When younger, it is important to have a life insurance policy in order to protect your loved ones in the event something unexpected happens to you. As you age, you might start wondering if life insurance is important, especially because the kids are grown up and financial obligations are very few. Nonetheless, people’s situations are different so the need for life insurance after 60 is not a one-size-fits-all kind of situation.
That is why a lot of people find it hard to decide whether life insurance makes sense after 60 or not. At that age, you are almost retiring or had probably taken early retirement, so does a life insurance policy count? Will it be a worthy purchase or will it be a total waste of money? Well, how you answer those questions depends on different factors.
Having a life insurance policy before you attain 60 years is important, but after that age, it might not make sense. This is because, after 60, you most likely have income sources like savings and pension. However, this does not completely disregard the fact that life insurance could make sense after 60, here are a few instances when it would.
You Have Children and/or Spouse Who Financially Depend On You
If you have young children or an older child with a disability, then you will need life insurance to support them. They are not able to provide for themselves, and since you are not certain for how much longer you will live, it is only fair to financially protect their future. Also, your spouse might not have the financial ability to pay for their lifestyle without you, and this is another reason why you might need a life insurance policy.
In fact, most spouses choose to take out life insurance policies on each other so that they may be both financially protected. As such, when one of the spouses dies, the other one benefits from the death benefit and is able to take care of themselves and their kids without any financial strain.
Life insurance is also important for estate planning. If you are a high net worth individual, then you probably have garnered a lot of property and estates during your working period. When you die, all these assets may be subdued to estate taxes that could totally ruin everything. Your loved ones might lose all the property when it is forcefully sold off to pay for estate taxes. What’s more, you don’t want to leave them with that financial responsibility. So when you have a life insurance policy, the death benefit can be used to pay off these estate taxes.
Life insurance is a great source of income replacement especially when you are working after 60 and your household depends on you. A lot of people still need to work after they retire in order to continue providing for their families. If your family would not be able to comfortably provide for themselves and sustain their lifestyle without you, then life insurance is a good way of financially protecting them. Evaluate your needs and how much would be required to replace your income.
Another reason you might need life insurance after 60 is for mortgage repayment. When you have an outstanding mortgage payment, then life insurance might be important. If you die before completing that mortgage, then the financial burden falls on your loved ones. If your surviving spouse is financially able to complete the mortgage payment, a life insurance policy might not be necessary but if they are not financially stable and rely on your income, then it would be vital to take out a policy.
Hence, part of the death benefit large enough to pay off the remaining mortgage balance is first paid to your lender and the rest to your loved ones once you die. This way, your family is left with peace of mind and don’t have to worry about paying off the remaining mortgage balance in your absence.
Leaving a Legacy
Your spouse might be financially independent and don’t entirely depend on your income. Your kids might also be grown and financially stable, hence don’t require your income to sustain their ways of living. As such you won’t need to take out a life insurance policy if you have enough savings and pensions to sustain you. However, you might just want to leave a legacy behind for your loved ones. If you want to leave an inheritance for your children, then life insurance would be a great choice.
If you don’t already have a plan of financing your final expenses, then you might just need a life insurance policy. Your final expenses include your funeral and burial expenses when you die. These expenses are not cheap, and you don’t want to leave your loved ones to borrow donations in order to be able to pay for them. To fully cover your final expenses, a term life insurance policy would be ideal. Do your due diligence to establish how much would be needed then take out a term life policy with coverage large enough to cater for those expenses, nothing short of that!
Term or Permanent Life Insurance?
One of the biggest questions when shopping for life insurance coverage is whether you need permanent or term coverage. The answer always depends on your needs.
Term Life Insurance
Term life insurance is a temporary type of life insurance that offers cheap policies for a certain period of time. While the premiums are cheap the amount of coverage is, however, limited. On the bright side, it is perfect for an individual over 60 because they likely have less financial obligations. So, when buying out a policy you buy only the amount of coverage you need.
Permanent Life Insurance
The most common type of permanent life insurance is whole life. Whole life insurance is structured to provide coverage for the rest of the life of the policyholder which means that it will expire when you die. They are made up of two components, the face value and the cash component, which is the reason why they are more expensive than term life insurance. Good thing is that they provide larger coverage than term life insurance and if you decide to terminate the policy, you receive an amount of money which is usually the accumulated cash value minus termination fees and other charges.
