Learn and Plan | Should you get life insurance after you retire?
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Should you get life insurance after you retire?

Mar 25, 2024, 5:49:16 PM | Reading Time: 6 minutes

Life insurance can provide financial security and peace of mind at any age, but is coverage necessary after you retire? While you may no longer have a young family or dependents to take care of, there can be benefits to having life insurance as you enter retirement. Let’s take a look at life insurance for seniors and why it may be a good fit for the next phase of life.

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Life insurance for seniors

Purchasing life insurance coverage is typically less expensive the younger and healthier you are, so putting a plan in place as soon as possible is often a good idea. But for current or soon-to-be retirees who lack life insurance coverage, there can still be options as you age and ways to protect and provide for loved ones. For individuals who are 65 and older, they may be in a transition phase of still working and providing for their family, while also preparing for retirement. They may have life insurance through their employer, but they will likely lose that group coverage when they leave the workforce.

Taking out a life insurance policy can help reduce the financial impact of your passing on your spouse and children or allow them to set aside money for future expenses. Even though policies may cost more for older individuals, there are still affordable solutions available that can also offer additional benefits.

Benefits of life insurance for retirees

With the average funeral costing $7,848, many retirees may struggle to cover these expenses if a loved one dies, especially if they are on a fixed budget. Purchasing life insurance as a senior can help protect those left behind and prevent family members from having to cut into their own savings to cover final expenses. In addition to helping cover funerary costs, a death benefit can also be used for a variety of other purposes, including:

  • Helping pay outstanding medical expenses
  • Replacing lost income if insured was still working
  • Supplementing surviving spouse’s retirement income
  • Paying off mortgage or other debt
  • Assist with estate and inheritance taxes
  • Providing financial support to children or elderly parents
  • Leaving money to favorite charity

Many people could live 20 years or more after they retire, so along with living expenses, they could potentially face rising health care costs. Research shows that at age 65, households will incur, on average, $310,000 in health care spending over the remainder of their lives. A life insurance death benefit can help a surviving spouse cover health care costs or unexpected medical expenses. Plus, some life insurance policies also offer living benefits where the insured can access a portion of the proceeds if they become terminally ill or confined to a nursing home.

Life insurance plans for seniors

Whether a person is recently retired or nearing retirement, they’re likely revisiting their financial plan and preparing to transition into a new chapter. This can be a key time to re-evaluate life insurance options and see if coverage should be a part of their retirement plan. There are two types of life insurance: term and permanent coverage. Discussing financial needs with a financial professional can help determine if coverage is a good match and what kind would best meet your goals.

Term life insurance

Term life insurance offers coverage for a set period of time, typically between 10 to 30 years. If the insured passes away during the term, the beneficiary will receive the death benefit. This is often a more affordable option than permanent life insurance and can protect against financial hardship due to income loss, final expenses, or other retirement costs. Since term coverage is usually more cost-effective, it may provide greater financial flexibility if there are still larger expenses to pay off, like the mortgage.

Permanent life insurance

For those who want coverage for the remainder of their life, permanent life insurance may be a good choice. One type of permanent coverage is whole life insurance, which along with providing lifetime protection, it may build cash value that can be accessed for future use, like supplementing retirement income or covering an unexpected event. Many insurance companies offer plan options for seniors up until age 85, so it’s still possible to apply for coverage even if you’re older. Since premiums are commonly based on age and health when a person applies, permanent coverage may be more expensive for older adults than younger applicants.

  • Guaranteed issue life insurance is a type of whole life insurance that can be a good match for those who may have a difficult time qualifying for coverage. This option can be more expensive than term and whole life policies, but can put valuable coverage in place if a person has pre-existing health conditions. Oftentimes there is no medical exam or health questions on the application, meaning acceptance is guaranteed.

Preparing for the what ifs in retirement and finding ways to reduce financial uncertainty can help to make the golden years more enjoyable. Talking to your financial professional about your specific financial and health needs can help zero in on the life insurance option that could fit your personal situation. No matter your life stage, there’s no better day than today to protect loved ones and create a more financially secure future.