What Happens to Your Life Insurance When You Retire?

When you retire, you have the option of continuing to pay for life insurance while you were working or purchasing your policy that is not at all connected to your employer. For most people, the type of group life insurance (offered at work) that costs almost nothing while working becomes too expensive to continue after you retire. Insurance companies have different policies for you to work on, which you should look for years before putting in your last day of work.

You should be aware of these things that can affect your life as a policyholder. It is always worth remembering that you actually only get one shot at planning for your retirement. Once you stop working or manage your business, you should be able to enjoy your freedom. One way to do this is to maximize the benefits you can get from life insurance during your retired years.

Life insurance, although not required, is one of the best and most stable assets that you can use to store cash during and for your retirement. Apart from the fact that it provides security for your family when you are not around, you can enjoy the benefits provided by your cash value when you are staying.

Life insurance companies have now become a lot more creative and are making policies that provide basic death benefit protection with the ability to provide competitive returns on your cash with unparalleled stability. Now you have more options than paying a large premium to insure your death benefit. If you are still hesitating and you want to know more about why you can think about life insurance after retiring, here are some things to consider.

How long should you get life insurance?

Life insurance, as the name suggests, assures that when you and your family are no longer here, you are financially secure. The most popular life insurance policies sold today are. You buy a term policy for a predefined term, usually 10, 20 or 30 years. After the period ends, the policy closes. This can be a good thing for you when you are younger and have a really tight budget as most term insurance is very affordable.

But if you are retired, you are probably looking at some kind of life insurance coverage that will last until you die, not for the next 10 or 20 years. Therefore, what we have found that the best option for most retirees is permanent life insurance. In fact, there are two main types of permanent policy – whole life insurance and universal life insurance.

If you want to read more about three types of life insurance, read this article.

The key to buying permanent life insurance (let’s talk specifically about participating in whole life insurance) is to get it long before you retire. If you buy whole life insurance when you are younger, you will find that it is much more affordable and if the policy is designed correctly the death benefit will increase over time. This is why when you plan to retire at age 65 or younger, it is best to do so.

Starting a policy when you are younger and when you are older will change what you are able to afford. When you are younger, you pay a lower premium for the same death benefit than when you were older. See this example from our whole life insurance calculator …

Brad is 30 years old and is married to Jenny. They had their first child and Brad was thinking about his life insurance. Right now, he has a death benefit that is 2x his annual salary at work which is about $ 160,000 in total death benefit. The cost in the policy is $ 12 / month. He thinks he would like to add $ 500,000 to whole life insurance. When he goes to our calculator, this is what he enters:

Enter your details in the whole life insurance calculator
Here’s an estimate of what Brad will pay. He now buys the policy at age 30:

Whole life calculator results for 30 year old male

If, on the other hand, Brad decides to wait and wants to buy the same whole life insurance policy when he is 55, then the result will be (almost):

The cost of waiting here means he will pay approximately 3x the annual premium for the same death benefit, much less in cash value to add additional liquidity to retirement, and his death benefit at age 65 ( Retirement age) is less than about $ 300k if he starts his policy right now at age 30. Waiting is expensive and can be detrimental to your ability to spend life insurance in retirement.

Do I need coverage if I have a pension?

The second thing is to get insurance when you already have a pension. Some consider their pension to be their most important retirement benefit. While this is not a bad thing, the pension may not be enough for you during your retirement.

What if you retire at age 65 and you are 95? If you still have to offer your support for 30 years, it will happen. Your pension can certainly provide a good, steady income, but it is unlikely that you want to enjoy your retired years. You still need an additional resource (more income) to help create a solid retirement plan. Cash value life insurance can add to that extra retirement income that allows you to enjoy yourself.

The good thing about having life insurance is that it serves as an additional source of money when you retire. You may have plans to travel, build a retirement home, or start a small business. Cash value accumulation in your whole life insurance or indexed universal life insurance is a ready source of available capital when you are ready to make your move. More often than not, a pension is only good as a monthly allowance. If you want to do other work even after retiring, you will not get enough from it.

If you are 65 or older

It is better late than never. It is advisable to get your life insurance even if you are 65 or old. Life insurance is worth it as long as you can pay the premium. The best advice we can give him is to adjust your expectations a bit. When you are 65 for $ 100 / month, you do not go to buy a $ 500,000 whole life policy.

But when you are 65 years old, you may be able to buy a $ 20,000 whole life policy for $ 100 / month. Certainly, this will not provide you with any additional benefits, but will ensure that you have the money to take care of your funeral expenses and perhaps to settle some small debts that may help your spouse. Just make sure that you understand the terms and conditions of the policy you are buying and you can comfortably bear the premium going forward.

Wrap up

The best time to get life insurance is now, whether you are small or big. As you age, it becomes difficult to find a policy that suits your budget by reducing challenges and policy costs. If you now have the opportunity to buy a policy that can provide you with a good death benefit, decent cash value accumulation and an affordable premium when you retire, don’t wait. As long as you are around you, you will continue to enjoy the benefits of your policy in the retirement years.