If you are retired or very near to retirement, have a paid-off mortgage, adequate funds on hand and your kids are self-sufficient, you probably no longer need life insurance.

When I advise people that they no longer need to carry a life insurance policy, they give me a puzzled look and say something like “I have paid into this policy for years. I can’t cancel it!  I haven’t received anything from it yet.”  But for some reason they don’t say this about other types of insurance.  They wouldn’t carry automobile insurance when they no longer drive and they wouldn’t  carry homeowner’s insurance when they no longer own a home, so why are they so attached to their life insurance policies?

The purpose of life insurance is to provide financial protection for people who are depending on your income. So you need to forget about all the emotional trappings that go along with life insurance and look at the heart of the matter.  Life insurance premiums will continue to rise as you get older.  Cancelling your policy allows you to eliminate an unnecessary retirement expense.

Now I do realize that there are some family situations in which you would want to hold on to your policy. If you have a relative with special needs who will be permanently dependent on you for income, it would make sense to continue paying the premiums on your life insurance policy.  If your spouse would lose part or all of the benefits of your pension or Social Security income when you pass away, life insurance can help fill in that gap.

Will you need to pay estate taxes? Life insurance can sometimes be a great estate planning tool.  If you have a family business and don’t have enough liquid assets to pay the estate taxes, you can have an insurance policy tied to your estate plans. It would be a good idea to talk to an estate planning expert before taking on a life insurance policy for tax purposes.

Life insurance is a sensitive topic to discuss. No one wants to think about what will happen to their family after they are gone.  It is often easier to just throw money at the problem in the form of insurance premiums.  Rather than waste money on something you don’t need, do yourself a favor and think about what is really necessary.  This will leave you and your family more money to enjoy and give while you are still here on this earth.