Do I Still Need Life Insurance If...

I am Retired
Many people think that the need and uses for life insurance are only applicable during one's working years. In fact, for many people, the only life insurance they ever have is that which is provided by their employer. Permanent life insurance, however, has a number of features that can provide benefits to you and your family, both before and after your retirement. Some of these include:

• Premiums that will never increase
• Cash value that builds on a tax-deferred basis and can be used at any time for any purpose
• The creation of an instant estate at a time when your loved ones need it most
• Permanent death protection that will enable you to spend down additional assets and maximize your income during your retirement years
• The ability to maximize your pension benefits

The presence of a guaranteed death benefit from permanent life insurance will give you the ability to increase your retirement income by enabling you to spend principal over your lifetime as well as income from retirement investment assets.

A guaranteed permanent life insurance benefit will provide assurance to a surviving spouse that they will be well provided for. Of course, this is dependent on whether the policy is in effect on the date of the death and the amount of loans against the policy. For example:

• When the principal of retirement assets is being used to increase income during retirement, the guaranteed permanent death benefit of life insurance will provide the legacy to heirs that otherwise would come from income taxable retirement assets.
• Inflation's eroding effect during retirement years can be offset by electing to have the annual dividend on permanent life insurance paid in cash to supplement other retirement income.

My Children Are Grown?
Providing funds to cover college cost for your children, even if you pass away prematurely, is a goal that many people share. After all, the benefits of a solid education far outweigh any cost for tuition. Many people use life insurance, either in the form of a death benefit, or by drawing upon the cash value, to ensure that this is accomplished.

Unfortunately, many people think that after accomplishing this goal they would be better off if they terminated all or a portion of their life insurance. What they fail to see is many of the other living benefits that a life insurance policy can provide. For instance, a permanent life insurance policy can help you increase the value of the assets that you pass on to your heirs. Through the use of various charitable gifting programs and permanent life insurance, both you and your children can realize increased wealth, and can avoid substantial income and estate tax burdens.

My Spouse Is Working?
A common approach to determining how much life insurance to purchase involves two basic steps. In the first, you would add together all your cash "needs." This would include things like paying off debt, providing for education funds for your children, and providing income for your surviving spouse and family members. The second step is to subtract from this number all of your resources - things like current assets and your spouse's income. The result would be the amount of life insurance that you "need." While this method has some merit, it has one substantial flaw - this method does not consider your "human life value."

The human life value approach to determining how much life insurance one ought to own involves a capitalization of a wage earner's income based upon factors such as age and earning potential. Essentially, your human life value is the present value of the portion of your potential earnings which (assuming you live long enough to realize those earnings) will be used to provide for others (spouse, children, etc.). This approach is of particular importance to those families that are more dependent upon the earnings of a spouse or parent than on earnings from investment assets.

Let's look at a simple example. Suppose you are 45 years old and currently earn $50,000 per year. If you intend to retire at 65, you would earn approximately $1 million over the next 20 years (assuming no inflation and no pay increases). You could say that your human life value is, therefore, approximately $1 million, and this is the amount of life insurance you should carry to protect those potential earnings.