As your life changes, your financial needs change as well. Re-evaluating your
insurance coverage after your spouse has passed away is an important part of
getting your finances in order. If you're older or have grown children, you
may need less life insurance or none at all now that you're widowed. But if
you have children or other people who are financially dependent on you (e.g.,
elderly parents), you may need more life insurance than you think.
Your coverage needs
Though your family has changed, the need to protect your children's future remains.
Life insurance can help ensure that your children will be provided for if something
happens to you. The amount of life insurance you need depends on the number
and ages of your children, as well as your income, debt, and assets. A good
rule of thumb is to buy coverage that equals six to eight times your annual
salary. You will want to make sure that you have enough insurance to cover your
children's day-to-day living expenses and the cost of their college education.
Ask your insurance agent or a financial planner to help you evaluate your needs
and find a life insurance policy that's right for you.
Beneficiary Designations
Whether you have children or not, you should also review and update the beneficiary
designations on any life insurance policies you own. Your insurance agent can
help you with the necessary paperwork. If you don't have an agent, you can always
call your insurance company and ask to speak to someone in the policyholder
service department for more information. But don't name a minor child. Insurers
generally won't make settlements directly to minors, and the probate court handling
your estate may require that a trust be set up, and a guardian appointed, to
manage the proceeds.
Tips on buying life insurance
- You may have the opportunity to purchase group life insurance through your
employer, trade groups, or professional associations
- If you're concerned about the cost of premiums, consider low-cost term life
insurance
- Find an experienced insurance agent or financial planner to help you evaluate
your situation and the products available
- Check insurance company ratings, such as A.M. Best and Standard & Poor's,
for an insurance company's financial stability
- Be sure to shop around for the best rates
- Periodically review your life insurance needs to make sure that you have
the proper amount of coverage
Please note that this description/explanation is intended only
as a guideline.