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How long do I need life insurance?

May 3, 2012: 5:00 AM ET

I know there are lots of calculators out there that determine how much life insurance a person needs, but if your intent is not to transfer wealth to the next generation, but only to cover needs in the case of an unexpected death, up until what age do you need term coverage? It probably varies based on your needs, but are there any guidelines? When do I need to sunset my term life insurance and start buying long-term care coverage?
--J.P., Santa Cruz, Calif.

You're right: This answer does vary based on your circumstances. But in general, once you have saved enough to meet your spouse's and any dependents' needs in the event of your untimely demise, you can cut the life insurance cord. That probably happens around retirement age, says Constance Stone, a financial planner in Chagrin Falls, Ohio. However, "if retirement savings and other source of income are inadequate, it would be wise to keep the term insurance in place after retirement for as long as possible," she says.

Age 51 is a good time to look at your policy and determine how much longer you need it. If your needs extend beyond the end of your term, see if you can convert your policy to a permanent one? "You might be better off converting, because the older you get, the higher the premiums go for term," Stone says. Alternately, if you're still in relatively good health, price out the cost of renewing your coverage and extending the term. It's far better to look now. "Everyone I've worked with who waited to increase their life insurance has had a health event that they didn't expect," Stone says. "And as a result they couldn't get more, or their premiums went sky high. It's better to do it while you're young and healthy."

Your early fifties is also a great age to look into long-term care insurance—owning one type of insurance doesn't mean you should drop the other. "They cover different risks," Stone says. "I suggest you pay premiums on both simultaneously until you retire, then consider dropping the term insurance."

--Kate Ashford

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