Forward Bank

When you reach retirement, it’s natural to reconsider your life insurance needs. After all, your children may have grown up, and the immediate need to protect your household from the loss of an income-earner might seem less pressing. But before you decide to cancel your coverage, there are a few important questions to ask yourself to ensure you’re making the best choice for your financial future.

Factors That Influence the Cost and Availability of Life Insurance

Life insurance costs and availability are influenced by several factors, including your age, health, and the type and amount of coverage you have. Life insurance policies also come with expenses like mortality charges and other fees. If you surrender a policy prematurely, you may incur surrender charges and potentially face income tax implications. Therefore, before making any decisions, it’s important to assess whether you are still insurable and to carefully consider the terms of your policy. Remember that any guarantees associated with a life insurance policy depend on the issuing insurance company’s ability to make claim payments.

Does Your Policy Have a Cash Value?

If you have a whole life insurance policy, it may have accumulated cash value over time. Whole life insurance is designed to remain in force for your entire life, as long as you continue to pay the premiums. Before surrendering such a policy, make sure you understand its features and limitations. The cash value could provide a valuable source of funds or serve other strategic purposes in your financial plan, so it’s worth evaluating carefully.

Are Estate Taxes a Concern for You?

If the value of your estate exceeds federal or state estate tax thresholds, your heirs may be required to pay estate taxes. Life insurance proceeds can help cover these taxes, potentially preventing the need to sell other assets. Given the complexity of estate tax laws and their tendency to change, consider consulting with a legal professional to stay informed about any potential legislative changes that could impact your estate.

Do You Have an Outstanding Mortgage?

If you still have a mortgage, whether from an initial purchase or a refinancing, life insurance proceeds can help your heirs manage mortgage payments in the event of your passing. This financial safety net can prevent your family from facing undue stress or financial hardship during an already difficult time.

By asking yourself these key questions and understanding the potential benefits and limitations of your life insurance policy, you can make a more informed decision about whether to maintain or modify your coverage in retirement.