009. The median share of household income contributed by those individuals was almost 25 percent.2 Just imagine the financial blow losing 25 percent of the family income would be to loved ones left behind.
Here are some other reasons you might want to enroll in employer-paid life insurance coverage or supplement that coverage with a voluntary policy:
To pay funeral and other burial expenses.
To pay off creditors.
To cover federal and state estate taxes if you’re fortunate enough to have high-value savings or investments.
To help your brothers and sisters pay for college, to provide your parents with funds for retirement or to finance a loved one’s personal dreams.
To fund a scholarship or charitable program.
Going to the chapel
If you’ve recently said “I do” or will soon walk down the aisle, it’s time to evaluate your life insurance needs. If you already have life insurance, review your beneficiary designations, ensure your current coverage is sufficient, and compare the cost of employer and individual plans. Sometimes voluntary insurance costs less than company-provided benefits and offers more coverage than adding a spouse to an employer-sponsored policy.
Marriage also signals it’s time for a health insurance review. Both of you may have group health insurance through your employers, so compare premiums and benefits to see if it’s more economical to maintain separate plans or to choose “employee and spouse” coverage offered by one of your companies.
Yes, sir, that’s my baby
One of the last things new parents want to think about in the joyous months after a baby’s birth is life insurance. But if you’re a new mom or dad, it may be appropriate to increase your coverage to reflect your new responsibilities. If the worst happens, life insurance benefits can pay for your child’s college education or help your spouse continue to pay the mortgage or rent, consumer loans, business debt … the list is endless. Remember too that both parents should be insured. If a non-working spouse dies, life insurance benefits can be used to pay child care and household expenses.
New parents will also want to add their babies to their health insurance policies. Some insurers require that additions be made within 30 days of birth. This includes employer-sponsored plans and voluntary plans too.
Ease on down the road
Many families choose the summer months to move. If you’re buying a new home, you probably have questions about mortgage protection coverage. Lender-required MIP (Mortgage Insurance Premium) and PMI (Private Mortgage Insurance) protect lenders in the event of default – they won’t pay off the mortgage if a homeowner dies.
Term life insurance is an inexpensive way for homebuyers to ensure their survivors have the funds needed to pay the monthly mortgage, or even to pay off a home loan in its entirety. With term insurance, you determine your beneficiary and coverage amount. And since a term life policy isn’t limited to a single purpose, its proceeds can be used not just to pay off a home loan, but also to help pay debts, personal loans, college costs or any other debt threatening your survivors’ security.
Here’s another reason a move should trigger a life insurance review: Relocation is often triggered by a promotion and accompanying salary increase. If that’s the case, you should consider protecting your family’s lifestyle by increasing coverage.
You give me (spring) fever
The days may be getting warmer, but you can keep your cool – financially, anyway – by reviewing your life insurance needs as well as your health care benefits. Because premiums are generally deducted from your paycheck, it’s easy to forget which options you’ve selected.
Remember also to take a close look at your entire benefits package to see if there are other employer-sponsored programs that meet your changing needs.
This article is for informational purposes only and is not intended to be a solicitation.
1 Aflac, “American Workers Waste Months’ Worth of Grocery Costs Due to Poor Benefits Choices,” http://www.aflac.com/us/en/docs/workforce/2012_awr_grocerycosts.pdf – accessed July 10, 2013
2 Pew Research, “Fighting Poverty in a Bad Economy, Americans Move In with Relatives,” http://www.pewsocialtrends.org/2011/10/03/fighting-poverty-in-a-bad-economy-americans-move-in-with-relatives/?src-prc-headline – accessed July 3, 2013