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What To Do With That Old Life Insurance Policy

What Does This Article Cover?
  • Have you outgrown the need for life insurance?
  • Is the family grown, and you're not sure what to do with your policies?
  • Have you considered how important adequate coverage may still be?

You're pretty well established financially — either already retired or close — with almost no little big–debt obligations, and few responsibilities. So, what should you do with that cash value life insurance you bought years ago, when the kids where young, the mortgage was big and the income was small? You bought it to protect your family. But what about now?

There is a common misconception that life insurance is strictly for younger folks. Many of us believe that, as we grow older, we also outgrow the need for life insurance. That may not be true.

Some people may need more life insurance coverage as they get older. No matter what our age, life insurance can help provide financial security for loved ones, help settle an estate and help make sure that personal and financial objectives are met.

Not sure? Take the following self–quiz. It may help you decide if you need additional life insurance coverage. Check the boxes that reflect your situation:

I have a spouse I want to protect. If you pre–decease your spouse, your life insurance proceeds can help guarantee that he or she is financially protected.

My employer–provided insurance was designed to terminate or reduce at retirement. Many people lose valuable life insurance coverage at retirement. Many also recognize the need to replace that lost protection.

I don't want a final illness to deplete my estate. For many people, the largest medical bills they incur are the result of a single, final illness. Medicare may cover not all costs. Life insurance can help ensure that cash is available to meet final expenses or provide additional funds for your spouse or family.

I recognize that inflation can return and undermine my spouse's standard of living after I am gone. Inflation may not be a factor today. Historically, however, we know it can easily return. Even at low levels, inflation can wear down purchasing power over time, especially for those living on fixed incomes.

Example: If you retire on a fixed income of $3,000 a month, and inflation is a 4% per year, the purchasing power of that money will drop by half — to $1,500 — in 18 years. If inflation comes roaring back to the levels of the early 1980s, your money's value will decline even faster. Life insurance can "replenish" assets and help undo the effects of inflation.

Purchasing Power and Inflation
Inflation Rate Time to Reduce Purchasing Power of $1.00 to $.50
4% 18 Years
6% 12 Years
8% 9 Years
10% 7 Years

I realize that my estate settlement costs may outstrip my estate liquidity, but I don't want my heirs to be forced to sell off assets. Life insurance can provide the liquidity needed to cover expenses and preserve other assets for your loved ones' future needs.

I have children and I want to leave something for them. Life insurance can help you keep your promise to your heirs. Coverage can be earmarked to provide a generally income–tax–free inheritance for your children.

I have grandchildren — or will someday — and I want to give them a head start in life. Insurance proceeds at your death can help provide cash to help them pay education bills, put together the down payment on a first home or take advantage of other opportunities.

I have a favorite charity I'd like to remember...and be remembered by. Life insurance can be an excellent vehicle for helping your alma mater or favorite charitable institution.

The point: Life insurance is not just for young families. Best of all, thanks to mortality and expense improvements, rates for older policyowners can be downright attractive.

Recommendation: If you checked even one box, recognize that you may not have outgrown the need for life insurance. Keep old policies in force. Plus, find out more about how additional life insurance can help you accomplish your goals, whether you are 25, 65...or somewhere in between. Contact your New York Life Insurance Company agent for more information.

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Consult an Agent:
At no charge to you, a New York Life Agent — professionally trained and experienced — can help you analyze your needs and recommend appropriate solutions through insurance and financial products and concepts. Request a no-obligation review with a New York Life Agent.

New York Life Insurance and Annuity Company does not provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.

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What To Do With That Old Life Insurance Policy

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