Financial Planning, Retirement Issues


How long do I need life insurance?

life insuranceMost people have life insurance of some kind to cover their debts when the pass away and to also provide for their families when they can no longer support them. No one want to see their family suffer after they are gone, especially if they are the bread winner.

Life insurance can be the safety net if someone suddenly dies leaving debts and dependents. But what should you do once the kids are grown up and out working, raising their own families etc? Of course you still want to have enough money for your debts and to cover your spouse, but how much should you have and when should you stop paying for life insurance. This is a question the writer is struggling with and trying to make a decision on. There is a business decision side to this and there is a emotional side of the decision. So far the emotional side is winning, since I feel that I really do not need to have life insurance at this time in my life. I am just afraid to give it up.

Stop Payments on Life Insurance When I retire?

Some people feel that retirement age can be the trigger to end your life insurance payments. If your income from pensions etc is sufficient to cover all of your expenses and this income will continue after you are gone, then you may want to consider stopping the insurance. However if your spouse will suffer a huge drop in income once you are gone due t a pension or pensions stopping, then you may want to reconsider your insurance coverage and keep it a bit longer.

Does it Depend On Your Personal Situation?

The answer is that it really does depend on personal situations. What your pension income is; how much will be left after you pass; what your savings level is and how much income can be derived from your savings. You may want to keep a small policy to cover your debts and not much more if you feel that there is enough to go around and pay for everything that needs to be paid.

Timing is Important

The longer you wait to make a decision the higher the chance is that you may have a health event of some kind. Once this occurs it will be more difficult to not only obtain life insurance, it will also be much more expensive to purchase life insurance. The payout may also be reduced as well.

If you are age 50 or older and have not yet had a health related event, you may want to give your health insurance vs. your life insurance some serious thought.

Long term care insurance is another factor that begins to creep into the picture the older we get. Some experts believe that while you might be dropping life insurance, you may also want to pick up insurance for long term care to cover the situation were you end up needing care of this kind.

None of us can predict what will happen. If we could we would only buy life insurance when we thought we would need it. Life insurance deals more with average probabilities and also our personal family history. We can take a look at how our families survived and how long they lived to help us decide when we need to have life insurance vs. long term care insurance. But there are no guarantees on life so bottom  line is:

  • Have enough life insurance to cover your debts
  • Have enough life insurance to make sure your dependents will live comfortably
  • Consider long term care coverage before it is too late
  • Evaluate your savings etc and consider whether you want to be able to leave something as a bonus for loved ones.

Once you have made those decisions, the decision about life insurance and how much you should have will become easier to make. That is my take on it, however many people have a variety of opinions on this topic. Leave us your comments and ideas if you agree or disagree.

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One Response to “How long do I need life insurance?”

  1. This has been a humbling year for me with taxes. I’m paniyg heavy, heavy five figures in taxes and I am not allowed to deduct anything. The only thing on the table for me is traditional 401k and my health savings account. I’m locked out of everything else. Further, because I helped the gov raise so much money I’m not eligible to get direct stimulus this summer. Which is awesome. People who pay more in taxes get less or zero back – makes perfect sense? Maybe they’ll cut taxes next year retroactively when we’re in a deep sh1t, a la Bush 2002. I won’t hold my breath.Honestly, I think social security will shore up BUT anyone who has a substantial 401k and retirement will be ineligible to receive benefits. Since I saved, I won’t be able to get the money the government saved for (robbed from) me and my employers. That’s what’s going to happen.Oh yeah, and we’re going to default on our debt and see marginal tax rates the likes of the UK and Europe – about 55% effective rate. Good stuff!!!!!!!!!!!!!!!!!!

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