While the word “life insurance” implies that we need such insurance throughout our lifetimes, this is surely incorrect. Children don’t need life insurance because — at least in most situations in developed countries — they have no responsibility to provide for others, or even for themselves.
Although some teenagers work, and some even pay their own way through their college years, adolescents and very young adults do not generally carry life insurance since they are accruing enough debt without adding to their costs. Also, except in rare incidences, they don’t have children depending on their income.
By the time you’re a mature adult, you are likely to have dependents — a spouse or partner, a child or children, elderly parents or other relatives who rely on your support. By the time you reach 25 or so, you should probably have your first consultation with an astute estate planning attorney, one who will guide you through the process of planning to meet your personal goals and prepare for contingencies. Life insurance is an important part of an estate planning attorney’s bag of tricks, and though it should always be discussed, it is not always necessary.
The Purpose of Life Insurance
The reason to buy life insurance is to protect your family from financial crisis when you die. This presumes that you are the primary wage earner, or these days more likely one of two primary wage earners, on which the family relies for sustenance. The two primary types of life insurance are designed to provide financial benefits that will help your family maintain its present lifestyle when it loses you and the income you have been providing. Term life insurance provides such a cushion for a particular length of time — 10, 15, 20 or 30 years — presumably a term that covers your income-producing years. Whole life insurance, on the other hand, provides coverage for as long as you live and has a cash value. Whole life insurance, as one would expect, is the more expensive variety.
When Life Insurance Is No Longer Needed
There are a number of circumstances in which you may no longer need life insurance, for example when:
- You (and perhaps your spouse or partner) have amassed enough wealth and income-producing investments to care for yourselves without any outside help
- Your children are self-sufficient adults and no other people depend on your income
- Your estate is not large enough to necessitate your payment of estate taxes
As any well-informed estate planning attorney will tell you, If you have reached a stage of life in which your mortgage is paid off, you own other property outright, and your have no tax debt or credit card balance, you may not require life insurance at all. With the generous, unencumbered inheritance you leave, your heirs and other beneficiaries may be perfectly able to take care of themselves.
Posted in: Estate Planning