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You have worked almost your whole life, and you are finally creeping up on retirement. You can practically smell the ocean and feel the sand between your toes. But before you start celebrating all your hard work, you will want to make sure you have a plan for your retirement. Does this plan include owning life insurance after retirement?
Retiring is a great accomplishment and should be an enjoyable experience. That is why you need to plan out your retirement so there are no surprises.
Do you have people depending on your income? Are you retiring with debt? Will you still be working part-time through your retirement?
If you answered yes to any of these questions, we recommend purchasing a life insurance policy.
Now you may say, “I had life insurance through my work for all of these years. What happened to that?”
Does Your Work Cover Life Insurance Once You Are Retired?
Depending on your company’s coverage, the policy may terminate once you are finished working. In some cases, the coverage will extend for a period of time but slowly diminish.
Each situation is different, so we advise you to speak with your employer about your benefits and how they coordinate with your retirement planning. If you planned ahead and purchased an additional life insurance policy on top of the plan your employer offered to prepare for this situation, then you will still be covered by that policy.
If your policy does terminate once you retire and leave the company, then purchasing a life insurance policy may be on the to-do list before you retire.
How Much Does Life Insurance Cost for Retirees?
Life insurance companies create the pricing for your policy based on how high of a risk they see in your life. They analyze your age, health, profession, lifestyle, and even your driving record. Each of these factors contributes to your lifespan.
Life insurance companies will want to know what type of lifestyle you live. If you live life on the edge, it will cost more for them to insure you. They will want to know about your health and medical history, as diseases are a major cause of death.
However, the most heavily weighted factor besides health is your age. No one can live forever, and the older you get, the greater the chance of you dying becomes. For this reason, it is typically cheaper to get a life insurance policy while you are young and in good health. Some experts recommend getting life insurance by the age of 35.
This is when most people start a family and have people depending on their income. For many individuals, retirement is a major goal but is so far down the road most people don’t properly prepare for it. For most Americans, retirement comes between the ages of 60 to 65. With an average life expectancy of 78, you can assume how expensive it will be to get life insurance coverage.
Although it is not cost-effective to wait until retirement to purchase a life insurance policy, it can still be done.
Is Life Insurance for Seniors Worth the Cost?
If you retire debt free and are capable of living off your savings, you may not have a need for life insurance. However, if you retire but still have debt, a part-time job, and people depending on your income, life insurance is a must. Most people have been dreaming of drinking pina coladas on the beach after retirement since they were 30.
Although this does sound amazing, sitting on the beach every day and drinking can get boring after a while. This is why almost 30% of retirees work part-time. If you are working part-time to do a job you have always been curious about, then you may not need life insurance.
But if you are working part-time because you have people depending on your paycheck, then you should purchase a life insurance policy. If you pass away and the checks stop coming in, how would your family make ends meet? Life insurance covers you in these situations so you do not have to lose sleep.
Do I Need Life Insurance if I Have A Pension?
People in some professions are lucky enough to get a pension once they retire. This provides families with a portion of their annual salary for years to come. A pension can be collected in one lump sum or an income option. Receiving your pension in one lump sum gives you all of the money upfront once you retire.
This can be beneficial if you do not need the money right away, so you can roll it into an IRA without paying taxes. The income option offered to pension holders stretches these payments over a period of time to keep cash flow. You pay taxes on every monthly check you get, but this option is more common because it is more secure.
Pensions are an incredible benefit offered by companies to help make retirement easier for those who have worked hard. However, if you retire with your pension and you receive payment annually, your spouse or beneficiaries may only be entitled to a portion of the payment if you die.
Life insurance can be a good backup to replace this shortage of income just to be safe. That is why you want to identify all of the people depending on your income.
Reasons Why Retirees Need Life Insurance
Providing Financial Security for Your Family
Every family’s situation is different. Some parents retire with their children still living at home, while others help out their children financially after they move out.
A common theme among parents is to cosign a big purchase. These can range anywhere from a new car a house, or even student loans.
This gesture helps get their children approved for such actions but also puts their own well-being at risk. You will want to ensure that your child is more than capable of paying off such debts so they default on them if you pass away.
A life insurance policy helps cover this type of situation. Provide the funds that can cover these types of payments so your children do not have to stress over these situations.
A life insurance policy will help loved ones get through a tough time because they will be better off financially.
If you still have children living at home who depend on your income, it is important to have a plan in place if something were to happen. The last thing you want in a time of grieving is a financial problem for your loved ones. Life insurance is all about keeping your loved ones protected once you can no longer protect them.
