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If you're saving money regularly now, will you still need
your life insurance policy when you retire?
And will the same policy you have today meet
your needs after you leave your job? It's
better to answer these questions sooner than
later.
"This is not something
to be thinking about the day before you retire," says Bruno Graziano, a senior
analyst with CCH, a tax consulting firm in Riverwoods, Ill. Before you can figure
out the future of your policy, it's important to understand the assets
you have today.
| Understanding
these points will help you determine
whether life insurance is necessary
during retirement. |
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| 7 tips to determine your life insurance
needs: |
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1.
Term insurance: cheap until you get older
Life insurance is generally
defined as either term or permanent, and there are several flavors of the latter,
including universal, whole life and variable life. It's important to understand
the basics of each type of product as well as their advantages and disadvantages.
With term insurance, a policyholder
purchases insurance and pays premiums for
a set period, typically 10 to 20 years. If
the policyholder dies within that period of
time, a death benefit is paid to the policy's
beneficiary. When the policy ends, it can
usually be renewed for another term. However,
as the policyholder gets older, the rates
for term insurance usually increase and may
become cost-prohibitive.
Bruce Udell, author of "Advanced
Estate Planning, Simple Solutions to Complex
Problems," says 65-year-olds who want
to buy policies with 20-year terms should
expect to pay about three to four times more
for coverage than if they were 50 years old.
The advantage of term insurance is that even
though premiums increase with the age of the
policyholder, they are still cheaper than
permanent life insurance.
A term policy
purchased during the working years could be timed to expire when the insured is
ready to retire. Once the term is over, however, there's no death benefit, and
your beneficiaries don't receive any payout.
"One of
the things you always have to look at with term insurance is what happens when
the clock stops," says Ben Jacoby, a senior financial adviser with Brinton
Eaton Wealth Advisors in Morristown, N.J. If you have enough money saved to fund
your own expenses and your children are grown and aren't dependent on your income,
then you probably don't need another policy. |
