A common question retirees have is, “Do I need life insurance in retirement?” For many, the answer is no. However, just as you had your unique financial journey to retire, you’ll have your own journey throughout retirement to create a lasting legacy. That’s why you should consider your financial situation and goals before pulling the plug on your life insurance plan.
Types of Life Insurance
Typically, the purpose of life insurance is to cover any lost income when the policyholder passes prematurely. This coverage can be helpful for spouses and beneficiaries to navigate an already difficult situation. If you’re retired, however, there’s generally no income to be replaced.
Two common types of life insurance policies are:
Term Life Insurance Policies: These policies are typically a less expensive option and provide coverage for a set period, like 10 to 30 years. A death benefit is paid to the beneficiaries if the death of the insured occurs during the term period.
Cash Value Insurance Policies: This policy type accumulates value over your lifetime and pays a benefit to beneficiaries upon the death of the policyholder. This option is generally more expensive but includes three coverage types: whole life, variable life, and universal life.
Considerations Before Dropping Your Life Insurance
Before you cancel your life insurance, remember that decision should be tailored to your unique financial situation. Here are a few scenarios in which you may choose to keep your life insurance after retirement:
When you’re still paying on large loans: If you’re still working to pay off large loans like real estate deals, having a guaranteed level premium life insurance policy may be a good idea. Consider a policy with just enough coverage to pay off the loan to avoid over-insuring.
If you’re the parent of a child with disabilities: The cost of ongoing support and medical care can add up for children with disabilities. Some retirees choose to invest in a cash-value life insurance policy to help cover the projected expenses for their disabled children after they pass.
When you want to create a charitable legacy: Some retirees leave their life insurance as a gift to a charity or non-profit organization. If correctly structured, the death benefits paid to the foundation would be paid to charity of your choice and help you create a legacy that gives to a cause you are passionate about.
As a potential estate planning option: When considering estate planning, researching all options, including life insurance, may help streamline the process for your heirs. For example, cash-value policies can provide an immediate source of cash for your loved ones to pay funeral expenses without needing to liquefy other assets.
In certain instances, keeping your life insurance may make sense for your financial and personal situation. A financial planner can help break down the intricacies of your specific policy to help you make informed decisions to reach your unique goals.
Learn More about Larry Davis, Financial Advisor Near Rochester, MI
About Larry Davis, Financial Advisor Near Rochester Hills
Larry has been active in the financial planning field since 2004 and is the founder of Davis Capital Management. As a well-known financial planner in the Southeast Michigan area, he works primarily with small business owners, post-divorce planning, and people transitioning from their working years into retirement. Davis Capital Management is located in Shelby Twp, just minutes away from Rochester Hills.
Through his experience he has developed and refined wealth management processes including the PET FORMula™. He is an active member in the Financial and Estate Planning Council of Macomb County. Larry is also actively involved with the Rochester Chamber of Commerce. He resides with his wife and three children in Washington Township and feels very blessed to be a part of this community.
Source:
cnbc.com/2014/04/23/life-insurance-for-retirees-for-some-it-makes-sense.html