AICPA Insurance Programs

Stages of life: When do you need to purchase life insurance?

If you’re like many Americans, you may unwittingly be putting your family at risk of a financial disaster. A recent report conducted by LIMRA International* finds that nearly a third of Americans don’t have any life insurance coverage. And among those people that have coverage, 40% believe their current amount isn’t enough.^[1]

Why do so many people lack insurance protection? Many people put off purchasing life insurance because they cringe at the thought of planning for their own demise. However, unpleasant as it may seem, your decision to purchase life insurance can impact your loved ones’ plans for the future. That’s because a life insurance benefit can be used by your loved ones to pay for everything from final expenses like a funeral, to living expenses such as mortgage payments, student loans, and groceries.

But the persistent feeling among consumers is that, despite the odds, they are somehow immune to the hard reality of an untimely death. The truth is, a 35-year old man has a one-in-six chance of dying before reaching his retirement age. The odds are only slightly better for a woman of the same age, who has a one-in-nine chance of dying before the age 65.^[2]

When should you buy life insurance?

Most people who have financial obligations, such as a spouse or partner, children, an elderly parent, a business, or outstanding loans, should have life insurance. But, since your needs can grow as your life changes, there are some milestones that should trigger a re-evaluation of your current coverage. For instance, review your insurance needs when you:

• Get married: When two people combine their lives, they bring their debt along with them. Purchasing enough insurance to make sure your new spouse has money at hand to settle your financial obligations, as well as provide for the future if you were to die, is an important step in building a life together.

• Buy a house: Mortgage payments and living expenses in many instances require two incomes. Without one income, mortgage payments may soon be too much for a surviving spouse to handle. Even if your spouse doesn’t work, life insurance for him or her is still important because of all of the roles he or she plays in maintaining your lifestyle. Without your spouse, you may have to pay someone to handle the tasks previously done by your spouse.

• Have a child: Life insurance can help pay for child care expenses – from day care to college tuition – should you or your spouse die. As your family grows, so should your life insurance coverage.

As your lifestyle changes, so should your life insurance coverage amount. And while everyone’s needs are specific to their circumstances, many insurance professionals recommend a benefit amount of 5 to 10 times your annual salary.