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The Money Coach

Life Insurance After 50: Still Make Sense?

In this episode of The Money Minute, Lynnette discusses whether you really need to keep coverage

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Once you pass 50, your life insurance needs may change. Perhaps the kids are grown and financially secure, or your mortgage is finally paid off. If so, you may be able to reduce or eliminate coverage. On the other hand, a disabled dependent or meager savings might require you to hold on to life insurance indefinitely.

See also: Picking the right policy for you.

Whatever your situation, you're looking at two main options: term life insurance or whole life insurance. Let's start with term life insurance. With a term policy, you buy life insurance for a fixed period of time, anywhere from a year up to 30 years.

In the event of your death during the period when your coverage is in effect, term life insurance will pay out a specified amount to the beneficiaries listed on your policy. The exact sum depends on how much coverage you bought. That's indicated by the so-called face amount of your policy. A term life insurance policy with a face amount of $500,000 will provide your heirs with a $500,000 payout when you pass away.

Term life insurance is far less costly than whole life insurance. A term policy is a good safeguard for specific financial commitments such as college tuition. You can time the term policy to expire after Junior graduates. Regardless of whether you buy term or whole life, your monthly payments typically remain fixed for the entire time you have a policy in force.

One advantage of whole life insurance, which is also known as permanent insurance, is that it doesn't expire. You have coverage for your whole life, as the name implies, just as long as you pay the premiums. That's critical if you have financial commitments that won't go away.

Another advantage of whole life over term is the savings feature. There are variations, but in general part of the money that goes into your whole life policy is invested and has the potential to grow over time. You can borrow against the cash value in a whole life policy while you're alive.

It's worth noting that newly issued life insurance policies, both whole life and term, start to get more expensive once you hit 50. Once you enter your 60s, if you want or need life insurance and you’re not already locked into a term policy, you may have no other option but to buy a more expensive whole life policy. Many insurers won't sell term policies to people 65 and older.

Lynnette Khalfani-Cox is the author of Perfect Credit: 7 Steps to a Great Credit Rating. You can friend her on Facebook or follow her on Twitter @TheMoneyCoach.

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