When does life insurance stop making sense?

Noel Whittaker tells Andrea whether she and her husband should ditch life insurance.

Should I keep my life insurance?

Andrea asks Noel Whittaker if she should continue to pay for life insurance, while Dragrush wants to know how best to reap some cash from an investment property.

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Q. Andrea
My husband and I are heading into retirement and have finally paid off the house. Apart from a few thousand dollars on our credit cards, we owe nothing. Should we continue to pay for life insurance? We are both insured for $300,000 each, and it costs us thousands to maintain this. Should we continue to pay through the nose when we are on a limited retirement income, just to ensure our adult children get a big payout when we pass away?

A. As you have pointed out, life insurance has a cost and, traditionally, the main purpose is to ensure that your partner can carry on if you die. It is really up to you to decide the best course of action here, but keep in mind it will get more expensive every year and you may well decide that it is now costing more than it’s worth.

I think at this stage in your life, your own personal cash position should be more important than leaving a large sum to your children.

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Q. Dragrush

Hi Noel. I would like to know the various ways I can get access to a lump sum, say $75,000, from a fully owned investment property worth around $500,000. I am on a part Age Pension.

A. You sound like the perfect candidate for the government-administered Pension Loans Scheme, which offers reverse mortgage loans to seniors at 5.25 per cent. Just bear in mind that legislation has not yet been passed – the scheme is scheduled to start next year.

Do you have a question you’d like Noel to tackle? Email us at newsletters@yourlifechoices.com.au

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    Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His answers are general in nature, and readers should seek their own professional advice before making any financial decisions.





    COMMENTS

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    Old Man
    31st Jul 2018
    3:23pm
    I believe that life insurance has a part to play in our lives. In our case, I took out enough life insurance to cover the mortgage in the event that I wasn't around before it was paid off. After the mortgage was repaid we found no reason to keep paying for life insurance as our financial position had changed. This nation has a million stories and that is just one of them.