Q When should my elderly father stop pay for life insurance?
For retirees who no longer work, having life insurance that was meant to replace their income if they died can be a waste of money. If they don’t have a salary to replace, the reasoning goes, why keep hanging on to your life insurance?
However, there are situations when seniors should have life insurance. One of the top reasons: Life insurance death benefits generally are tax-free, while payouts from retirement plans are taxable.
Here are instances when seniors should consider dropping life insurance:
1. The funeral is covered. If you’re worried about burdening your spouse or family members with this cost and you already have enough money to pay for it, life insurance isn’t needed.
2. You've got $100,000 set aside. Other than a funeral, other costs pile up after someone has died, such as medical bills and taxes. Having assets such as a retirement fund, stock portfolio or hefty savings account can make a life insurance policy unnecessary. A life insurance policy can be partially cashed out while retaining some of the death benefits.
3. The kids are gone. If your children have moved out of the house, consider getting rid of the coverage if supporting them is no longer a priority. You can find better uses for that money, such as covering daily expenses or saving for health care.
4. You live alone or are very old. Not having heirs to worry about makes life insurance optional.