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Your Career

August 16, 2022

Change in Income, Change in Life Insurance Needs?

The short answer, it depends.

Here’s the thing: No matter where you’re at in your career, life insurance is a critical piece of your financial planning. At any stage of life, things like household income, assets, and debt all come into play when calculating your life insurance needs. Only problem? These numbers will change as your career progresses. Whatever your current status, you’ll want to make sure your family can maintain their current lifestyle in your absence.

If you’re just starting out, you still need to think about how any outstanding debt will impact those you’ve left behind – whether or not you have a young family or are living the single life.

With this in mind, it’s always a good idea to re-assess your life insurance needs following any major life changes, including a new home, a new baby, a big promotion, or retirement.

Do I need life insurance if I’m just starting out?

If you’re a recent graduate in an entry-level job, you might not see the value in an investment like life insurance – especially if you’ve already got a lot of other monthly expenses. But if you have outstanding debt or someone who depends on you financially, it may be a good idea to start thinking about a product like this. Why? Because if you were to die suddenly, the right policy could pay off those debts (instead of leaving them to your family) or it could help provide for any dependents.

In addition to covering outstanding debt or income replacement, you may see great value in locking in your ability to purchase insurance while you’re still young and healthy. Why? Because not only may this be the most affordable time to buy, but you’re setting yourself up financially for the future and making it easy to convert to more permanent coverage when the time is right.

What life insurance do I need at this early stage of my career?

At this stage, term life insurance could be the most affordable option for you. It’s a good choice for short-term financial goals, like paying off student loans or credit card debt upon your death. Plus, this type of temporary coverage lasts for a pre-determined period of time, so you can re-evaluate your coverage throughout your working life – and convert to a longer term or a permanent policy, if need be – when you have more money coming in, and possibly a mortgage to pay off or a family that depends on you.

If you’re offered a group life insurance policy through work, keep in mind that a group policy is typically a great way to supplement your individual insurance plan – a group plan alone may be insufficient when it comes to covering your family’s needs in the event the unexpected were to happen. Plus, it ties your life insurance to your job. If you leave your current workplace, you may have to seek out new coverage.

Do I need more life insurance after a promotion?

Whether you’re celebrating a promotion or a lucrative career move, now is an important time to reassess your life insurance needs. Because here’s the truth: As your salary increases, so do the needs of those who depend on that salary. The higher your family’s standard of living, the more difficult it will be to afford if you were to pass away.

And as you keep climbing the corporate ladder, you may begin to make major investments in your future, like taking on a mortgage or purchasing a second vehicle. Not only that, but you may want to leave behind a legacy for your children. These are the types of expenses and goals that should be considered in your life insurance plans. Because leaving your loved ones with an inheritance sounds a lot better than a mortgage to pay, right?

What life insurance do I need as I progress in my career?

As your financial obligations expand and become more permanent, it may be wise to consider a combination of both term and permanent life insurance. Speak with an expert to come up with a customized plan to meet both your short- and long-term needs. And the sooner you get it, the sooner you’ll lock yourself into a lower premium.

While a whole life policy is typically more expensive, it provides coverage for as long as you pay into it. And it comes with a tax-preferred* cash value that grows over time – money that you can dip into* to cover major expenses like a home renovation or a child’s post-secondary education.

*Note that policy loans and withdrawals may be subject to income tax. To better understand when and why this might occur, consider speaking with a tax specialist.

How will my life insurance needs change if I’m in between jobs?

If you’ve previously purchased individual life insurance, your life insurance needs may not change as much as you think when transitioning from one role to the next. If, however, the only coverage you have is through the group life insurance at your previous workplace, you will suddenly find yourself uninsured. But, don’t panic. Look into it first – some life insurance companies will give you the option of converting your workplace plan without a full medical questionnaire if you do so within a certain number of days of ending employment (e.g., within 31 days of leaving your previous role).

What life insurance do I need if I’m not currently working?

While in transition, it may be a good idea to book a FREE Needs Analysis to understand if your needs are short- or long-term at this point in your life. Get started!

If you’ve decided to stay home to be with the kids, consider the cost of child care if you had to pay someone else in your absence. Term life insurance is a great way to ensure your little ones are taken care of financially, even if you’re no longer with them.

Do I still need life insurance after retirement?

In retirement, your life insurance priorities can change significantly. You no longer have a regular income to replace, and you may have fewer people relying on you. A reduction in coverage may be an option. That said, the right life insurance can provide your loved ones with financial relief when it comes to any final expenses like funeral costs or taxes – so be sure to speak with an expert before making any major changes, especially before reducing coverage.

This is also the time to start thinking about what you’re leaving behind. Do you want to give your grandkids a small savings fund, or donate a generous gift to a charity that means a lot to you? Whatever it may be, if you plan ahead, you can get the most out of your policy and leave the people and causes you care about with a lasting legacy.

What life insurance do I need when I’m retired?

Whether your goal is to cover estate taxes, burial costs, or leave behind a legacy to your loved ones or a favourite charity, it may be time to consider permanent insurance. At this stage, your needs are no longer temporary, and you likely have more expendable income to invest in your legacy.

As always, it’s important to make your life insurance decisions for retirement as early as possible to take advantage of lower rates. To ensure you have enough coverage to support the ones you love throughout any stage of your career, speak with the experts. Get started today!

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