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Term isn’t for life

Chris Farrell Jan 24, 2012

Question: My husband and I have had term life insurance since we married. Now that our children are on their own, I’m considering canceling my life insurance. Is this “penny wise and pound foolish”? We no longer depend on my income to pay bills. What other reasons are there for keeping term life insurance?  Jane, Shorewood, WI 

Answer: Term life insurance is a pure death benefit. It’s to protect your loved ones from your untimely death, especially when the kids are young. Term isn’t for life. It also gets more expensive as you age. You’re right to question whether you need it now. 

You probably don’t have any dependents now that the kids are out of the house and building their own lives and careers. You have savings and other assets to tap in your elder years. Both suggest you don’t need any term life. You can put the money you’re paying in insurance premiums to other uses, perhaps into a savings account or mutual fund. I don’t think it’s a penny wise and pound foolish move to consider, because at some point, most people should let the term policy lapse. 

Why would you keep a term policy? I think the younger you are the stronger the case for keeping some life insurance in force.

Now, I don’t see why you would need the same amount of term life insurance you had when the kids were young. But you still may want to have some coverage in place if you and your husband are relatively young — say, in the 50-something range. If one of you were to pass away unexpectedly, a bit of life insurance money could help cushion the financial blow, paying for everything from the funeral to taking time off from work to experimenting with a different job or career. It also would allow you to leave your retirement money and other savings alone while you figure out what comes next.  

I don’t know if that kind of a small financial cushion makes sense for you or not, but it’s worth thinking about. What do you think?

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