Evaluating life insurance in your 40s and 50s usually centers on revisiting the decisions you made when you were younger.
You may need more coverage now that you earn more money and are paying for college. Then again, if your kids are out of the house and that house is paid off, you may need less.
And if you’ve been ignoring life insurance until now, it’s not too late to buy it.
Life insurance provides a financial safety net for your family if you die. This becomes particularly important to many people once they have children. These days, many people put off having kids into their 40s and (more so for men) their 50s, so if this is your situation, you may just be getting around to asking yourself, “Do I need life insurance?”
Think about the many, many costs that come with children and buy insurance to match. If you have minor children and want to make them beneficiaries, create a trust that would receive your benefits on behalf of your minor children and a trustee to disburse the money. Minors won’t be able to receive life insurance benefits directly.
Some companies and agents market certain types of cash value life insurance as a good way to save money for college, because these policies do not factor into the needs analysis for financial aid, notes the independent student financial aid website FinAid.org. But the site warns cash value life insurance often costs more than other saving options and has complicated provisions regarding taxation and borrowing or withdrawing money from the policies.
If you bought a policy when you were younger, you may have purchased a level of protection based on your income and debts at the time. Since then, maybe you’ve moved up the earnings ladder and adjusted your lifestyle to match, or maybe you’ve racked up more debt. Is your life insurance coverage still adequate?
If you are paying a child’s college bills and are depending on your income (or loans) to cover those massive costs, you’ll want your insurance benefit to be large enough to cover the expense if you died.
On the other hand, if you’ve managed to pay off your mortgage and your children are off on their own, your life insurance needs probably have gone down.
As the National Association of Insurance Commissioners puts it, “people at this age often begin to ignore their policies. It may be important to periodically review and update your coverage to reflect changes in your financial situation and family composition.”
Now is the time
You may have needed life insurance for years now but haven’t gotten around to buying it. A 2014 survey by the financial services industry research group LIMRA and the nonprofit insurance group Life Happens found people don’t buy life insurance because of its perceived cost, other financial and attention priorities, the complexity of policies, distrust of insurance companies and agents, and an aversion to thinking about death.
Cost was the top concern but also a source of misperceptions. Adults generally guessed the monthly charge for a 20-year $250,000 term life insurance policy for a healthy 30-year-old would be $400, when the real cost is around $150. You’ll have to pay more than that if you’re in your 40s or 50s, but maybe less than you think.
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