However, life insurance remains a powerful tool to help provide for your loved ones in the event of your death. The amount of life insurance that’s right for you depends on your personal circumstances, so it’s critical to review your life insurance needs regularly in light of changing circumstances.
Reasons to Reevaluate
In addition to watching for changes to the estate tax exemption amount, consider reevaluating your insurance coverage if you’re:
- Buying a home or paying off a mortgage,
- Getting married or divorced,
- Having children,
- Approaching retirement, or
- Facing health issues.
The right amount of insurance depends on your family’s current and expected future income and expenses, as well as the amount of income your family would lose should you pass away. The events listed above can change the equation, so it’s a good idea to revisit your life insurance needs as you reach these milestones. For example, if you have kids, your current and future obligations are likely to increase significantly for expenses related not only to providing for their needs on a day-to-day basis but also potentially for childcare and college tuition.
As you get older, your expenses may go up or down, depending on your circumstances. For example, as your children become financially independent, they’ll no longer rely on you for financial support.
On the other hand, your health care expenses may increase. When you retire, you’ll no longer have a salary, but you may have new sources of income from retirement plans and Social Security. You may or may not have paid off your mortgage, student loans or other debts. And you may or may not have accumulated sufficient wealth to provide for your family.
Periodic Reassessment a Must
There are many factors that affect your need for life insurance, and these factors change over time. To make sure you’re not over- or underinsured, reassess your insurance needs periodically, especially when your life circumstances change. Also keep in mind that, absent Congressional action, the gift and estate tax exemption will drop to an inflation-adjusted $5 million in 2026. Contact the office for assessing whether you have an adequate amount of life insurance coverage.
