Your children depend on you financially when they’re young. Life insurance helps you meet your responsibilities and ensure a solid foundation for their futures—if adequate. Fortunately, term life insurance is inexpensive if you’re healthy.
When your children leave home, your situation changes. You may be tempted to cancel your life insurance, but are you being hasty?
Do children really leave home?
Leaving home is a sign of independence. With today’s job market, that independence may be temporary. Continuing your life insurance is a way to provide a tax-free lump sum that could really make a difference in their lives.
Do they still depend on you (at least partially)?
If your children still somewhat depend financially on the Mom-and-Dad, continuing your life insurance can help them when you’re not there.
Do you want to leave a gift for them?
You may want to leave a gift for your children or grandchildren even if they’re financially secure.
If you’re married, you’ll save money with Joint Last To Die insurance which makes a tax-free payment when the last spouse dies. That’s when the big taxes are due. Funding those liabilities with life insurance leaves more for your heirs.
Tip: You may not want to buy new life insurance. Instead, you could keep your current insurance and convert term to permanent coverage.
Who else depends on you?
Children aren’t your only responsibility. What about your spouse, siblings or parents? They may rely on you (or you might want to provide for them as a precaution). You could have dreams like helping a charity.
How healthy are you?
The value of your life insurance increases if your health deteriorates because a payout is more likely. Since premiums are generally guaranteed, the insurance company can’t charge you more. You get extra value for no extra cost if you keep your coverage.
Have you taken on risky activities?
When you’re applying for life insurance, your activities impact whether you’re insurable and how much higher your premiums are. Risky activities include scuba diving, parasailing, mountain climbing and traveling to dangerous parts of the world.
Once you have life insurance, you can generally start risky activities without affecting your coverage or premiums. Play Pokémon Go with impunity!
Some permanent life insurance plans allow tax-sheltered growth. Money you were spending on your children could be deposited into your life insurance as part of your retirement planning. You can get projections for different scenarios from your advisor or directly from the insurance company.
Children remain yours after you say goodbye. Life insurance doesn’t. Canceling coverage is much easier than getting the protection back.
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Flickr: Nicolas Huk