The kids are grown and out of school, your mortgage is paid off, your retirement account is, if not fat, at least plump. This is the perfect time to dump your term life insurance coverage, right? Maybe.
The kids are grown and out of school, your mortgage is paid off, your retirement account is, if not fat, at least plump. This is the perfect time to dump your term life insurance coverage, right?
Maybe, says Marvin Feldman, president of the LIFE Foundation, a nonprofit educational organization, but maybe not.
“Depends on the situation. If the breadwinner, whichever spouse that is, should die and there are other assets, like a retirement account, that can replace that income; the need may not be as great as in the past,” Feldman said.
Even if you don’t have someone depending on your income, life insurance may be needed for expenses, from burial costs to estate taxes.
“It can cover medical bills incurred that were not covered by medical insurance,” Feldman said. “And maybe you’d like to make specific bequests for charities, or for your church or college and be remembered in perpetuity, but don’t have sufficient assets to do that. Or maybe you’d like to leave a legacy for family members. Life insurance is a perfect way to do that.”
A study earlier this year by LIFE and the research group LIMRA found that 30 percent of American households have no life insurance. Today there are 11 million fewer households covered by life insurance compared with six years ago.
“Part of the reason is our current financial situation, and people trying to set financial priorities,” Feldman said. “And the high unemployment rate, which has caused people to lose their benefits, which included life insurance.”
The biggest misconception about insurance, Feldman said, is that it’s expensive.
“Most people overestimate the cost by three times,” Feldman said. “Young people overestimate the cost by more than seven times.”
To keep premiums low, Kendra Hamel Nasvadi of Pumphrey-Hamel Insurance in Massillon recommends buying your life insurance while young, and taking care of your health.
“Older people can usually still get whole life, but it’s so expensive they can’t afford it. And term insurance isn’t even an option,” she said. “If you have a weight problem, you can get (insurance) but it’s going to be more expensive.”
Other factors that can increase your rates, Nasvadi said, are medications you take, and your driving record, especially DUIs.
Who should have life insurance?
“You need it if you are going to leave any debt for somebody else to pay off, and if you have children — those are two triggers,” Nasvadi said. “Also, for retirement planning, you don’t want family to have to pay taxes on your estate.”
How much do you need? Try the simple calculator at www.lifehappens.org. Just plug in a few numbers and it will calculate a rough estimate.