How Long Should I Have Life Insurance? (2024)

FAQs

How long should you hold life insurance? ›

Expenses until retirement age: Your life insurance policy should ideally last until your beneficiaries. wouldn't struggle to pay expenses without your financial support. For many people, this financial independence occurs at the age of retirement, when their children are out of college and their mortgage is paid off.

At what age is life insurance no longer needed? Life insurance is no longer needed for many people once they reach their 60s or 70s. At this point they have retired, their kids have grown up, and they've paid off their mortgage and other debts.

Most people aim to do this over their mortgage period of 25 years. This is to ensure that if a death occurs, any debts or payments will be covered in this time. This policy is also ideal if you have children still living at home or in full-time education.

If you have young children or plan to soon, term life insurance of 15 or 20 years or longer can offer security to your family.

Life insurance may not be worth if you have no dependents, if you have a tight budget, or if you have other plans for providing for them after your death.

In most cases your premium payments will be forfeited, and you will not receive anything for your previous payments. The one exception to this is if you have whole life insurance and cancel it. You may have built up equity for all of the payments you have made so you may receive a lump sum payment from your insurer.

If you cancel or outlive your term life insurance policy, you don't get money back. However, if you have a "return of premium" rider and you outlive the policy, premiums will be refunded. If you have a convertible term life policy, you can sell it instead of canceling it.

After the 20-year level term ends, your coverage expires. By outliving your policy, both the death benefit and two decades of premiums are lost. Terms are available in different lengths, typically from 10 to 30 years, so it's important to select one that you think will be sufficient for your financial needs.

Thankfully, it's never too late to purchase life insurance. Buying life insurance from certain insurers may be difficult depending on your age and health, but it's not impossible.

If you only need life insurance for a relatively short period of time (such as only when you have minor children to raise), term life may be better because the premiums are more affordable. If you need permanent coverage that lasts your entire life, whole life is likely preferred.

What happens if you never use your term life insurance? ›

Generally, when term life insurance expires, the policy simply expires, and no action needs to be taken by the policyholder. A notice is sent by the insurance carrier that the policy is no longer in effect, the policyholder stops paying the premiums, and there is no longer any potential death benefit.

Term life is designed to cover you for a specified period (say 10, 15 or 20 years) and then end. Because the number of years it covers are limited, it generally costs less than whole life policies. But term life policies typically don't build cash value. So, you can't cash out term life insurance.

Keep insurance policies while they remain active

When it comes to insurance, consider keeping current documentation and updated proof of insurance as long as you're paying on the policies, and they remain active. Any time you receive any new/updated policy information, consider shredding the outdated documents.

Insurance companies can delay payment for six to 12 months if the insured party dies within the first two years of the policy.

Permanent life insurance, such as universal and whole life policies, comes with a death benefit and a cash value account that you may can cash out while you're still living.

This is insurance you buy for the length of your life. Unlike term insurance, whole life policies don't expire. The policy will stay in effect until you pass or until it is canceled. The initial cost of premiums is higher than it is with term insurance because of the length of the policy.