Life Insurance: Do I still need it?

You bought life insurance years ago. You paid the premiums like clockwork. Now you’re older. Your kids are grown. You’re nearing retirement or already retired. And you’re wondering, do I still need this policy? Does it still make sense to pay the premiums at this stage in your life?

Let’s break it down.

Why You Bought Life Insurance in the First Place

When you were young—with a mortgage, a spouse, a couple of kids, and a lot of financial responsibilities ahead—life insurance made perfect sense. If something happened to you, the payout would cover your family’s living expenses, debts, and maybe even college tuition.

Back then, insurance seemed important because the risk of your death, though low, would’ve had a big impact.

But as life changes, so do your needs.

When Life Insurance Starts to Lose Its Value

Now, you’re not who you were at 35. Maybe your kids are grown, your mortgage is paid off, and your savings and investments can stand on their own.

So ask yourself: Is your life insurance policy still providing real value—or are you just keeping it out of habit?

Here are some methods to help you decide:

Take Stock of Your Finances

Grab a coffee, paper and pencil (or a spreadsheet) and do a little financial sleuthing.

• What income streams would be available to your survivors? Pensions, Social Security, retirement accounts, rental income?
  • How much income will each provide and how might it grow or diminish in time.
• What debts do you have? Mortgages, loans, medical bills?
  • What is the total monthly amount? When will they be paid off?
• What responsibilities have changed? Will you still need to provide for your children, or are they on their own now? Do you need to help provide care for an elderly parent or relative?
• How much will your survivors need each year for real estate and other taxes?
• How much money will they need to live comfortably? (Don’t forget to account for inflation.)
• What major new  expenses do you foresee for your survivors? Will you need to buy a new car, replace the roof on your house?

Compare income expectations to the amount of money they’ll need. Could your survivors maintain their financial stability without your life insurance benefit? 

Reasons to Keep Life Insurance Later in Life

Before you cut your policy loose, here are a few scenarios where it might still make sense:

• Financial protection for loved ones: A life insurance payout can help surviving spouses or children cover costs and maintain stability.
• Covering final expenses: Funerals, probate costs, and other end-of-life expenses can add up. Insurance can spare your family that burden.
• Estate planning: If your estate is large enough to be taxed (especially in states with low thresholds), life insurance can provide liquidity to cover those taxes, so your heirs don’t have to sell assets to pay the bill.

But even here, it’s worth asking: Could you set aside the same money in a savings account or investment fund and get more control over it?

Smart Alternatives to Traditional Life Insurance

If you’re leaning toward dropping your policy, consider these options:

• Convert to a paid-up policy: No more premiums, but you still keep some coverage. A good way to scale back without letting it go completely.
• Tap into your whole life policy’s cash value: If you have a permanent policy, you may be able to withdraw or borrow from the cash you’ve built up.
• Look into long-term care insurance. As medical needs grow with age, this might serve you better than a basic life policy.

When It’s Time to Let Go of Your Life Insurance Policy

It might be time to say goodbye if:

• You’ve built enough assets to cover future needs without a policy.
• You no longer have significant financial dependents.
• Your premiums have become too high for what you’re getting in return.

A life insurance policy shouldn’t be a burden. If it’s costing you more than it’s worth—or no longer aligns with your goals—let it go.

How to Make a Smart Decision

Still unsure? Here’s how to approach the decision:

• Talk to a financial advisor. A pro can help you evaluate your situation with fresh eyes.
• Review your policy annually. Things change. Your insurance should evolve too.
• Do the math. Compare the costs of keeping the policy with the potential benefits.

Final Thoughts

Life insurance isn’t something you buy once and forget. It’s a tool—and tools need to fit the job. If that job has changed, your policy might need to change too.

Don’t let fear or habit keep you paying into something that no longer serves you. But also don’t rush to cancel without a clear plan.

The goal is simple: Make sure your money is working for you, not the other way around.

Photosource: Istockphoto