You’re older now, your children are grown, and you have a plenty of assets, including a healthy retirement portfolio. So, should you ditch that Life insurance plan? Many people reach a point in their lives when they begin to question the necessity of Life insurance. Obviously, 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. By now, your children are probably out of the house and earning their own income. If you were to die, your spouse would be covered by income from your retirement investments.
However, there are still plenty of compelling reasons for you to hang on to that Life insurance policy. For one, it offers financial peace of mind. As a matter of fact, 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 the countless advantages Life insurance has to offer at any age. Here are five good reasons to hold onto that policy:
Advantage #1: It prevents financial loss for your loved ones. If any of your loved ones would suffer from a financial loss if you were to die, you definitely need to keep your Life insurance policy. Life insurance is critical for the following people:
- 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 might assume your retirement investments would provide plenty of income for your spouse if you were to die. However, it’s important to ask yourself a couple of critical questions: If I were to die tomorrow, would my spouse be able to maintain his or her current quality of life? Would he or she still be able to save up for a comfortable retirement? Probably not. Suddenly faced with a smaller income, your spouse might end up cutting back on retirement contributions to make ends meet. That could put his or 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 every day expenses, allowing them to continue to build up a 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 could be facing 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 could be subject to estate taxes after your death. Depending on the value of your estate, these taxes can be steep — and this could create serious financial hardship for your loved ones. Without Life insurance, many or all of your assets could be liquidated to pay your estate taxes. 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 might want them to have it. It might be worth it to give up some of your income now to make sure 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 special charity that’s near and dear to your heart, you could continue to pay just a little into a Life insurance each month so you can leave something behind to the cause.
Of course, whether you choose to 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’re struggling to make this decision, discuss the pros and cons with one of our financial advisors.