Growing up on the farm, we would get a surprising number of unwelcome visits from insurance salesmen. One of the least complimentary things you could say about somebody was that they reminded you of a life insurance salesman.
Of course, times change. I now have extensive training in life insurance and understand what a useful tool it can be to help families reach their financial goals. I like life insurance more than ever before. But my clients mostly don’t like life insurance. I suppose the problem is that you have to die to see a benefit from the insurance. None of us really likes thinking about that.
So, to answer the question, “Aren’t I too old for life insurance?” no, you are probably not too old.
Life insurance can be pretty handy for anybody at any age. Here are a few reasons why:
- Whenever a family loses a loved one, it’s shocking and disruptive. Having a check arrive to help with expenses can be a big relief.
- Many life insurance policies can now include benefits to help with long-term healthcare needs in old age. For most of us, we will need some care at the end of life and this arrangement can be very efficient.
- Death benefits are tax free. In a recent survey by Allianz Life, two-thirds of folks said they don’t believe that death benefit payments are tax free. Well, they are. Life insurance proceeds paid to your family at your death are free from income tax.
- Many times, the folks you leave behind will still need financial support for items like:
- Paying off the family residence
- Paying loans and other debts
- Providing for younger children
- Paying for life while your family takes some time off from work to adjust to the loss
What kind of life insurance do I need?
Term insurance is different from permanent insurance. Term life insurance provides protection for a specified period of time. Once that time period is over, the policy terminates. Many people have life insurance coverage through their employer, and most often this is term insurance. This is like renting an apartment. You can stop paying at any time and walk away. You don’t own anything.
Generally speaking, term policies have lower premiums than permanent policies, but they expire, and that can create a challenge. That’s why term policies are a great fit for specific risks you need to protect. Like:
- Cover the value of your mortgage until the house is paid for.
- Cover the cost of college for your kids until they are done.
- Cover the cost of child care if you became a single parent household while the kids are little.
A permanent life insurance policy does not expire during a set term. In addition to death benefit protection, permanent insurance has the potential for a cash value accumulation. Any available cash can be withdrawn or taken as a loan and be used to cover unexpected expenses or help meet a financial goal such as paying for college, buying a home or supplementing retirement income.
Understanding life insurance
As you can see, there are a few moving parts and things really depend on the details of your situation. This is just another situation where getting some professional advice from an advisor who is trained in all aspects of financial planning.
As a fee-only, Certified Financial Planner ™ professional, I am not licensed to sell insurance. I cannot get paid by insurance companies. But I am required to maintain my expertise in how to use insurance products to reach financial planning goals.
For questions about life insurance, having a Certified Financial Planner™ professional, an advisor who is always his client’s advocate – a fiduciary advisor, and an advisor who does not sell any investment products – a fee-only advisor, makes a lot of sense.
Yes, I am a Certified Financial Planner™ professional. I am always a fiduciary for my clients. All my compensation comes from client fees. And, yes, I am still accepting a few great new clients each year.
If this article has you thinking about your own life insurance, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their financial plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.