5 Life Events Where Life Insurance Can Help

From starting a family to planning for retirement, life is filled with important milestones. These life events, meaning significant changes or milestones, often come with both opportunities and challenges. Understanding how to prepare for these moments, particularly with tools like life insurance, can make a world of difference when it comes to financial security.

Keep reading to learn more about the life events where life insurance can help, so you can start every major milestone on the right foot!

1. Marriage

Marriage isn’t only about true love, wedding dresses, and ring shopping, it’s also about combining your finances and planning for the future. You and your spouse will likely combine bank accounts and credit cards, set up a budget, and plan for the future together.

While many married couples without children skip life insurance altogether, this can be a costly mistake. For most couples, both spouses work and contribute to household expenses. Not to mention, many younger couples are dealing with student debt, mortgages, and car payments. When you add this to standard costs, you can see how most newly married couples definitely rely on both incomes.

In the unlikely event of an untimely death of one spouse, the other spouse may be struggling to make ends meet, especially if they own a home or are paying down a lot of debt. This is why life insurance is vital to consider when you get married – it helps protect your spouse from financial burdens if they ever have to deal with this unexpected tragedy.

For example, Emily and James got married last year and recently purchased a home together. They both work full-time, and their combined income allows them to manage their mortgage and other expenses comfortably. However, James realized that if something happened to him, Emily might not be able to cover the mortgage payments alone.

To address this, James purchased a life insurance policy naming Emily as the beneficiary. Tragically, James passed away in a car accident a few months later. While Emily was devastated by the loss, the life insurance payout allowed her to pay off the remaining mortgage balance and avoid the stress of selling their home. This financial security gave Emily the time and space to grieve and rebuild her life without the additional burden of economic hardship.

2. Having Children

There’s no doubt about it – raising children might be joyous, but it is also expensive. From food and clothing to education and extracurricular activities, having kids is not cheap. In fact, the average cost of raising a child was over $15,000 per year in 2023. Not only is it expensive, but it’s also one of the 3 most important events in your life, so it’s not a decision you should take lightly.

Life insurance is just one of the ways to financially prepare for having kids. Whether your family has two incomes or one, you’ll need a big safety net to give you peace of mind and protect your children in the event of an untimely death of you or your spouse. The surviving spouse will likely be stressed to meet every expense while also paying for additional childcare. Even in the death of a stay-at-home parent, the surviving parent will now need extra help watching the kids and taking care of the housekeeping. This is where life insurance comes into play.

A life policy for both parents can give you peace of mind that your family will be cared for, even during a tragedy. This policy can help you cover your child’s education, daily expenses, daycare, and future needs, while also giving you the resources to focus on your grief and emotions, not having to worry about how you’ll cover the bills that month.

3. Buying a Home

Many people purchase life insurance simply so their partner can cover the mortgage in the event of an early death. This makes sense – several financial responsibilities come with home ownership. You’ll need to cover your mortgage payment, maintenance costs, taxes, insurance, and maybe even an HOA fee, depending on where you live.

If your spouse signed with you or co-signed the home loan, they will be responsible for 100% of the debt and payments if you pass away before them. In this situation, you want to make sure you have a thorough backup plan!

If one spouse passes unexpectedly, the other spouse may struggle to cover all these expenses. In the worst-case scenario, people overwhelmed by this extra load could end up defaulting or even losing their homes. This is why life insurance is so important!

When one spouse is already dealing with grief, the last thing they want to do is worry about how they will cover the mortgage that month. Life insurance can give both you and your spouse peace of mind. If you ever have to deal with this kind of grief, you’ll know that you’ll still have a place to live, no need to stress over it.

4. Starting or Growing a Business

Entrepreneurship can be risky, yet rewarding. Not only do you have to worry about your own income, but you also have to keep your business afloat and your employees paid. Not to mention, you might have star employees you heavily depend on to keep your business running. What happens if you lose them to death or disability? Luckily, life insurance can help.

You can take out different forms of life insurance for you and your business. Your policy can cover your unlikely death, paying a benefit to your family, partners, and employees, and you can also opt to cover key employees that your business depends on in the event of their death.

This way, everyone involved in the business is covered, so if one person is no longer around, the business won’t crash and burn, and you’ll have the resources to find someone else. On the other hand, your family can rest easy knowing that if you ever aren’t around to run the business, your income will still be replaced.

