If you’ve had life insurance for most of your life, it can be difficult to decide whether to keep it after you retire. Unfortunately, if you’ve relied on your employer life insurance, then to get life insurance during retirement can be a little harder as this is taken away. Having said that, it’s important to recognise whether you really need life insurance during retirement or if it’s time to go without.
If you’ve paid into a policy you’ll whole life, it can be hard to just let it go without payment. However, you could be saving yourself money every month leaving you with more income during retirement.
You have a whole life insurance policy
There’s no easy answer really on whether you need life insurance during retirement or not. It all depends on your individual needs and savings. If you’ve already got a whole life policy, you may want to consider whether you still need it.
People often take out a whole life policy in order to guarantee a payout to their family after their death, no matter when it may be. Therefore, you don’t want to waste years of investment and not have the money left to give your family. If they premiums start to become unaffordable, you can borrow against your policy. Provided that you’re careful with the amounts, it can enable you to pay for your premiums during retirement. You’ll then be able to have the rest of the amount left to pass on to your family.
When your term life insurance is ending
If your term life insurance is ending or coming to an end, you may still need your life insurance. If you need life insurance during retirement, then you may want to be careful about price hikes. Keeping the same policy can be an option, but insurance companies will charge you significantly more in premiums for the same type of cover.
In the case that you’ve suffered from a serious illness after taking your original policy out, keeping your current life insurance may be beneficial. Bear in mind that life insurance premiums are based on age and health. Therefore, if you’re relatively healthy shopping around and comparing prices may be worth your while.
It is important, however, to make sure you really need life insurance first. Before you go ahead and spend unnecessary money on a new policy.
Are you still earning an income?
Some people choose after retirement to take a part-time role on or work in a different role to replace income. In addition to this, you may have income in the form of benefits that help you to meet payments each month. It may mean that your partner won’t be able to meet bill payments in the event of your death because they don’t have access to this money.
In addition to this, partners often don’t receive the full amount of pension from their partner. Instead, they will get a percentage and will have significantly less money to live on.
To live in the same house with less money could cause problems. Therefore, your partner may have to move after your death. In this circumstance, it may be beneficial to take out a little bit of life insurance. This can help to cover the loss of income for your partner after your death.
Do you still have debts?
Ideally, you’ll want to reach retirement age debt free. However, this isn’t always the case. Around 30% of homeowners age 65 and older still carry a mortgage, and around 21% of retirees of 75 were still making house payments in 2011.
These days, people are buying houses later and later on in life. Therefore, it’s more likely that the mortgage payments could continue past retirement age.
In addition to this, it has been predicted that student loan debt is going to increasingly become a problem for retirees. This is down to co-signing debts as well as the remaining loans that they themselves will be paying off.
If you still have debts, then it may be beneficial to continue your life insurance policy or take out a new term to make sure that these debts aren’t passed on to your family. It can ensure that they are all paid off, rather than taking it out of your estate.
When you have dependants
If you have no children, or children that are self-sufficient then you may not require life insurance. However, if you have children still living at home, then life insurance may help provide them with a security net.
Similarly, if your spouse needs caring for, or they will lose a substantial income if you pass away, then life insurance can help to bridge the gap. It can help any dependants to maintain their standard of living, keep their home and gives them time to get on their feet.
Your estate is over £325,000
If you have considerable assets that will fall into your estate, your family are likely to pay a substantial amount of tax. By placing a life insurance policy into a trust, the payout is tax-free. Therefore, you can use the money to counteract the tax paid on the estate.
In this circumstance, your family will be able to receive more out of the estate. They can then use this money to pay off any debts, the mortgage or even just to help them maintain their lifestyle.
You want to enjoy your retirement
When you’ve been working most of your life, you’ll be looking forward to retirement. All that hard-earned pension fund is now available to spend. If you have more than enough to pay the bills and live off, then you may want to enjoy your time off.
However, if you spend all your retirement money, there won’t be any left for your family. Therefore, if you still want to pass on a legacy, paying for life insurance during retirement can help. It enables you to enjoy your retirement and leave money behind for your family as a gift. They could also use some of the money to pay for funeral expenses.
You would like to support a charity
If you believe in a cause and want to leave some money behind to support it, then you can take out life insurance to pay towards a charity. It can be any amount that you choose, and you can pick the charity as a beneficiary. They will then receive the payout from your life insurance.
When you don’t need life insurance during retirement
If you have no income to replace, very little debt and a self-sufficient family, then you may not need life insurance. There’s no point paying for something that you no longer need. If you want advice on whether you need life insurance during retirement, then you can always speak to an insurance advisor. Comparing policies can be a great way to see if life insurance is affordable and to see if it’s the right fit for you.