Life insurance can provide important benefits for you and your loved ones, including helping your loved ones pay off debt, providing living benefits or even funding your retirement with its cash value. However, buying or keeping a policy isn’t the right choice for everyone, so consider the reasons for keeping a policy and how you might use it before or after you reach the golden years.
Is life insurance necessary after I retire?
Your decision to change your life insurance coverage or buy another policy depends on your financial health, the type of policy you have and your personal needs. Consider how much money you have for retirement with your financial responsibilities, including how you plan to pay for medical bills and professional care as you get older.
However, several situations might dictate whether you need life insurance after retirement:
- You’re paying off debt like a mortgage or business loan. You may not want to burden your loved ones with debt.
- Have dependent children. You could set up a trust to manage payouts for a child with special needs or any child who needs your financial support.
- Support your spouse. If your spouse relies on you for financial support or stands to lose retirement income when you die, life insurance can fill the loss.
- Are planning your will and estate. Life insurance can help you leave an inheritance to loved ones. Also, if you own assets worth millions of dollars, you might want life insurance to pay taxes on your estate. This can help loved ones use your estate as an inheritance, rather than sell it to pay taxes or debt.
- Want to cover your funeral costs. To pay for your own burial, unpaid medical bills and other end-of-life expenses, a life policy can ease that burden on your family.
How to compare life insurance for retirement
When you’re shopping around for a policy, keep these tips in mind:
- Get multiple quotes. Any life insurance policy you choose must be affordable throughout retirement. Make sure you can comfortably pay your premiums and compare quotes from multiple insurers to get the best value for your money.
- Compare cost and benefits. Cost is always an important consideration when buying insurance, but it shouldn’t be the only one. Remember to compare life insurance quotes along with the features and benefits each policy offers. This can help you find the best value for money.
- Get expert advice. An experienced insurance broker can help you assess your coverage needs, compare a variety of policy options and find the policy that’s right for your situation.
How much life insurance costs after retirement
Life insurance companies reserve their best rates for young, healthy applicants — so you’ll likely be charged higher rates as a senior. The tables below show how much you can expect to pay for coverage before and after you retire by coverage amount.
| Age | Gender | $250,000 coverage | $500,000 coverage | $1,000,000 coverage |
|---|---|---|---|---|
| 56 | Man | $53.16 | $93.88 | $181.39 |
| 56 | Woman | $40.25 | $64.43 | $127.82 |
| 57 | Man | $57.91 | $103.78 | $201.18 |
| 57 | Woman | $42.21 | $70.18 | $141.61 |
| 58 | Man | $68.66 | $121.55 | $223.36 |
| 58 | Woman | $42.21 | $85.35 | $146.31 |
| 59 | Man | $75.92 | $135.99 | $250.66 |
| 59 | Woman | $45.84 | $85.30 | $162.71 |
| 60 | Man | $83.41 | $150.29 | $280.37 |
| 60 | Woman | $52.02 | $97.66 | $186.15 |
| 61 | Man | $92.88 | $168.20 | $311.44 |
| 61 | Woman | $58.65 | $109.14 | $206.93 |
| 62 | Man | $103.66 | $189.64 | $347.75 |
| 62 | Woman | $63.92 | $121.46 | $230.12 |
| 63 | Man | $106.42 | $206.46 | $390.74 |
| 63 | Woman | $80.55 | $141.76 | $277.51 |
| 64 | Man | $120.36 | $234.34 | $436.68 |
| 64 | Woman | $90.24 | $159.68 | $313.36 |
| 65 | Man | $135.78 | $265.20 | $487.38 |
| 65 | Woman | $100.81 | $177.16 | $348.32 |
| 66 | Man | $153.34 | $300.30 | $557.25 |
| 66 | Woman | $119.85 | $238.00 | $444.97 |
| 67 | Man | $168.43 | $330.48 | $636.44 |
| 67 | Woman | $135.79 | $260.95 | $490.87 |
| 68 | Man | $190.87 | $375.36 | $715.36 |
| 68 | Woman | $153.21 | $290.31 | $520.41 |
| 69 | Man | $218.39 | $430.40 | $836.79 |
| 69 | Woman | $172.69 | $321.85 | $594.36 |
| 70 | Man | $247.98 | $484.11 | $953.26 |
| 70 | Woman | $190.75 | $374.06 | $713.56 |
Types of life insurance to consider for retirement
If you decide that life insurance after retirement is the right option for you, these policies might be the right fit:
- Burial insurance. As you pay off your debts and your children become independent, you may end up only needing insurance that covers end of life expenses — such as medical and funeral costs. Coverage is capped at small amounts, like $50,000.
- Simplified issue life insurance. This policy skips the medical exam but requires you to fill out a health questionnaire. If you’re approved, you could get up t0 $100,00 in coverage that goes into effect within days.
Policy features to look for
Along with comparing policies, consider these features that may come as an extra cost:
- Cost-of-living rider. Some policies increase how much you’re insured for each year so it keeps pace with inflation. This is an important feature because it guarantees that the level of coverage you choose increases in line with the rising cost of living.
- Critical illness benefit rider. This add-on pays out a lump sum benefit if you suffer a covered critical illness, such as a stroke.
- Long-term-care rider. This rider allows you to pull money from your death benefit to pay for a nursing home or other care expenses if you’re diagnosed as chronically ill.
- Guaranteed insurability rider. Policies with this feature allow you to adjust coverage without having to take a medical exam.
How to use life insurance during retirement
You can use a life insurance policy in several ways to prepare for or fund your retirement with a permanent life policy.
When you take out whole, variable or universal life insurance, part of the premium goes to an investment account that becomes a cash asset over time. Once you’ve built enough cash value, you can use the money, but any loans or withdrawals are deducted from the death benefit.
- Borrow against your policy. You can borrow against your policy’s cash value without paying taxes, and for most policies that’s true even if you borrow more than the premiums you paid. However, the loan accrues interest.
- Withdraw up to the premiums paid. Policy withdrawals are considered a partial surrender of the cash value and are tax free until you reach the amount of premium you’ve paid. Withdrawals don’t accrue interest but do reduce the death benefit.
- Surrender the policy. You also could cancel the policy and collect its surrender value minus any fees. You pay the lowest fees if you’ve held the policy for 10 years or longer, but you forfeit the death benefit with this option.
- Living benefits. Many policies offer extra coverage — called riders — that let you use the death benefit while you’re alive, such as for long-term care or medical bills if you become terminally ill.
Tax and the cash value
Withdrawing the cash value of your policy has some tax advantages. Generally, cash-value withdrawals aren’t taxable up to your policy basis.
Your basis is the amount of premiums you’ve paid, minus any dividends earned or withdrawals you’ve made. If you exceed that basis, you’ll be taxed.
Bottom line
Retiring doesn’t mean you should abandon your life insurance, but you should evaluate what your loved ones need after you die. To find the policy that fits the next chapter of your life, check out our guide to life insurance and compare life insurance companies.
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