Your life insurance needs depend on all your life circumstances, not merely your age. Life insurance is not for you but for those you leave behind. The number of dependents you have, your marital status, and the size of your estate are three of the most important factors in determining whether or not you should drop life insurance.
       If you have dependents (young children, elderly parents, or a disabled dependent) you need life insurance to make certain they're taken care of when you're gone. If you're retired and your spouse cannot live on the pension, Social Security, and savings you'll leave behind, you need life insurance.
       Single people with no dependents probably don't need life insurance. Neither do healthy, empty-nesters with a paid-up mortgage and combined assets of less than $1.2 million. If your estate is larger, life insurance may be helpful to pay estate taxes. If you wish to leave a legacy to a specific person or charity, you may wish to use life insurance to fund it, naming the beneficiary of your policy. Tax lawyers often advise this because it means the legacy won't end up in court or go to some distant relative you've never met. You should consult your own advisers about these matters.
       If, after evaluating your circumstances, you decide to drop a term life insurance policy, all you need to do is cancel it. If you have a cash-value life insurance policy, consult with your tax adviser before cashing in the policy. You'll be liable for the difference between what you receive when you cash in the policy (surrender value) and the total premiums you've paid. A tax adviser can suggest options to minimize any tax liability.

Be cautious when insurance agents suggest you switch to a new policy. Agents may call it "replacement," but often they're practicing what's called "churning," the unnecessary switching of policies to generate commissions for the agent. In 1996, the Consumer Federation of America estimated policy switching cost consumers more than $6 billion annually.
      If an agent offers you a replacement policy, claiming you can have it for little or no extra cost, the agent is not being truthful.
       A recent survey by Money magazine found "too little knowledge and too much trust makes consumers relatively easy prey for agents peddling insurance of dubious value." Although more than two-thirds of the survey respondents considered themselves savvy about life insurance policies, less than 40% could accurately define different types of life policies.
      Older people often are the targets and victims of churning, especially if they have a small cash-value policy they've been paying on for many years.
       Have an independent third-party evaluate whether or not it's wise for you to switch policies. A fee-only financial planner may charge several hundred dollars for this service, but the advice could prevent you from losing thousands of dollars.
       In addition to churning, insurance agents may try to sell life insurance to people close to retirement age and eligible for a pension as part of a "pension maximization" plan. It may sound good, but you could be trading a sure thing for an unknown. Consumer advocates suggest you get an appraisal of the proposal from an independent third party before you sign up for a "pension maximization" plan.

As long as you have dependents, you may want to carry life insurance to provide for them when you're gone. This may not be necessary, however, if you have a substantial estate and believe its assets will be sufficient to provide for their care, upbringing, or education. Consumer finance books and magazines often provide work sheets you can use to determine how much life insurance you need. "Making the Most of Your Money" (ISBN 0-671-65952-9), by Jane Bryant Quinn, has such a work sheet, and a wealth of other information about life insurance.

The sole purpose of term life insurance is to pay someone when you die. Cash-value life insurance or whole life insurance has two parts--a life insurance policy and a savings or investment account. You should consider it a long-term investment. If you

1. Expect to live for a long time after you retire, at least 10 years or more;
2. Have a substantial retirement income; and
3. Have exhausted all the other tax-deferred savings plans available (for instance company 401(k) plans and deductible individual retirement accounts), cash-value insurance may appeal to you. Otherwise term insurance probably is your best choice. Remember, because term insurance premiums are less expensive than those for cash-value policies, you can get more insurance coverage by buying term insurance.

If you're covered by a group term life insurance policy at work, check with your employee benefits or human resource department before you retire to learn what happens to your coverage when you retire. In some instances, you may keep your group life insurance coverage. Or, you may have a conversion option, permitting you to replace your group coverage with any individual policy issued by the same insurance company after you retire. Still, a conversion policy may not always be the best policy available. If your life circumstances necessitate carrying life insurance after you retire, make certain you get appropriate coverage at the lowest possible premium. Shop and compare.

If you and your spouse are the sole owners of the business, you or your company probably should purchase a policy on each of your lives to cover estate taxes and any debts for which you've signed personally. If you and your spouse have business partners who are co-owners, you probably should talk to your lawyer about establishing a buy/sell agreement, funded by life and disability insurance. If a business partner dies or becomes disabled, this agreement allows the remaining partner(s) to buy that person's share of the business.

The federal unified credit against estate tax has the effect of exempting up to $600,000 from estate taxes. If you're single and your assets are less than $600,000, or if you and your spouse have combined assets of less than $1.2 million, you don't need life insurance to pay estate taxes. But, even then, there still could be significant estate taxes without proper property ownership and a will that coordinates passing on the $1.2 million tax-free to the next generation. And, if your estate is more and your investments are illiquid--for example, real estate or a business--a life insurance policy may help pay your estate taxes. Consult your tax adviser.