Life insurance is easy to forget when you don’t need it. As you near retirement, it might be a good time to reevaluate your needs. Is your old policy – possibly purchased decades ago – still serving a purpose?
Life insurance is important as we start our adult lives – get married, buy homes, have children. That’s because we want to provide for our loved ones should a tragic accident or illness prohibit us from providing financial assistance.
But then life goes on. Our children grow up. We pay off our mortgages. We retire, and we’re living (hopefully) comfortable lives provided by our Social Security income and retirement savings. But we have these old life-insurance policies, and we’re still paying premiums for them. What should we do?
One option is to simply stop paying premiums and let the policy lapse. The money you paid in premiums could be used in a number of other ways that are more beneficial given your current life circumstances.
For example, you could use the proceeds to pay down any debt you have. You could use the money to add to your nest egg, investing it in a manner that will, hopefully, grow over time.
Or you could invest it in long-term care insurance (or a dedicated “rainy day” fund to be used for long-term expenses, should you need them as you age).
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Of course, the policy may still benefit you. Just because you have no children living at home doesn’t mean you don’t need life insurance. Think of all the ways the people in your life could be affected by your death, and ask yourself how your life-insurance proceeds would help them.
If you can come up with enough ways, it might be worth keeping your policy in effect and reevaluating in another one to five years.