Recently 2 of my clients, a couple with grown children, reached the end of their 20 year life insurance term. They are 50 and 53 years old. The wife showed me the options presented by the insurance company, and asked my advice. My first question to her was: Do you think you still need life insurance? In other words do you still have major financial responsibilities and how are you doing on building your estate?
They are the first clients of mine who have arrived at an important juncture in their financial plan. Having paid off their mortgage in the recent past, with grown children, and a disciplined savings plan, whether to renew or purchase life insurance deservedly requires serious discussion. By the way I have been their financial planner for almost 17 years.
Here are some points to ponder.
Hopefully, like my clients when life insurance is purchased, you bought it when you were young and healthy, and you bought it for the proper term. I have seen too many cases where a 10 year term was purchased. But almost always your present financial responsibilities will last longer than 10 years. You can’t send your kids out to work at 10 years old, nor do most homeowners pay off their mortgage in 10 years.
So what happens at the end of 10 years and you most likely still need life insurance? You are 10 years older, and possibly in poorer health. Therefore premiums will cost more. Purchasing a proper term is an altruistic act, you are thinking about the people that are important in your life.
If a client has been properly advised, and has followed that advice by being disciplined in their spending and savings habits, he or she can definitely arrive at the point of being self insured. I know there is a camp that claims the need for life insurance is permanent, but there is no good general answer to that assertion. Every family is different and as always proper discussion and evaluation is necessary.
Questions and comments are welcome.