Never Too Old—or Too Rich—to Consider Life Insurance

Grown Children or Money in the Bank May Not Reduce the Need for Coverage

A large majority of Americans believe that it’s important to provide for their families after they are gone.¹ Yet experts say that most people with life insurance may not have enough coverage for their families to avoid financial hardship if they were to die unexpectedly.²

But let’s say your children are grown and/or you have substantial assets. Should life insurance still play a role in your overall financial picture?

The primary reason to own life insurance is to cover expenses that would otherwise fall onto dependents who may not have the means to pay them. This might paint a picture in your mind of a young widow who needs money to raise small children. But don’t let this traditional definition blind you to the bigger picture.

Here are some possible reasons to consider owning life insurance, even if you have convinced yourself that it’s no longer necessary in your situation.

A Spouse’s Retirement

A spouse who is suddenly faced with a smaller income may be tempted to cut back on retirement contributions. Proceeds from a life insurance policy can help ensure that a surviving spouse has money for retirement.

Education for Children and Grandchildren

One often-overlooked consequence of losing an income earner is the possibility that dependent children may not be able to afford college. Life insurance can also be helpful in cases where grandparents had hoped to help pay college costs.

Taxes, Probate, and Final Expenses

Given the uncertainty surrounding the future of the federal estate tax, it’s prudent to assume that some form of estate taxation can be expected for the foreseeable future. Life insurance proceeds can be used to help pay any estate taxes and probate costs, as well as final expenses.

Immediate Cash

One little-considered advantage of life insurance is the swift payment of benefits. Life insurance proceeds typically are not subject to probate or income taxes, and the interval between the claim and the payment of benefits can be a matter of only days or weeks. The money might even serve as a lifeline if significant medical expenses are looming just as the family’s income ceases.

Your Legacy

Life insurance proceeds represent an opportunity to make a significant charitable contribution or leave an inheritance for loved ones. In some cases, it might even be possible to leverage money you had earmarked for a donation by using it to purchase a life insurance policy with the charity named as beneficiary.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.

As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications Before you take any specific action, be sure to consult with your tax professional.

1) MarketWatch, September 23, 2008
2) Life and Health Insurance Foundation for Education, 2008