If you are trying to get your financial house in order, you have likely been told that buying life insurance should be part of your plan. However, this advice isn’t always true – particularly if you are over the age of 50.
Who Needs Life Insurance?
It’s true that life insurance has it’s place. In fact, I would argue that as long as you have children, a spouse (or anyone else you are financially responsible for), and are under the age of 40, a life insurance policy is a must have. When you start to approach the age of 50 though, my opinion changes. Let’s take a deeper dive into why this is so.
When you are in your 20’s and early 30’s you likely don’t have anyone that is dependent on you for your income. If you were to unexpectedly pass away, the loss of your income wouldn’t likely affect anyone. However, when you have children or a spouse that changes. The loss of your income would likely be very disruptive to those who rely on your paycheck. That is why life insurance is so important and that is exactly why it is an important consideration in any financial plan.
When you reach the age of 50 your life likely looks much different. The kids are grown and making their own way in the world, the mortgage is getting paid down to a manageable level, and hopefully you have a nest egg of some sort. For these reasons, the need for life insurance becomes much less than when you were younger.
The Cost of Coverage Depends on Your Age
Another important reason why life insurance might not fit into your financial plan as an older adult is simply the cost. Fact is, the cost of a life insurance policy if you are over 50 is expensive, and only increases as you age.
If you are in your 20’s or 30’s, you could get a very favorable policy for half of what you would pay if you are over the age of 50. Of course, I already discussed how the need for life insurance coverage in your 20’s and 30’s likely isn’t as great. When you factor in the large premium increases, buying life insurance when you are over 50 has two very distinct downsides:
- You likely don’t need the coverage because your kids are grown, you have a nest egg, your financial obligations aren’t as large, etc.
- The cost of the policy outweighs the need for coverage
What About Insurance as an Investment?
This philosophy definitely exists.
From “who” you might ask? From the people who sell it and make a commission.
What is commonly sold as “insurance as an investment” is whole life coverage. This is also a type of insurance that has a very high commission in most cases. For an insurance broker, the best type of insurance for you (likely term coverage) is the lowest payout when it comes to commissions.
Let’s also not forget that there are a host of other reasons why life insurance doesn’t make sense as an investment: high fees, often poor return on your investment, etc.
While life insurance has it’s place for many people, that benefit and protection starts to diminish as you age. For all the reasons discussed above, you should think long and hard before you purchase life insurance over the age of 50. After you give it some thought, you might just find that life insurance doesn’t make sense in your situation.
Author Bio: Jason Hessom is a veteran of the insurance industry with more than 20 years of hands-on experience. You can learn more about Jason and his website FinancialSumo.com here.