Do You Need Life Insurance In Retirement?
Most of us understand the importance of life insurance, particularly in the middle of life.
For example, if you’re a working dad and your wife and kids rely on your income, odds are that you have some kind of life insurance to protect your family just in case.
But what about when you’re retired? Do you need life insurance then?
Well, it turns out that income replacement is only one reason individuals buy life insurance – and there are actually a few other reasons that retirees might consider life insurance.
Do I Need Life Insurance After 60?
Whether you’re in retirement or not, we get many individuals over the age of 60 who are curious about life insurance. Why would you need life insurance after the age of 60 if there’s no one relying on your income?
Well, there are four main reasons people buy life insurance after age 60, and especially after retirement:
- Life insurance can cover funeral and end-of-life costs.
- Life insurance can pay off any outstanding debt.
- Life insurance can leave a legacy.
- Life insurance can help cover long-term care costs.
In essence, these are 4 excellent reasons to get life insurance after 60 or once you’re retired. Whether or not you need life insurance after 60 will depend on how you respond to each one of these reasons.
Let’s go over them in detail to help you understand whether life insurance in retirement may be a good option for you.
Four Reasons You May Want Life Insurance In Retirement
1. A final expense life insurance policy will pay for your funeral and other end-of-life costs, which takes that financial burden off of your family members and loved ones.
There is a type of life insurance that is called final expense insurance – also sometimes known as burial insurance – that is used to pay for your funeral and any other final expenses you might have.
Many individuals choose to get a final expense insurance policy to make sure that their kids or other loved ones don’t get stuck with a big funeral bill. That’s not exactly what we want to be known for, after all!
Funerals are probably more expensive than you think, with the national median cost for a very basic one costing around $7,000. In reality, many funerals with modest arrangements cost more like $10,000. These prices also vary depending on which state you live in, and they’ve been rising steadily over time.
There are also other end-of-life costs to consider, such as medical bills, any credit card debt, legal expenses like probate, and so on. It turns out that dying can be pretty pricey.
The beauty of a final expense policy is that once the insurance company confirms your death, they immediately send your death benefit to your beneficiary. That person can choose how to spend the money, so if they need $10,000 for your funeral, and $2,000 for your credit card debt, they can take care of that right away.
They can even save a few hundred dollars for a beautiful flower arrangement at the service. There’s flexibility and security in a final expense insurance plan, and they’re very affordable. Even if you’re very unhealthy, there are final expense policies that don’t have any health questions, which means virtually anyone can get it.
A final expense life insurance policy is an excellent plan to have in retirement.
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2. Any outstanding debt, like a mortgage, a car loan, or credit cards, can be covered by a modest life insurance policy.
If you pass away with debt, it doesn’t disappear – it’ll get rerouted to your family.
Many individuals will keep a permanent life insurance policy – which means it never expires – to cover any debts they have.
Debts do change, and the great thing about life insurance is that you do have the ability to make adjustments if you need to. For example, if you take on more debt, you can adjust your benefit accordingly. The same goes for if you pay off a lot of debt – you can lower your death benefit to match.
Some individuals will use a final expense life insurance policy to cover any debt, but other permanent life insurances can also work. When you work with one of our agents here at Medicare Allies, we’ll help you determine which type of life insurance will offer the best benefit for the most competitive price.
Just because you’re in retirement doesn’t mean you don’t have debt, and a great way to cover it is to maintain a life insurance policy.
3. You can leave an inheritance to your children or even a substantial gift to a charity or church – life insurance gives you an opportunity to leave a legacy.
If you don’t have any outstanding debt and perhaps prepaid for your funeral or already have savings set aside for your funeral, life insurance can give you the chance to leave a legacy.
Many individuals like the idea of leaving money for their kids and grandkids, and it can often be a nice surprise in an otherwise mournful time.
There are different permanent life insurance policies, and sometimes, your savings can build cash value and offer a better death benefit. This means that it generally makes more financial sense to leave a legacy for your children through a life insurance policy versus just savings in the bank.
Additionally, you can use life insurance to leave a donation to a charity or a church that’s close to your heart. This is a safe way to make sure the funds go where you want them to, even when you’re not here to orchestrate it.
4. A life insurance policy can be a way to insure yourself against expensive long-term care stays.
You heard that right! There are life insurance policies that actually have two functions:
- They leave money for your beneficiaries when you die
- They give you the option to pull that money out early to cover long-term care if you need it
These are called Life Insurance policies with a Long-Term Care Rider.
Many individuals prefer this hybrid insurance product over traditional Long-Term Care Insurance, because you know you’re going to use it. Your loved ones will get the death benefit when you pass, but if you do end up in a nursing home or with the need for extra care, you can pull a percentage of your death benefit out early to help.
Long-term care is one of the most devastating costs that arise after retirement, and the fact that you can use life insurance to protect your assets is pretty awesome if you ask us!
How Long Do I Need Life Insurance?
When you’re past age 60 or are entering retirement, we almost always recommend a permanent life insurance policy. This means the policy never expires – it stays in place until you die.
This means that you won’t have to worry about how long you need life insurance – you can have the peace of mind that it’s not going anywhere.
On the other hand, if there is a reason for you to need a term life insurance policy, you will need to determine how long you need it.
It’s rare for seniors to need term insurance, but here are a few examples:
- You just bought a house and want to make sure the mortgage would be paid for if something happened to you.
- Your spouse relies on your income for the time being, and if you passed, they would not be able to maintain their current standard of living.
In these circumstances, it might make sense to look into term life insurance, and you’d want to make sure you were covered for the appropriate length of time. For example, you’d want your life insurance to last until the mortgage is paid for.
Again, we don’t generally recommend a term life insurance for anyone over the age of 60, but you can contact us to receive a personalized recommendation.
Keeping Life Insurance After Retirement
As you can see, just because you’re retired doesn't mean you don’t need life insurance anymore! Consider those four reasons you might need life insurance, and double check with one of our licensed agents here at Medicare Allies.
We do not recommend insurance that you don’t need, so don’t hesitate to get an expert’s opinion before making up your mind.
Our team of dedicated, licensed agents can help you as little or as much as you need. Whether it’s answering a few questions about Medicare or creating a comprehensive Medicare Planner with you, we are your Medicare Allies.