For an individual over 60 years, whole life insurance might not make much sense unless they have plenty of property under their name. This way they can plan for their estates and protect that property. Otherwise, buying whole life insurance after 60 is not necessary, you will be likely paying ridiculously high premiums for coverage you don’t even need.
Universal life is a permanent type of life insurance that combines the best of both term life and whole life. In that, it has lifelong coverage that is relatively larger than what you would get with term life but is cheaper than whole life insurance. This would be a perfect option for you if you can’t find a suitable term life insurance large enough for all your needs, but also don’t want to pay incredibly expensive premiums for the policy.
What Option Best Meets Your Needs?
Your current financial status and needs would impact your ability to buy a life insurance policy. It would also impact the type of policy you buy, that is if you need to buy one. Is your income just enough to cater to your needs or will you afford to set aside a certain amount for life insurance? Also, what are your future financial needs? Do you have a financial plan for your final expenses? Are all your major debts cleared? Will your loved ones have a reliable source of income for all their needs, from education fees for your children or grandchildren,(if you have any who depend on you), to healthcare expenses, and daily upkeep.
Once you establish what your needs are, then find a policy that meets those needs. For instance, if you have an outstanding mortgage you need to repay in the next 4 years, then you could take out a 5-year term life policy with a coverage large enough to pay off that outstanding amount.
Perhaps you found a perfect policy for your needs but cannot fully afford it, or you are having trouble finding a good product, get the help you need from an expert. Every life insurance policy is designed differently, and temporary policies have their advantages over permanent ones and vice versa. Since there are different permanent life insurance policies, it is equally important how each function should you decide to head that direction.
When it comes to the question of whether term is better than permanent life insurance, there is no specific answer to it because everyone’s needs are different.
One mistake that a lot of people do when buying life insurance is buying the first option thrown your way. Then later you realize that there was a better product than the one you rushed to buy. Worse even, you realize that the product you bought is too big and you don’t necessarily need all that coverage, or bought a small coverage that isn’t large enough to cater to your needs.
Especially when buying through agents, you should be careful because some of them have no experience or knowledge about life insurance and simply want to get their commission and go home. Once you understand that some of these agents care about what they get paid at the end of the day and not you, then you know how important it is to shop around before making any major move.
A good agent should be able to provide you with different options for you to choose from before you make a final decision. If you are not satisfied with the current option, inform them, and let them take you through more options.
At the end of the day, you need to look into different options before choosing the most suitable option, whether you are buying through an agent or not.
When To Drop Your Life Insurance
While life insurance could apply in some instances, sometimes it is more logical to drop your policy rather than keep it. For instance, you are over 60 years and retired with no financial worries. Then you don’t need to continue keeping your current life insurance policy. The best thing to do is to ask your insurance company to cancel the coverage.
Other scenarios where you might need to drop your current life insurance policy is when you have no children who are financially dependent on you and have cleared all major debts and mortgage payments.
If you have a term life insurance policy in force, then you could wait for it to expire, or ask your insurer to cancel, or stop making the premium payments. On the downside, dropping a permanent life insurance policy is not as easy as it is with a term life policy. On the bright side, the policy should have accumulated a cash value if you had been paying the premiums over the years. So if you had taken out the life insurance policy while younger, then you should receive a decent cash value amount accumulated over the years from your insurer once you ask them to cancel it.
Oftentimes, life insurance does not make sense after 60 because, at that age, most people don’t have any financial worries. Perhaps you are relying on a fixed income, then you don’t need to pay for that expense, it is an unnecessary headache that will only strain your finances. The most important thing to do is to discuss your needs with a financial expert or your insurance agent to reason with and help you make the right decision.
And if you decide to drop your current coverage but later decide to buy another policy, then it might end up costing you more because it will be expensive to buy a new policy when you are over 50. Don’t’ just make decisions blindly, otherwise, you are the one to face the consequences of your actions anyway!
In the end, you want to speak with a pro because your needs will be unique. Outside of needs, there is always the legacy that you want to leave behind.