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In Your 50s? Don't Risk Life Insurance Lack

HUNT VALLEY, Md. (TheStreet) -- How do you know if you need life insurance in your 50s? And if so, how much?

For starters, is anyone reliant on you for their financial well-being? A spouse? Minor children? Life insurance does not pin a numerical value on your life; it helps compensate for the financial loss accompanying your death. Therefore, if no one is reliant on you for their financial well-being, you don't need life insurance. End of story? Not exactly.

We avoid certain risks altogether (skysurfing without a parachute, say) while reducing others, but until you can handle the costs of death on your own, lacking life insurance shouldn't be among those risks.

Many years ago, I was trained by one of the best life insurance companies on the planet. I was instructed first to definitively answer a potential client's question, "Do I need life insurance?" with the simple answer, "Yes!" This, however, is patently false and driven by the blatant economic bias on the part of insurance companies who profit only if we pay.

Every day, we manage a variety of risks, but only occasionally do we transfer that risk to an insurance company. We avoid certain risks altogether (skysurfing without a parachute, say) while reducing other risks to a manageable level (for instance, wearing sunscreen). If you have reached a level of financial independence -- meaning your passive income from investments and other income sources is enough to care for you and anyone left behind -- you and your loved ones can assume the risk associated with your untimely passing.

Folks in their 20s and early 30s tend to have rapidly increasing responsibilities associated with homeownership, marriage and young children without having built an asset base to care for anyone they may leave behind. Those in their late 30s and 40s see their income increasing, but as they start to make meaningful progress building a nest egg for the future, their ability to save is hampered by spiking costs at home as older children with educational inclinations gobble up discretionary income. These demographics typically have the greatest life insurance needs.

So as adult children decouple, 50-somethings eye empty-nesthood, a drastic reduction in household expenses and peaking household income. This gives them -- maybe you -- a chance to take stock of what you've been able to accumulate as retirement savings and set a course for financial independence.

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