How Long Will You Need Life Insurance Coverage?
You know that you need life insurance, but you must now decide how long you will need to be covered. The point of term insurance is to cover you when you are most financially vulnerable. For most people, this is when they are raising a family, paying off their home and saving for retirement. As you get older, in most cases, your need for life insurance will diminish. When choosing term coverage, a few different “life milestones” can be used to determine length of coverage.
Youngest Child is No Longer a Dependent – Some people choose to keep coverage until their youngest no longer needs financial support. This is usually around the time when the youngest child graduates from college, sometime in their early 20’s. If your youngest is 3 years old, a 20 year policy will last until they are 23 and hopefully able to support themselves.
Retirement Age – Some will use their expected retirement age as the ending point for coverage. This point in life usually means that children are old enough to be financially dependent and you are at a point where you have saved for retirement, your home is paid off and you can start collecting social security. For term coverage, this is probably the most thorough approach.
Mortgage is Paid Off –This is another milestone that people use for determining life insurance coverage length. Most people take out a 30 year mortgage when they buy a home and in most cases it is their biggest financial obligation. Having life insurance coverage until the home is paid off is their primary goal.
Is there a permanent need for coverage? You have the option of purchasing permanent coverage but you must ask yourself if there is a permanent need. For some people, permanent coverage is a viable option. If you have accumulated a large estate that will be the subject of estate taxes, permanent coverage is a worthwhile option as it could help your heirs with estate taxes. If you have a child with special needs, the death benefit from a permanent policy will be able to provide care for them while they are an adult well after you’re gone. Permanent life insurance is much more expensive than term coverage but it accumulates cash value and provides coverage that lasts your entire lifetime. You should carefully consider if there is a permanent need for coverage before you purchase a permanent policy. We can help you decide what plan is best for you.