Do You Really Need Life Insurance?

Are you questioning whether or not you need life insurance? — Photo by Fuse/Getty Images

What to do about life insurance when you get older? No single answer works for everyone. Personally, I quit buying coverage in my late 50s when my last term policy ran out. My husband and grown children don't depend on my income, so they'll be all right (financially, anyway) if I die. Instead of paying insurance premiums, I put the money into investment accounts.

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But many of you might have dependents who will need help if you die. Or you might have a cash value policy you no longer need, and wonder whether to keep it or monetize it in some way. It's impossible to cover all the tricky corners of life insurance in one short column. But I can offer some ideas to start with:

If you need more insurance, you can still buy 10- or 20-year term coverage, as long as you're in reasonable health. For a look at the range of premiums, go to Term4Sale.com. Remember, you need less coverage now than you did 20 years ago, because your life span is shorter. If you're uninsurable because your health is poor, you might be able to convert your current term policy to cash value coverage without a health exam. It will be expensive, but worth it if you don't expect to live for many more years (sorry to be this blunt, but death is what life insurance is about).

If you think you'll need coverage for more than 20 years, you might look at no-lapse universal life. The premiums are lower than those on traditional cash value policies, which accumulate savings over time. The guaranteed death benefit can last for as many years as you want. The downside: There's not much flexibility. If you cancel the policy, you'll get little or nothing back. No-lapse doesn't accumulate cash value.

If you can't afford the premiums on your current cash value policy but you still need life insurance, consider turning it into a smaller, paid-up policy that lasts for life, or use your dividends (if any) to cover future premiums. Certain forms of universal life policies might be losing cash value and will automatically terminate if you don't restructure.

If you have a cash value policy you don't need anymore, consider these five options.

1. Cancel it. Use the cash value and the money you were paying in premiums to add to investments or pay your bills. Warning: You might owe a surrender charge. You might also owe taxes, if you took a loan against the policy.

Next: More cash value policy tips>>