Here are the insurance advisors you need at every stage of life

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What kind of insurance should you have at different stages of life? When asked, the financial advisors pointed to disability and life insurance as the most important types of coverage at each stage because they last throughout our lives.

In addition, counselors discussed commonly overlooked considerations at various points in your adult life. Here are some age-specific insurance tips from your college days to your golden years in retirement.

The insurance you need for every stage of life

Here is an overview of five phases of life and the type of insurance recommended for each:

  1. Single: health, disability, renter, car
  2. newlyweds: Add lives and homeowners
  3. With children through college age: Increase car insurance for young drivers and add liability. Use the employer’s FSA/125 plans. Give your children life insurance.
  4. Empty Nests: LTC or Hybrid Life and LTC policies
  5. Pensioner: Medicare, with Medigap guidelines. I don’t need a disability anymore. Long-term care insurance is very important. Necessary life insurance for the surviving spouse and legacy for the heirs.

— Sallie Mullins Thompson, CPA/PFS, CFP, Washington, DC

college days

“If you take out a personal student loan … and that loan is co-signed by a parent and won’t be repaid after your death, you need life insurance to cover the loan,” said certified financial planner David J. Haas, owner of Cereus Financial in Franklin Lakes, NJ.

Since the need is temporary, just for the life of the loan, a term would be appropriate, he said.

At work

“If you work, you almost certainly need disability insurance,” said Sean M. Pearson, CFP, associate vice president at Ameriprise Financial in Conshohocken, Pennsylvania. “Most large employers offer it as a benefit, but that doesn’t mean you have enough.”

Note on life insurance: The two main categories are commonly referred to as ‘Term’ (insurance for a fixed period of time) and ‘Permanent’ (insurance for an indefinite period, ie for life).

It’s important to understand your reporting, he said. The plans can cover total disability, which is defined when the worker is unable to work, or they can only cover a situation where the worker is unable to perform part of his or her job or requires reduced hours.

“For example, if you were making $100,000 a year before an injury or illness and could still do a job that pays $40,000 after a change in your health condition, but are unable to continue in your current role, you can may not collect insurance,” Pearson said.

family time

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Getting married and starting a family is when things get more complicated, said CFP Robert Fragasso, CEO of Pittsburgh-based Fragasso Financial Advisors.

“If you have a mortgage and you need two incomes and you want to start saving for college, term life insurance would be appropriate until that debt is paid off,” he said. “For obligations arising after your death, such as For example, inheritance taxes, a business acquisition, or supporting a disabled child, you should consider permanent insurance.”

At this stage, long-term disability insurance is often overlooked, said Haas of Cereus Financial.

More from Life Changes:

Here’s a look at other stories that offer a financial perspective on important life milestones.

“It matters most the younger you are because it covers a lifetime of income that is at risk if you become disabled,” he said.

Pearson said it’s important to consider “porting” or taking your disability insurance with you if you’re taking a leave of absence to care for a child or family member. “If a stay-at-home parent wants to return to work but experiences a change in health while serving as a caregiver, that person may not be able to return to work as quickly or with the expected salary,” he noted.

Get ready for retirement

Early retirement is the time to plan for protection against chronic illnesses that might require care in retirement, Pearson said.

“There is more choice [at that age] …that can be less expensive if you plan early,” he added [in their] Late ’50s when education spending is mostly over,” he said.

your golden years

If you’re freshly retired or retiring, a one-time premium immediate annuity is one way to protect yourself from the end of life, Ivan Illan said, founder from Aligne Wealth Preservation in Los Angeles.

This simple form of annuity requires an upfront payment, which is generally irrevocable, and pays you a lifetime stream of income immediately. (This is in contrast to a deferred annuity, which begins to be paid at a later date).

It’s important to note that they don’t address inflation risk, he said.

“Annuities in and of themselves aren’t evil—it’s all in the application,” Illan said. “But there’s no such thing as a free lunch — you’re essentially giving that lump sum away, but the cash flows can be vastly better than bonds.”

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