Do you need life insurance after you retire? What life insurance products for retirement are there?
Once you retire, you may have many questions surrounding life insurance.
- Do you need life insurance after you retire?
- Can you use your life insurance policy cash value while you're alive?
- If you don't yet have life insurance, what insurance products for retirement are available?
Life insurance can help at any point in your life. Even if you retire with solid savings and minimal expenses, health issues may pop up. Or, you may want to leave a meaningful inheritance for loved ones through a life insurance policy.
Whether you already have a policy or you don't yet have one, use this guide for navigating life insurance in retirement.
If You Don't Have Life Insurance in Retirement, Do You Need It?
If you have dependents who will struggle financially after you pass away, like a spouse or disabled adult child, then yes, life insurance can help you. With life insurance, you name beneficiaries who will be financially compensated when you die. This can help with costs like outstanding debts, funeral and burial expenses, daily living expenses or outstanding medical bills.
You'll also want life insurance if you have a high net worth or you own a growing business. In cases like these, your estate may be subject to estate taxes. A life insurance plan like a permanent life insurance policy enables you to keep your life insurance longer so your family can get cash to pay estate taxes and protect a business you own.
Another benefit of a permanent life insurance policy is that it builds up cash value, which you can withdraw tax-deferred funds from in retirement. If unexpected costs come up, you can use the cash value you've grown to cover them.
There are insurance products for retirement that are available if you don't have life insurance yet. One is Guaranteed Issue Whole Life Insurance. This type of life insurance doesn't require a medical exam or any health questions to be answered. You can get a policy with coverage of up to $25,000 to help with end-of-life costs your family might have to pay.
What Happens to a Work Life Insurance Policy After Retirement?
Typically, work-issued life insurance policies are no longer in effect once you leave a company. That includes retirement. That's why it's always recommended to get a personal life insurance policy in addition to any policy offered through work. You can lock in lower premiums the younger you are and the more optimal your health is.
If you lose your work policy and no longer have life insurance, you should look into a personal plan now. If you already have a personal plan like term life insurance, and you're coming up to the end of the term, you may think about rolling over your policy to a permanent life insurance policy.
What Should I Do with My Existing Life Insurance Policy?
If you have a life insurance policy and have now entered retirement, you may be wondering what to do with it.
- Keep paying premiums?
- Let it lapse?
- Purchase something new?
Before you make any changes to your existing life insurance policy, know that you are unlikely to lock in a lower rate if you decide to get a new policy. If you still have outstanding debt, you may want to keep your term life insurance so it provides your beneficiaries with funds if you pass on.
Another reason you might want to keep your term life insurance is if you still plan to work during retirement. If your spouse or another dependent will miss the income you're making in retirement, keeping term life insurance makes sense.
In some cases, you may want to change a term life policy to a permanent life insurance policy. One reason would be that you no longer need a large death benefit amount. For example, maybe your kids are grown up and out of the house, or your spouse is still working. A permanent life insurance policy with smaller death benefits and premiums that won't rise may be the right choice.
Can You Change Life Insurance Beneficiaries?
In retirement, the way you choose to use your life insurance policy payout may change. Maybe you've decided you want to allot a portion of funds to your favorite charity. Or, maybe your children's careers are taking off, and you want to change your primary beneficiary.
You have the power to change your life insurance beneficiaries whenever you want. Simply contact your life insurance company to do so.
Remember that it's a good idea to have a secondary beneficiary (and possible additional ones) in case you, the insured, and the primary beneficiary die at the same time. If you only have one beneficiary and that happens, the life insurance benefits would go to your estate, which would be subject to probate (court proceedings) if you don't have a revocable living trust in place.
Have Questions About Life Insurance in Retirement?
If you have any questions at all about what to do with life insurance in retirement, the friendly representatives at AIG Direct are here to help. Call 800-294-4544 to speak to our team today.