If your mortgage is paid off, your kids are financially independent, and retirement savings cover future needs, ongoing life insurance premiums may no longer make sense. At age 62, policies often become expensive habits rather than true financial protection. The key is to run the numbers – spousal income, Social Security survivor benefits, retirement savings, and healthcare costs – before deciding whether to cancel, reduce, or convert coverage.

• Purpose check: Life insurance is only needed if survivors face a financial shortfall. No dependents, debts, or estate-tax exposure means the policy may have served its purpose.
• Policy type matters: Term insurance ends with no cash value; permanent policies may offer cash surrender, conversion, or life-settlement value.
• Run survivor math: Consider Social Security survivor benefits, $330,000 average retirement healthcare costs, and $8K–$10K in funeral expenses before dropping coverage.
• Decision tool: Red flags to keep coverage include >25% income loss for a spouse, big debts, or estate-tax exposure (federal exemption $13.61M in 2024). Green lights include secure retirement income, no dependents, and premiums consuming <1% of budget.
• Alternatives: Downsizing face amount, using cash value for a paid-up policy, or selling a policy in the life-settlement market can balance protection and affordability.

For more than thirty years you’ve paid the premiums. They protected a young family, secured a mortgage, and bought peace of mind. Now the kids are independent, the house is free and clear, and those same premiums climb higher every year. At some point life insurance stops being a necessity and starts being an expensive habit. But cancelling too soon can expose a surviving spouse to unexpected risks. Here’s the kind of deep analysis financial planners use when advising clients in this exact situation.

Start With the Purpose, Not the Policy

Life insurance is not an investment, it’s a risk-transfer tool. Its only mission is to create cash for survivors who would otherwise face a financial shortfall. When there is no longer a shortfall to insure, no dependent income need, no big debts, no estate-tax problem, the policy has already served its purpose.

According to the 2024 LIMRA Insurance Barometer Study, cost is one of the main barriers to life insurance, with 72% of Americans overestimating prices. About 22% of policyholders feel underinsured, showing many keep coverage out of caution rather than a clear financial need. Premiums do rise sharply in the early sixties, but LIMRA does not state that “peace of mind” is the top reason people over 60 keep policies, nor that modest new term coverage at age 62 typically costs $2,000–$4,000 annually.

Know Your Contract Cold

The next step is to examine exactly what you own.

Why it matters: a permanent policy with large cash value is an asset. Cancelling without evaluating surrender value, loan options, or settlement offers can mean walking away from thousands of dollars.

New: If you own term coverage, check whether it’s convertible to permanent insurance without new medical underwriting and note the conversion deadline. If health has declined, a conversion, even to a smaller paid-up amount, can preserve insurability you may not be able to replace later.

Run the Survivor Math

Even if the mortgage is gone, your spouse may still depend on your Social Security survivor benefits.

• Survivor benefits: A surviving spouse typically receives one Social Security benefit (the higher of the two). If your death cuts total household income by 25–50%, life insurance can bridge that gap.

• Healthcare costs: The average 65-year-old couple will need roughly $330,000 after tax for lifetime medical expenses (Fidelity 2024 estimate).

• Final expenses: Funerals average $8,000–$10,000 nationwide.

If your spouse could comfortably cover these with existing savings and retirement income, insurance is probably redundant.

The Decision Tool

Fill in your own numbers to see which way the scale tilts.

When most of your checkmarks land in the Green Light column, the financial case for keeping coverage disappears.

Options Besides an On/Off Switch

• Reduce the face amount to cut premiums while keeping some protection.

• Paid-up policy: use cash value to maintain a smaller death benefit with no further premiums.

• Life settlement: sell a permanent policy to a third party for more than its surrender value (but less than the death benefit); investors continue paying the premiums.

Each option has tax implications, so a fee-only financial planner should run the numbers first.

The Emotional Side

Many people keep insurance long after it’s needed because it feels reckless to drop something bought to protect loved ones. Recognize that cancelling isn’t selfish; it’s acknowledging that you’ve already fulfilled the responsibility you took on decades ago.

New: Consider a family conversation and an annual “survivor drill.” Document which income sources continue, which stop, and how cash needs would be met. Revisit the plan each year; if the income gap keeps shrinking while premiums rise, that’s your cue to downsize or exit.

Bottom Line

At 62, with a paid-off house and grown children, the burden of proof flips. Unless your spouse would suffer a major income loss, or you face estate-tax issues, the default strategy is to cancel or downsize coverage and redirect premiums toward retirement savings, travel, or long-term-care planning. Work the decision table with real numbers, review cash-value options and conversion deadlines, and let the math, rather than habit, determine whether your policy still earns its keep.