No sooner do you reach one milestone in life, you start looking forward to the next one. Adult milestones have a bearing on your financial status and subsequently, on those you choose to share your life with. The more wealth you earn across every milestone, the more important it is to evaluate your life insurance and any changes in life insurance premiums.
While we cannot predict the future, we can prepare for it as well as possible. Whether you are getting married, having children, moving up in the work world, or getting ready to retire, life insurance protects you and your family. Since life insurance policies vary significantly, it is worth considering the impact on insurance premiums concerning the following five life milestones.
Getting Married
Some couples invest more time in planning for their wedding day than in planning for the rest of their lives together, when they would be better served by doing just the opposite.
As two lives join together, so do their finances. Both partners may bring income into the marriage, and they may also bring debts into it such as student loans, credit card debts, or car payments. When we earn more, we tend to spend more. The recommended income-to-debt ratio is no more than 43%, yet the average debt-to-income ratio in Canada is nearly 171%.
While it can be hard to envision one spouse passing away, it unfortunately does happen to some people. When it does, the surviving spouse is left with both people’s debts and a smaller income. Life insurance can help the spouse who is left behind pay for debts such as student loans, credit card debt, car payments, or a mortgage. A life policy can also help with final expenses for the departed.
Another big consideration is how purchasing life insurance is always less expensive when couples are young and healthy. This is the best time to lock in rates and build premiums into your budget. A whole life insurance policy for newlyweds will never be more affordable than when you are young.
Buying a Home
It is a dream to buy a nice home in a beautiful setting. Nonetheless, a first-time homebuyer quickly learns how fast expenses can add up. With a mortgage payment, new home insurance, property taxes, maintenance, and repairs to pay for, it can be a lot for your loved ones to manage financially if you unexpectedly pass away.
Your home is your largest asset. About two-thirds of Canadians are homeowners, and about half of them have a mortgage to pay. Moreover, housing prices have increased more than 16% year after year in Canada. If a spouse cannot continue paying the mortgage payment on one income, they could lose their home and have difficulty finding an affordable place to live.
The right life insurance policy may cover a large mortgage payment, making the rest of the bills more manageable for the remaining spouse. Life insurance is tax-deductible, which also helps during tax time.
Starting a Family
In addition to the expenses of owning a home or paying rent, having one or more children increases expenses even more. In addition to food and clothing, parents have to figure in extra expenses like daycare, sports, activities, school expenses, and medical expenses for children.
The primary and secondary school years are the time to start saving for college. Canadian parents can expect to pay $6,693 per year in a full-time undergraduate program for one student, and the cost has been rising.
A mistake parents often make is not purchasing life insurance for a stay-at-home parent. A working parent will not lose income if the stay-at-home parent dies, but they may need to hire someone to do all the duties their spouse took care of at home. Time is at a premium with working and maintaining a household, especially when kids need care. A surviving spouse may need to hire a housecleaner and childcare provider. They may also hire out such tasks including shopping for food, doing laundry, or maintaining the lawn.
Getting a Promotion
Working hard pays off in pay and promotions. When you have more money, you want to enjoy spending more of it. With a promotion, it may be time to buy a more spacious home or a newer, more expensive car. If you should lose that high-paying job, however, it can be harder to hold onto the assets you have invested in when times were better.
The rule of thumb is to have at least six months of monthly bills in the bank to account for a financial crisis. Considering that, it may not be enough if you experience lengthy unemployment. Many financial experts recommend every individual should have enough life insurance to replace at least seven years of income.
Disability insurance and critical illnesses can replace income if you are not able to work due to an illness or injury. Disability and critical illness coverage can either be in the form of standalone policies or be added as riders to a life insurance policy.
Also, you may be able to tap into the cash value of a whole life policy if you need some extra cash to tide you over as you try to regroup your financial situation.
Entering Retirement
As people get closer to retirement, they start thinking about whether their retirement savings are enough. The cash value in a whole life policy can be used to supplement retirement income, and it does not have the restrictions other investments carry. At this milestone, they will see the largest change in life insurance premiums.
It is not uncommon for older people to carry some amount of debt into their retirement. Those debts remain when a person dies. Their loved ones have to pay off the debts using funds from the estate, which means there is less to distribute.
A person’s health naturally starts to decline with age. Life insurance can take care of extra healthcare costs such as assisted living or nursing care.
If nothing else, retirees may opt to take out a life insurance policy to cover their final expenses. Funerals can be as low as $1000 for a simple cremation, yet can go over $20,000 for a funeral or more. Life insurance can cover these costs so the family does not have to pay out of their pockets.
Final Thoughts
Life goes by fast, and it often seems the milestones come too quickly. Have you been procrastinating in purchasing a life insurance policy? No matter what milestone you just reached, our licensed life insurance agents are happy to help you plan for the current time and the milestones to come. Call Hometown Life Insurance at 289-606-0103 for a quote today!
