Keeping Your Life Insurance Is Not An 'All-Or-Nothing' Decision

Perhaps you bought life insurance years ago with the expectation of not needing it at retirement. But, as you begin retirement, you find that your savings are less than you expected. So, what should you do about your life insurance?

If, as a couple, you have enough retirement savings so if one of you dies, the other has enough to live on, then you don't have to rely on life insurance to supply extra 'savings' with its death benefit. Your large saving is a form of 'self-insurance' for both of you.

That's the circumstance that many boomers hoped they'd be in at retirement when they bought term insurance years ago. But stock and real estate market turndowns and other unforeseen circumstances may have significantly undermined their savings.

So, they may have to work longer to increase their savings. They could also cut back on other expenses to save more for the few years left to their retirement. And speaking of expenses, what should they do about their life insurance as its term coverage comes to an end?

Savings' shortcomings have left a need to maintain life insurance coverage. But being 10 or 15 years older than when you first bought your policy is going to mean significantly increased premiums to maintain the same coverage. That'll further aggravate trying to cut down on expenses.

What could you do in such a circumstance?

Recognize that maintaining life insurance coverage doesn't have to be an 'all or nothing' decision. If you're in such a situation, you can opt for a half-way measure that keeps you insured while not increasing your present life insurance expenses. Here's how...

First off, you probably don't need the extent of coverage you needed some 10 or 20 years ago. Perhaps your kids are out of college and independent. And further, your savings - though less than what you'd hoped for - are probably much larger than before.

Secondly, premiums may be less than you think. There's been a lot of competition between life insurance companies selling term insurance over the last 20 years. This, along with increasing life expectancies, has fostered more economical premium rates.

Settling for lower life insurance coverage and for a shorter term may solve your problem. Though you're older, you may be able to maintain or even lower your current insurance expenses.

If you've got a cash value policy but are still paying premiums on it, you may opt for converting it to a paid-up policy of lower benefit. That way you'd have some coverage and eliminate any further premium payments.

So you see you probably have a way to maintain the safety that an insurance policy gives you while you continue to increase your savings for retirement.

at 12:47 AM
Back to Top