As life changes, our need for protection in worst case scenario changes as well. With DD2 graduating college next year, by June 2023, theoretically we have no more dependents, or people depending on us other than each other. We do however depend on each other's income an awful lot right now for both living off of, and saving for retirement. We both have policies through work, an annuity started when we were pretty young, and term life. I added more insurance for myself three years ago when I had the extra scare, and realized I was woefully under insured considering the college kid was still just 18 and we relied on me working for health insurance. While I don't think we can over prepare, I think we are in an adequate place for now.
However, with DH retiring, I lose some security in two years with his employer provided life insurance. We are starting to price out options to replace at least part of it, at least through my turning 66 and able to fully access Medicare, so approximately a 10 year policy. Three years ago we added an affordable 15 year policy for me, so starting with that company for a bid.
I am not an expert by any means, and this entire post is anecdotal to myself, but hopefully gives you at least things to think about for your own protection. I starting asking these questions and quite frankly, should be doing so at least annually and adjusting or modify strategies as needed.
- Who all and for how much, is dependent upon my salary? How long will this need continue?
- How much ongoing income will need to be replaced and for how long?
- Would a lump sum payout help minimize the ongoing financial needs? Think of things like paying off a mortgage, a car or other consumer loan, or lingering student loans. Is there any tax penalties to those lump sums?
- What about interim expenses? For example, if both DH and I pass away we'll leave our kids a house to deal with. They'll still need to pay taxes, insurance, utilities and maintenance until either one of them takes it on from the other two, or they sell it outright. While assets can be sold, there's no guarantee how quickly.
- What bills will increase with me or our significant other no longer being around? Think of all the things that might need to be hired out or conveniences that your dependents might need at least while they are adjusting to a new life. For example, DH does all the outside stuff pretty much himself. I'd want to make sure I have funds to cover hiring this out. He'd likely bring someone in perhaps at least one half day a week for housework.
- How much will health insurance cost my dependents if I no longer accessed through my work? If you carry the policy, what will your employer allow for transition?
- What about final resting costs? How will those be paid? (better yet, does your family know your wants and preferences now?)
- What can my dependents access of my current assets, and what might be lost if action doesn't happen before I pass away? Think of our list of beneficiaries. Are the right people named? Are there stipulations in place for how the assets get divided. Make sure you are not leaving a headache and potential hard feelings for your loved ones. Consider if they might have a tax penalty and how to minimize and prepare for that.