If you are over the age of 50, you’ve probably realized by now that your life insurance needs have not gone away as you were assured many years ago. The agent that sold you or the financial magazine that told you, life insurance is only for the short term, were wrong.
The need for life insurance rarely goes away. Yes, for some people it does but for most people life insurance is an essential part of their financial plan. There are lots of good reasons to own life insurance in your 50’s. Let examine why people are still buying or still want to own life insurance over age 50.
Do People Still Need Life Insurance Over Age 50?
Most people do and here are the primary reasons people purchase life insurance in their fifties:
1. Family Protection
2. Estate Liquidity
3. Business Protection
4. Tax-Deferred Investing
Let’s go over each of these needs and find out why people still purchase life insurance as they get older and analyze which policy might be best to suit your needs.
Many people over age 50 are still working. They still might have a mortgage, the kids might be on their way to college or in college but whatever life situation applies to you currently, these are reasons to still have life insurance. Protecting your family while you are still working is important because they are depending on your income to help keep them in their current lifestyle. Whether you are a husband or wife, you have a human life value to your family.
A person age 50, earning let’s say $80,000 a year, might have another 15 or 20 years before they retire. That is over $1 million dollars in future income to your family. If you died today, they would lose the income and most likely struggle financially to pay the bills if you did not have life insurance to protect your income potential.
When many people hear the term Estate Planning, they immediately believe it’s a concept that only applies to the rich and famous. The original concept of estate planning was designed to make sure the rich could pass their wealth down to their heirs and pay as little tax as possible. Today estate planning can apply to just about everyone.
Here’s what I mean: You don’t have to be a “gazillionare” to have an estate plan. Planning your estate means you have a will, you provide funds to pay off your debts and you provide money to pay for your funeral and burial expenses. Life insurance can provide the funds or the liquidity to pay for all of your final expenses so your family won’t have to sell assets or liquidate investment accounts.
Here is a simple formula to calculate how much insurance you need for your final expenses: Assets – liabilities + burial expenses = Net amount of insurance needed.
If you own a business, life insurance plays a very important role in protecting your business. The most common business insurance policies are:
Key Person Insurance – This type of coverage protects your business if you have a key person, executive or salesperson that your business could not survive without. If that individual is essential to the maintenance, growth and profitability of your business. A key person policy will ensure that your business will keep running if that key employee passes away.
Buy-Sell Agreements – If you have a business partner or several business partners, a life insurance policy should be owned by the company, insuring all the lives of the business principals. Many partnership agreements mandate life insurance be taken out on each partner to provide immediate cash to buyout the partners share of business in the event of one of the partner’s passing.
Business continuity – Making sure that your business passes down to your family or heirs without assets having to be sold or even having to sell the business is very important to many business owners. Life insurance provides liquidity to keep the business running when you pass away and also pays inheritance taxes that could be due when large assets are passed to the next generation.
This is somewhat of a controversial subject and won’t spend much time on it here but will provide much more detailed information in a future post. Whole Life insurance can have some very attractive investment qualities such as tax deferred growth, unlimited contribution amounts, immediate access to your money and much, much more. If it is designed properly it can be a very powerful investment for people in their 50’s that have maxed out their 401K’s and IRA’s.
Whole life is one of the oldest forms of life insurance and it is often misunderstood. It is not an obsolete, old-fashioned product as some would have you believe. It is certainly not a “rip-off” as many financial celebrities tell their followers. Over time, whole life has been proven to be a secure investment.
Owning whole life in your 50’s allows you to:
- Never lose value while growing your retirement account
- Become your own source of financing by borrowing tax free from your policy
- Have a financial security net when you need access to cash
- Grow your money tax-deferred
- Leave a legacy for your loved ones
Want to know more about this powerful investment that can help you meet your financial goals? Just call: 914-633-1717 or Contact me.
What’s the best life insurance over age 50?
As with any financial product, there are pros and cons. What might be the right policy for one person, could be totally wrong for another. When thinking about your life insurance needs over 50, a common question that comes to mind is, what is the best life insurance over 50? There are two primary categories of life insurance coverage to choose from. Term and permanent.
Term Insurance – If inexpensive life insurance over 50 is your main goal then you should consider term life insurance. With a term policy, you are purchasing temporary coverage – it’s like renting your insurance. You are getting death benefit coverage for the term you choose. Most term policies are sold for five years, 10, 15, 20 years, 25 or even 30 years. There is no savings component with term insurance and no cash build up. When the term ends, so does your coverage.
Permanent life insurance – or whole life insurance as it is most commonly called, is different from term coverage in many ways. First, like term, whole life offers death benefit protection. Coverage remains in force for the policyholder’s entire life as long as premiums are paid.
Second, there is a cash value or savings component that is included with the policy. Part of the premium goes to support the death benefit in case you die and another part of the premium, called “excess” goes to a cash value account, in case you live.
Thirdly, the cash that grows inside of the policy is tax-deferred, which means you will not pay taxes on the growth until you make withdrawals. Even in some instances, if you borrow from the policy – or from yourself – you could avoid paying any taxes whatsoever.
A permanent life insurance policy is a good choice for those who believe their life insurance needs will last for the remainder of their lives. These policies are also good options for estate planning, as well as for other longer-term financial planning purposes.
Conclusion and Recommendations
As you have probably realized, your options for life insurance over age 50, are often different than your options when you were younger. As we age, our health tends to decline and our medical files are thicker than they were years ago.
Both age and health are two of the key determining factors that are reviewed by the underwriters when determining whether or not an applicant for coverage will qualify. If you have health issues or if you smoke, you may want to consider applying for life insurance over age 50 with no medical exam.
Consider this: If you’ve owned term insurance over the past several years and your term policy has ended or it is now running out, you may not want to a term policy again unless you are absolutely sure your future insurance needs are temporary.
If you are over 50, looking for life insurance coverage, it is highly recommended that you work with an independent agency like ours that has access to numerous insurance companies to give you unbiased advice and more options for coverage. This way, you will be able to compare the best life insurance companies, and determine which will work the best for your specific situation. Feel free to give us a call during normal business hours at: 914-633-1717.