Retirement-Age Life Insurance: How Helpful Is It?


Speaking very generally, life insurance is usually taken out to make sure that dependents who are supported by your income will be protected in the event of your death. You may think that your need for life insurance goes away – or is at least significantly reduced – once your children are fully grown. For many retirees, though, life insurance still has a significant role to play. Consider these facts:

  • A cash value policy can cover the unexpected expenses or losses from an investment-based retirement plan.
  • A life insurance policy can provide extended support for dependents or spouses who cannot draw on your pension after you are gone.
  • Existing life insurance policies give you a greater range of financial possibilities during your retirement years.

Generally, life insurance is purchased to protect a family from the sudden loss of income that would come with the death of the primary breadwinner(s). This situation is common across a wide range of ages, from the early twenties to the late sixties. Once your kids are grown, the mortgage is nearly paid off, and you’ve almost retired yourself, is there any further need for life insurance?

Advantages Of Life Insurance In Retirement:

Estate Planning: Life insurance can serve as an effective way to organize your estate, especially if you have significant assets to think about. Death benefits from a life insurance policy can amplify the total value of your property and make it easier for heirs to deal with taxes without selling off assets.

Pension Replacement: If a pension is a major part of your retirement income and there are no provisions in place to allow your dependents to access those funds after you die, life insurance can provide the needed financial support when you’re gone.

Investment Security: More and more retirees rely on stock market investments to provide the financial security they’re looking for in retirement. Life insurance with a cash value can serve as an emergency bolster against economic adversity if you have to contend with a severe market downturn after your retirement.

Emergency Protection: You can deal with a range of different financial difficulties by either taking a loan against your life insurance policy or withdrawing some of its value.

Potential Drawbacks of Life Insurance In Retirement

Buying new life insurance close to your retirement years deserves careful thought. Here are some issues that could come up:

High Costs:

Insurers are hoping to recoup the cost of your death benefits from the premiums you pay while you’re alive. The older you are, the fewer premium payments the insurer can expect from you. That translates into very pricey policies when you take out policies in your 60s.

Fees For Cash Value Policies:

Term life insurance operates according to very straightforward principles, with relatively fixed benefits and level premiums. Whole and variable life insurance and other policies with a cash value are more complex, often including investments as well as traditional insurance. They can come with additional fees and commissions that increase their cost significantly.

Assets Serve a Similar Purpose:

If your retirement plans rely on income generated by a range of different investments and assets (stocks, bonds, funds, savings accounts, IRAs, property, etc.), simply transferring the ownership of these assets in your will can deliver the income protection you might otherwise take out life insurance to provide.

Final Thoughts

There are some lifestyle factors that your premium depends on. Unless you’re modifying policies that you already hold, it can get very expensive to get life insurance close to your retirement years. Assess the benefits delivered by life insurance carefully and decide if the benefits it offers outweigh the potential drawbacks.


John Orlando