Does It Make Sense To Keep Life Insurance After Age 50?

Posts Tagged ‘whole life insurance’

Does It Make Sense To Keep Life Insurance After Age 50?

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Term vs. Whole Life

Once you pass 50, your life insurance needs may change. Perhaps the kids are grown and financially secure, or your mortgage is finally paid off. If so, you may be able to reduce or eliminate coverage. On the other hand, a disabled dependent or meager savings might require you to hold on to life insurance indefinitely.

Whatever your situation, you’re looking at two main options: term life insurance or whole life insurance. Let’s start with term life insurance. With a term policy, you buy life insurance for a fixed period of time, anywhere from a year up to 30 years.

In the event of your death during the period when your coverage is in effect, term life insurance will pay out a specified amount to the beneficiaries listed on your policy. The exact sum depends on how much coverage you bought. That’s indicated by the so-called face amount of your policy. A term life insurance policy with a face amount of $500,000 will provide your heirs with a $500,000 payout when you pass away.

Term life insurance is far less costly than whole life insurance. A term policy is a good safeguard for specific financial commitments such as college tuition. You can time the term policy to expire after Junior graduates. Regardless of whether you buy term or whole life, your monthly payments typically remain fixed for the entire time you have a policy in force.

One advantage of whole life insurance, which is also known as permanent insurance, is that it doesn’t expire. You have coverage for your whole life, as the name implies, just as long as you pay the premiums. That’s critical if you have financial commitments that won’t go away.

Continue to Lynnette’s article: Does It Make Sense To Keep Life Insurance After Age 50?

Should I Take a Loan From My Whole Life Insurance to Pay Off My Debt?

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Author: The Money Coach

Q: I Owe $15,000 in Credit Card Debt, all on 1 Card. I Just Switched to 1 Credit Card With a 2.99% Rate Until May 2011. The Contract on My Job is Ending Soon. Should I Take a Loan From My Whole Life Insurance to Pay Off My Debt?

A: If it was just a matter of evaluating the wisdom of using your life insurance to pay off your charge card debt, I would be inclined to tell you that it would probably be a smart move. However, there is a big wrinkle in the whole equation: namely, you stated that your job is ending soon. Normally, I would have counseled you to seriously consider paying off the debt quickly while you can – especially since taking a loan from your whole life insurance policy should have no tax consequences to you. However, the bigger issue is your looming unemployment status.

Use Insurance as a Cash Cushion in the Future

If you don’t find another job or a replacement contract, you will have to consider how you will pay all your normal monthly obligations – housing, food, utilities, transportation, and so forth. I assume you have little to no savings (or some of that likely would have paid the debt already). Unfortunately, it is taking people longer than ever to find jobs. And with 10% unemployment, 1 out of 3 job-hunters has joined the ranks of the “long-term unemployed.” This means they have been out of work for at least six months. So given the current economic environment, and the fact that your credit card debt is carrying an extremely low interest rate right now, I would suggest continuing to pay on that debt as aggressively as you can, but don’t yet tap the cash value of your whole life insurance policy. Keep it untouched for now, as a standby cash cushion that you can access in the future if things get especially tight and you can’t easily replace your income.

Ask The Money Coach

Posts Tagged ‘whole life insurance’

Does It Make Sense To Keep Life Insurance After Age 50?

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Should I Take a Loan From My Whole Life Insurance to Pay Off My Debt?

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