During Age 20s And 30s - This is the period of time when you are adjusting to life in the "real world," so it's understandable if life insurance isn't a top priority. But appreciating how it works can help you avoid making crucial errors that could affect you down the road.
65% of people between the ages of 18 and 29 did not have life insurance policies. Meanwhile, Americans now carry US$1.6 trillion worth of student loan debt. Even though the majority of student loans (92%) are federal loans — meaning that debt is forgiven should you pass away — there is still US$131.8 billion in private loan debt in this country. Add to this the fact that the country's outstanding credit card debt and other revolving debt have risen almost 20% in the past decade, according to a January survey from CompareCards. Those debts are not forgiven, and a life insurance policy can protect you from passing that debt burden on to a loved one.
During Age 40s And 50s - By this point, you have likely earned more assets, which can include a mortgage, lingering or perhaps even increasing credit card debt, and dependents in the form of children and aging parents in retirement. You want to make sure your family is taken care of on both ends of the spectrum.
Life insurance can and should evolve as your needs change. A new family might consider short-term coverage to help build savings during that early childhood period. If you are interested in more long-term estate planning or if you anticipate ongoing child care needs — in the case of special needs, for example — you may find that permanent coverage best suits your situation.
In general, this is the period where you begin to take stock of your family goals and plans. A common question is whether both parents need life insurance. If one parent plans to stay home and care for the child or children full time, it might be tempting to assume that only the primary breadwinner would need coverage. But consider the services the stay-at-home parent provides. In the case of their untimely death, would the surviving parent need to pay to replace those valuable child care services? Insurance could also help the surviving parent cover costs and expenses while dealing with an upended life.
During Age 60s And Beyond - At this point you may be considering retirement. Your children (if you decided to have a family) may be grown and starting their own families, and you may consider the need for life insurance coverage waning.
During this stage of life, the focus should be shifting toward securing your financial legacy. Life insurance can be used to help pay off any remaining debts to ensure they aren't passed on to your loved ones. A will cannot be processed until the debt is paid, and if those left behind are unable to cover the owed money, it is taken out of the estate. In some cases, a policy payout itself could become an inheritance for a child or grandchild should there be any uncertainty about the financial strength of your estate.
When you’re 60 or older and seeking the best coverage option, it's important to ask if life insurance is even a necessary purchase. If you don't have loved ones who are financially dependent on you and you have savings set up for burial expenses, then it's probably unnecessary. If you still have dependents or want to ensure funds for end-of-life planning, term life insurance could also be a good fit to put coverage in place for that financially vulnerable period.
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