5. Retirement Planning

Even if you’ve been diligent about retirement planning, most Americans worry they will outlive their retirement savings. With concerns about social security disappearing and potential stock market crashes, this worry makes a lot of sense.

Life expectancy is also on the rise, meaning that your retirement savings could be stretched even more. Many people have to pay for costly long-term care solutions when they are elderly, which can quickly drain resources.

A permanent life insurance policy is a good solution to these concerns. This policy allows you to supplement your distributions with policy loans if needed, giving your savings a chance to bounce back. And if you do run out of retirement savings, your policy’s cash value can offset some of the lost income.

Life insurance becomes more important as you get older since your risk of death gets higher with every year. If you are married, getting a permanent policy that will last through old age is important – the money you or your spouse receive after passing away will provide critical financial resources during retirement.

Unexpected Life Events and Life Insurance

Life insurance is beneficial not only for significant life events but also for unexpected life events. So, what is an unexpected life event? It’s exactly what it sounds like – major life events that happen unexpectedly. This could include a sudden critical illness, a major accident, or a job loss.

An insurance policy that can provide financial relief in these stressful situations can be useful. When you’re dealing with a serious illness, injury, or even death in your family, the last thing you want to do is worry about finances. Instead, you should be focusing on wellness and recovery. This is why life insurance is so important; it keeps your bases covered!

For example, Jenna and Tom were in their early 30s with two young children when Tom was unexpectedly killed in a workplace accident. As the primary breadwinner, Tom’s income provided for his family’s lifestyle and their plans for the future, including their children’s education.

Luckily, Tom had a term life insurance policy in place, and Jenna received a payout of $500,000. This money allowed her to cover immediate expenses, like the mortgage and childcare, while also setting aside funds for the kids’ future education. Without the policy, Jenna would have faced significant financial burdens.

Here’s another example – Carlos and his brother Marcos ran a successful landscaping business together. They had a buy-sell agreement funded by life insurance, which made sure that if one of them passed away, the other could buy out their share of the business without burdening their surviving family members.

When Marcos passed away unexpectedly from a heart attack, the life insurance payout allowed Carlos to purchase his late brother’s share of the business. This way, the company could continue operating smoothly while providing financial compensation to Marcos’s family, who no longer had to worry about the business’s future.

How to Choose the Right Life Insurance for Different Life Events

When choosing life insurance, you’ll have two main options – term life insurance and cash-value life insurance. Term life insurance is purchased for a period of time, or a term. If you die during the term, your beneficiaries will receive the benefit. This is a lower-cost option that can cover you for a shorter period, like 10 or 20 years.

On the other hand, a cash value life insurance policy is a long-term solution. You can keep it for as long as you need it. Many of these policies also have savings or investment options so you can get money from the policy while you are still alive. Universal life, whole life, and variable life are different cash-value policy options.

So, if you are considering life insurance, ask yourself these questions to determine the right option for you and your family:

• How much of my income does my family rely on?
• How long could my family survive without my income?
• Will our financial situation change over time?
• How many years will I need death benefits?

Here’s what to ask an insurance agent for further clarification:

• Does the policy have a cash value?
• Does that cash value build up over time, or does it stay the same?
• How often do I have to pay premiums?
• Does the policy change from year to year?
• What part of the policy isn’t guaranteed?
• Are there guaranteed minimums on this policy?

If you already have an existing life insurance policy, compare the new one with the old one. Don’t cancel a current policy until you get a new one, and remember that changes in your health may impact your ability to get a new policy, or may increase your premium.

Also, make sure to verify that you can afford the premium, and ask what the highest premium might be to keep your coverage – this needs to comfortably fit in your budget!

Conclusion

Life insurance is essential in many different situations, like when you are getting married, starting a business, retiring, or even in the most unexpected circumstances. Whatever situation you’re in, a good life insurance policy will help you make sure you’ve covered your bases so that you can have more peace of mind.

Life insurance is a proactive step when planning for the future. If you have questions about which life insurance policy is right for you, contact our staff today – we’re here to help you find the best option for you and your family!

Frequently Asked Questions

What events does life insurance cover?

Life insurance covers deaths that result from natural causes, accidents, murder, and suicide (as long as you’ve had the policy for over two years, in most cases).

Does life insurance pay for a funeral?

Life insurance can pay for a funeral, in addition to other expenses like debt, daily expenses for beneficiaries, childcare, charity donations, and many other things. The beneficiaries decide what to do with the money after they have received the payout.