Do You Still Need Term Life Insurance After Your Mortgage is Paid Off?
There are times where people come to believe that they are no longer in need of term life insurance. Most often this period occurs when a specific milestone has been reached, for example upon paying off your mortgage or other large ticket purchase. This safe feeling is a little bit deceiving, especially when it comes to your term life insurance needs. When it comes to your term life insurance needs, there’s plenty more you need to think about and consider than simply the mortgage payments. Sometimes people cancel their term life insurance policy upon paying their mortgage off, only to find that they are putting their family in a severe financial hardship after they pass away.
A Quick Consideration Before You Cancel Your Term Life Insurance Policy
Let us say that you have just recently retired, and you are looking forward to the opportunity to live the good life that comes with the “golden years.” Now, you realize that just before you’re retiring, you have paid your mortgage off – your home is finally yours free and clear. Just because your mortgage is paid off, that does not mean that it was the reason you obtained your term life insurance policy to begin with. Why would you cancel your term life insurance policy, simply because you think you no longer need it? Term life insurance is something that you can always use. This type of thinking, then, is completely wrong and really has no merit to it at all.
Term Life Insurance Serves a Purpose Many Individuals Don’t Understand
The first thing that people generally forget regarding term life insurance is the burial expenses and other costs associated with death. The average burial and funeral costs can be more than ten thousand dollars. The next thing that people typically forget about when canceling their term life insurance policies is the fact that the government only tends to pay out a couple hundred dollars, meaning that there are thousands of dollars that need to be found somehow.
This is what term life insurance and other insurance policies are all about – providing your loved ones with the benefits that they need to care for themselves and your estate after you pass away.
There are plenty of other considerations that you need to make as well when it comes to term life insurance coverage. Running your home, for example, is a cost that needs to be factored into the whole equation. Just because the mortgage has been paid off, that simply does not mean that living there will cost your family nothing. There are property taxes to pay, for example. Property taxes have to be paid for by anyone who owns property, and this can turn into a lot of money for many people depending on where you live.
The truth is you could get into trouble with the IRS if these taxes go into default if your term life insurance policy cannot take care of your family. This should be a very real concern for you, if you do not leave a term life insurance policy for your loved ones to take advantage of if you pass away unexpectedly.
You need to give consideration to all of these possibilities before you cancel your term life insurance policy. There is a lot more that you need to consider when it comes to your term life insurance policy and whether or not you need it. The last thing that you should ever want to do is to leave behind a financial burden that your family cannot deal with.