by Jamie K. Fleischner, CLU, ChFC, LUTCF
President, Set for Life Insurance
Yesterday I had some long time clients contacting me, asking me how long they need to carry life insurance. Their term policy was about to expire and their children are in still in high school. After discussing their situation, I discovered that college has been saved for and the only outstanding debt is their mortgage. They need to have the life insurance coverage for the next 10 years until their children are financially self sufficient.
Life insurance is intended to cover an economic loss. As such, you need to carry your life insurance for the amount of time that you have survivors depending on your economic value. Once your survivors are no longer financially dependent, your financial obligations are minimal. This does not mean you do not want to leave money to your survivors. This was a question of need, not desire.
The rule of thumb answer which also relates to these clients is you need to have the insurance until your youngest child is at least 25, which is the approximate age when they no longer rely on their parents’ financial support.
Some insurance professionals would argue that people need to insure their lives for their entire life and are proponents of whole life. Whole life is a great solution if someone has the cash flow to pay the hefty premiums and is looking for an accumulation vehicle with tax benefits. It is not a necessity to leave an inheritance, it is more of a luxury, unless you have accumulated a lot of wealth and your heirs will need to pay estate taxes which is a whole other discussion.
For more information about life insurance, contact Set for Life Insurance today!