Covering the Costs of Remaining Debts
Being in debt is another major reason to purchase a life insurance policy. Retiring without having your mortgage paid off is more common than you think. A lot of people like to settle down somewhere nice when they retire, which usually involves purchasing a new home. This is why more than one in three homeowners over the age of 65 are still making mortgage payments.
Paying off your mortgage before you retire should be taken very seriously. This is typically the largest purchase someone makes in their lifetime. Still having to pay this off without having a steady income can be a terrible blow to your retirement savings.
We strongly advise speaking with a financial adviser to develop a plan to get your finances in order before you retire. You need to keep in mind how your family would pay off such debts if you were to pass away. Leaving a burden like a mortgage payment is not something you should leave behind for your loved ones to deal with.
A life insurance policy can provide your loved ones with the funds they need to eliminate this payment.
Helping Your Family Handle Your Estate
From funeral arrangements to estate and inheritance taxes, life insurance is a great way to make sure that those you leave behind have enough to handle the costs of your passing. Estate planning needs to be meticulous, as it has an exorbitant amount of loopholes and guidelines to adhere to. When it comes to estate planning, we highly recommend speaking with a professional.
Funerals can cost anywhere from $10,000 to $20,000, and if you leave no liquid assets behind, your family might have to go through the hassle of sorting through and selling your non-liquid assets (property, stocks, jewelry, etc.), which can put a lot of unnecessary strain on your already grieving loved ones.
No matter what, it’s a good idea to take a serious look at your expenses before canceling a policy. If you do cancel and then discover that it’s still in your best interest to have a life insurance policy, you most probably won’t be able to recover your policy at your previous rate.
Consult a life insurance professional at Intramark today to find out if a post-retirement policy is right for you. You can also get started with an instant life insurance quote today.
What Types of Life Insurance Are Best for Retirees?
To go into depth about the best types of life insurance for retirees would take a long time and not really fit in very well with the theme of this article.
However, to help you get started on your research, the table below shows some popular life insurance policies among seniors, some benefits they have, and what companies are the best providers for those policies.
| Policy | Description | Our Favorite Companies |
|---|---|---|
| Term Life Insurance | Generally speaking, term life insurance becomes more expensive as you get older. Terms are usually available for 10-30 years in 5-year increments, but most life insurance providers only offer term life coverage through age 75. A few providers (like Mutual of Omaha) offer term life insurance coverage through age 85, and even 95. |
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| Permanent Life Insurance | Permanent life insurance offers permanent life coverage (until you die or reach age 100 or 122 in most cases, depending on the company). These policies can be broken down into many subtypes that each offer cash value accumulation, investment components, and varying types of premiums. |
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| Guaranteed Issue Life Insurance | This type of life insurance is best for people who need life insurance quickly or who are otherwise uninsurable because they are a very high risk. This type of insurance usually has limited coverage ($5,000 – $25,000, with some companies going as high as $100,000). No medical exam and no health questions are required, so everyone qualifies for coverage. |
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| Simplified Issue Life Insurance | This type of life insurance is a step up from guaranteed issue. It is also a type of no-medical-exam life insurance policy, but there are some health-related questions asked to assess risk and make sure the applicant is insurable. This coverage is also usually limited to the same amounts as guaranteed-issue, and the waiting time for approval can be a bit longer. Naturally, simplified issue life insurance rates for seniors are more affordable than guaranteed-issue. |
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| Joint Life Insurance | This type of life insurance policy covers both spouses with the same coverage under one policy for one monthly premium. Both term and whole-life policies are available. There is second-to-die life insurance which provides a death benefit upon the death of the second spouse, and first-to-die life insurance, which provides a death benefit upon the death of the first spouse. |
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| Final Expense Insurance | Final expense insurance is meant to cover the immediate costs after your death, such as funeral expenses and remaining debts. This can come in the form of guaranteed or simplified issue life insurance, which are both often called burial insurance. These policies have no medical exam and usually go up to $50,000 in coverage, with some companies offering even more burial insurance coverage for seniors. |
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Feel free to follow any of the links in the chart to learn more about the various types of life insurance for retirees and the life insurance companies we have listed.
Finding the Best Life Insurance Rates for Retirees
When it comes to answering the question, Do I need life insurance now that I am retired?, you want to take the time to consider a number of factors, such as who is dependent on your income and what type of debts you have remaining.
Due to the large investment that life insurance is, and the number of options on the market, you want to be sure that the life insurance policy you choose is the best for you and your family.
The easiest way to ensure that you are choosing the best life insurance coverage as a retiree is to speak with an independent life insurance agent who can compare rates and policies from dozens of companies at once.
Our agents work with each client directly to identify their specific needs and help them find a policy that best suits them. Give us a call today, or get instant life insurance quotes for retirees by using our online quoting engine!
