You’re older now, your children are grown, and you have many assets, including a healthy retirement portfolio. So, should you ditch that life insurance plan?
Many people reach a point in their lives when they question the necessity of life insurance. Your situation has changed quite a bit since you initially purchased the policy. More than likely, you no longer have young children who rely on your income, and your children are probably out of the house and earning their income by now. If you were to die, your spouse would be covered by revenue from your retirement investments.
However, plenty of compelling reasons exist to hang on to that life insurance policy. For one, it offers financial peace of mind. The more life insurance coverage a person has, the more confident they are about their financial security, according to a 2008 Journal of Financial Planning survey.
Of course, financial confidence isn’t the only benefit of life insurance. Before you run out and cancel that policy, consider life insurance’s countless advantages at any age. Here are five good reasons to hold onto that policy:
Advantage #1: It prevents financial loss for your loved ones.
- Couples in their peak earning years
- Parents of non-adult children or grown children with special needs
- Retirees who will lose a substantial portion of income if one spouse dies
- Families with a large estate that will be subject to estate tax
- Business owners and business partners
- People who want to pass monetary assets on to their heirs tax-free
If you fall into one of these categories, you still have a significant need for life insurance.
Advantage #2: It ensures a comfortable retirement for your spouse.
You may assume your retirement investments would provide plenty of income for your spouse if you die. However, it’s essential to ask yourself a couple of critical questions: Would my spouse be able to maintain their current quality of life if I die tomorrow? Would they still be able to save up for a comfortable retirement? Probably not.
Suddenly faced with a smaller income, your spouse may cut back on retirement contributions to make ends meet. That could put her retirement years at risk. However, if you were to hold onto that life insurance policy, the proceeds could give your spouse enough income to cover everyday expenses, allowing her to continue to build up her nest egg.
Advantage #3: It offers quick cash for your family.
Life insurance death benefits can provide fast cash for your surviving loved ones. As long as your policy is up-to-date and in order, your beneficiary could collect the death benefit as quickly as a couple of weeks after your death. This money could be essential at that time, as your spouse may face massive medical bills, outstanding debts, taxes, probate costs, and other final expenses.
Advantage #4: It helps to shield your estate.
If you own a successful small business or have a high net worth, your family may be subject to estate taxes after death. Depending on the value of your estate, these taxes can be steep and create severe financial hardship for your loved ones. Many or all of your assets could be liquidated without life insurance to pay your estate taxes, and you can prevent this from happening with a life insurance policy.
Advantage #5: It allows you to leave behind a legacy.
Life insurance also enables you to leave behind an inheritance to your children or grandchildren. This money could help pay for your son’s graduate school expenses or your granddaughter’s wedding. Even if they don’t need this money, you may want them to have it. Giving up some of your income now may be worth it to ensure your loved ones receive a special gift later.
On the other hand, you could use the proceeds from your policy to make a significant contribution to your favorite charity. If there’s a particular charity near and dear to your heart, you could continue to pay just a little into life insurance each month so you can leave something behind for the cause.
Of course, whether you keep your life insurance policy after retirement is entirely up to you. There is no “right” answer-it all depends on your unique situation. If you struggle to decide, discuss the pros and cons with Brian Gruss.