By Chris Taylor
NEW YORK (Reuters) - Joe Natiello is facing what you might call a "nice problem to have."
Almost 20 years ago, the 64-year-old Westfield, New Jersey, resident took out a term life insurance policy, to help cover his family in case the worst happened.
Next year, though, that policy is elapsing, and at his age, Natiello's insurance premiums would spike if he decided to extend coverage.
Obviously, it is better than the alternative of not being around anymore. But it begs the question, for Natiello and every other policyholder in his situation: "Do I need this anymore?"
It is a fraught decision that can bring up some pretty big existential questions. Such as: How much time do I have left? What is my health situation like? Is it still critical to safeguard my family's financial future?
"It is actually a great time to revisit your need for life insurance, and whether it is adequate or too little or too much," says Scott Bishop, a financial planner in Houston.
Remember there are different types of life insurance on the market, and those with "permanent" versions do not face this conundrum. Those types offer different advantages, depending on the particular policy – such as not lapsing, containing options for investment growth, and having a cash-value component you can withdraw or borrow against – but are far more costly.
Term policies appeal to those who prefer a simpler product with lower monthly premiums. A typical monthly cost for a 30-year-old male in good health buying a 20-year, $500,000 policy – the most common length and amount – is in the range of $19-$28 monthly, according to offers on the aggregator site Term4Sale.com.
So if your "deadline" is coming up, here are options to consider:
LET IT LAPSE
A key rationale for life insurance is protecting your family early in your career, when you do not have much to your name. But with enough assets, the equation changes.
"Ideally, they bought the term policy when they were young, and possibly had small children and a large mortgage," says Kayla Johnson, a financial planner in Wilmington, North Carolina. "Now they're near retirement, the kids are out of the house, and the mortgage is paid off. By this point, life insurance is hopefully a waste of money."
Since Natiello's two kids are now out of college and he has some universal coverage, the former Wall Street trader decided to let his term policy lapse.
EXTEND YOUR CURRENT POLICY
You may choose to keep the meter running on your existing policy, which typically gets renewed on an annual basis. The advantage of this is that you will not have to go through another battery of health tests to get approved.