5 Reasons to Keep Your Life Insurance Policy After Retirement

5 Reasons You May Still Need Life Insurance

Life insurance may seem like an unnecessary expense after you retire, but there may be good reasons that policy.

Thinking about retiring soon? Besides deciding which pickleball club you want to join, you may have some bigger decisions to make, like whether to keep your life insurance. If your kids are grown and out of the house, you may wonder if you still need it.

Believe it or not, there are some reasons to consider keeping life insurance. In fact, many experts think retirees don’t use life insurance enough!

“During seminars, I’ll ask how many people let their life insurance go because the kids have grown up? The hands go up,” Chuck Czajka, CEO of Macro Money Concepts, a retirement planning firm in Stuart, Florida, told Kiplinger this past April. But Czajka, like many other financial experts, says life insurance can also be a really good retirement tool.

When life insurance makes sense

Not everyone needs to keep a life insurance policy in effect. If you have no debt and no beneficiaries who could really use the money, you might be better off spending those premium dollars on yourself.

But many people aren’t in that position. Here are some reasons you might want to hold onto that policy.

You’ve got financial dependents

Whether it’s your spouse, an adult child who has suffered a financial setback, or grandkids who need help paying for their college education, you may not want to leave them facing any sort of money struggles when you’re gone.

You may also want to keep your life insurance if you’re still working part time. After all, you do have some income coming in that other family members like your spouse may depend on. You will need a replacement for it.

You’ve got financial debt

Haven’t paid off your mortgage yet? If you die unexpectedly, you’ll want life insurance to kick in to cover the remaining costs. The same holds true if you’re still paying off a car loan or credit card debt.

You don’t have much of a nest egg

Financial experts recommend that you have half a year to a year’s income squirreled away to meet any expenses if you or your partner dies. You don’t want your loved ones scrambling to pay for burial costs, for example. If you don’t have that extra pool of cash set aside, life insurance can provide the resources to cover these expenses, often within a few weeks.

You want to provide something for your grandkids

A life insurance policy is actually a good way to pass on some wealth to future generations. It’s also tax free, so they won’t have to hire an accountant to figure out how much they owe to the IRS.  Just make sure your beneficiary designations (the people that you want your life insurance to go to) are up to date! This way, your loved ones won’t have any hassles collecting the proceeds once you’re gone.

You may need emergency funds

Some life insurance policies allow you to take out a loan from the policy’s cash value. Let’s say you need a new roof, pronto, but don’t have $30,000 lying around to spare. You may be able to borrow from your policy’s cash value and pay it back with interest. That can be a helpful option if you’re on a fixed income!

If your policy has a Living Needs Benefit, you may be able to use part of your insurance money if you end up in a nursing home. After all, you could live for another two to three decades after you retire, and if you end up with any chronic health condition, costs could really add up. In these cases, the death benefits are accelerated, so that they can help pay medical expenses.

Can you purchase life insurance after age 65?

If you never purchased life insurance, or yours expired, it’s not too late to get it. The only catch is that since you’re over age 65, it may be harder to pass a medical exam. The good news is some life insurance companies often offer no-exam life insurance. Here are some options:

Guaranteed issue policy

This is a permanent life insurance policy, which means it lasts for the rest of your life. A guaranteed issue policy doesn’t require a medical exam. Because of that, coverage amounts are usually lower, around $25,000. The average cost for $20,000 in coverage for a 70-year-old female is about $156 a month, according to Forbes Advisor.

Simplified issue policy

This is like a guaranteed issue policy but with a higher coverage amount and higher premium. You can get a simplified issue policy either as a term life (which means it expires after a certain amount of time, such as ten to twenty years) or as a permanent life policy. You will have to answer some questions about your health and lifestyle, but you don’t have to take a medical exam.

Burial insurance

If any sort of life insurance policy seems too pricey, you can purchase burial insurance. It will cover funeral expenses such as your burial plot, casket, funeral home services, and headstones or cremation services. It can also be used to pay any outstanding debts you have, like credit card or medical debt, or even mortgage bills.

Just remember, when it comes to life insurance, one size doesn’t fit all. It all depends on your individual situation.

Don’t forget about Medicare

While life insurance may be optional, good healthcare should never be. That’s why it’s important to be sure you’re getting the right coverage for your situation. Does your policy cover your doctors? Does it offer fitness and drug store benefits? What about dental or vision care? Learn more about your Medicare options and compare plans in your area with our easy-to-use Find a Plan tool.

Additional resources

Lynn Cicchelli is a writer with over 20 years' worth of experience creating healthy lifestyle content for both print and digital publications. Originally from New York, Lynn currently lives in Connecticut with her husband, stepson, and dog Indiana.


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