There are some common misconceptions people have about life insurance. By understanding the options and variations of a life insurance policy, you can make insurance work for you, and give you and your family peace of mind no matter what your age and financial position.
The financial needs for young adults and older retirees are quite different, but there are a number of plans and variations of life insurance plan that fit in nicely with financial goals as age increases over the decades.
Younger adults are perfect for term life insurance. It may be the ideal form for you while in your late teens through your early to mid 20s because of its low premiums. As you grow older your income will increase along with your responsibilities, and other options might be the better choice.
In most cases, when adults attain the age of 30, insurance should be re-thought. If you have term insurance consider converting your plan to a whole life policy. The sooner you get started with such a plan, the lower the premiums will be. As the whole life policy begins its maturation process and builds cash value, you, as the policy holder will be able to borrow against its value and use the money as you see fit. The loan will not have to be repaid. Instead, that amount will be deducted from your death benefit.
As you reach the age of 40-50, money accumulated from insurance dividends can be withdrawn and used to invest in retirement plans or for whatever purpose. Obviously the longer the funds are undisturbed the more the value will increase. Keep the policy in force and continue paying the premiums.
When retirement draws nearer, at age 60 or so, your financial situation will change. Ideally, your mortgage has been payed off, and the expenses of educating and raising your children are behind you. At this point, you should review your coverage and consider reducing the amount of your coverage. In some cases, you may decide that life insurance is not necessary. If this is not the case, keeping your insurance coverage in-force may be the better option. Your dependents and heirs may face serious financial damage if you should suddenly die.
This is the time to think about replacing income that will cease upon your retirement. When retirement does occur, does your income stream match your needs? Once you determine your retirement income needs, you can decide on how you would like the proceeds of your life insurance policy to be disbursed. Many choose to purchase an annuity plan that can pay monthly benefits, while others select a single disbursement of the funds. Your overall financial picture will come into play in choosing the right path. Your financial adviser can guide you through the options.
As you reach the age of 70 or older, consideration must be given to how your estate taxes, if applicable, will be payed upon your death. You might take a quick glance at death actuary rates. The average life expectancy of a male adult is somewhere near 78 years. Is your estate fluid enough to pay taxes due upon your death. You might consider designating some of your insurance proceeds for estate taxes and any other contingencies that might come up.