Have you found yourself wondering if you really need that life insurance policy you pay for every month? You are not alone.
As time goes on we often forget the reasons behind purchasing the amount and type of coverage we did. For this reason it is advisable to have regular reviews to make sure you are adequately protected.
Perhaps you are having trouble making ends meet and are looking to trim expenses. Maybe you simply don’t think you need it because the kids are getting older and your obligations to them have diminished. Some may feel that they have enough assets accumulated that insurance is no longer necessary and even a waste of money. Before you make the decision to cancel your life insurance policy, consider these compelling reasons to keep it.
Can no longer afford the premiums?
The most common reason people cancel their insurance is affordability. In times of financial stress many people start eliminating unnecessary expenses. Consider this – if you think you are having trouble making the life insurance payments each month now, think how difficult it will be on your family if you were to die prematurely, without it.
Will your family be able to pay the necessary living expenses such as; housing, food, transportation and education without your salary?
In times of financial instability, make insurance the last thing to go, not the first. Think of switching to a lower cost plan such as term insurance to get you over the hump. You have to qualify medically to make this change but if you find yourself uninsurable, this is definitely not the time to consider getting rid of it.
So when it comes to trimming expenses, perhaps get another year out of your cell phone, skip dinner out once a month or even take the drastic step of skipping your morning Starbucks. You will sleep better at night knowing your family is protected.
Don’t feel you still have a need?
Are there any lingering debts, unpaid taxes, mortgages or outstanding loans that should be paid off should you die prematurely? The last thing you would probably want to do is to leave your family the financial burden of your unpaid debts.
Or perhaps, your parents are still living and are somewhat dependent on you for financial support. Who would be responsible for them should you die and would there be enough resources?
Your children may have left home to start their lives but the unforeseen does happen and they may return as members of the boomerang generation. Should that happen, and you find yourself with financially dependent children living at home once again, you may want to consider keeping or reducing the insurance to an amount that matches your new requirements.
Will your estate require liquidity when you die?
Even the wealthy may have a need for liquidity in their estate. Often, there may be taxes arising from capital gains, recaptured depreciation, administrative fees and last expenses. Assets may need to be liquidated in order to pay some of these costs but that may take time, or it may not be the right time to sell those assets. Life insurance is the most cost effective way to provide this needed liquidity allowing families to make decisions to sell assets if and when the time is right
Do you want to leave a legacy?
Life insurance has long been a method for charitable minded individuals to leave a legacy to a charity or institution of their choice. Not only does this benefit the recipient but it provides a tax deduction in the amount of the gift to benefit the estate.
What about the adult children?
There is no doubt about it, the next generation are having a lot harder time financially today than at any other time. Rising house prices and education costs not to mention today’s cost of living make it necessary for adult children to depend more on their parents than previous generations.
If you are not in a position to leave a large inheritance to your children, life insurance can certainly be the answer. While continuing to pay the premiums may not be life changing for you, the insurance proceeds when received may certainly be life changing for them. This generosity will likely help your grandchildren be raised and educated at a higher standard than their own parents could reasonably afford.
If you can’t afford the policy yourself as you head into retirement, perhaps your children would be in a position to take over the premiums. It’s important to include your adult children in these discussions as you enter your retirement years.
What about survivor benefits in retirement?
If you and your spouse are soon to retire or have retired already, you understand the risks in outliving your income. Backing up your retirement nest egg with life insurance to protect a surviving spouse is one way to manage risk in retirement when safe investments are yielding lower returns.
Do you have the right type of Life Insurance?
If your renewable term insurance coverage is up for renewal, the substantial premium increase may be causing you to rethink the need for insurance. Renewable term insurance does renew at increasingly higher premiums and will ultimately expire at age 80 or 85. It may be time to consider changing or converting some of your life coverage to a permanent form of insurance that has a level premium for life.
As you can see there are many reasons to keep your insurance for your lifetime. Let’s have a chat to determine if you have the coverage that makes sense for your family’s needs or if some adjustments to amounts or insurance plan are necessary at this time.
As always, please feel free to share this information with anyone you think will benefit from it.