While the cost of life insurance is an expense many of us wish to remove from our budgets, the fact that you no longer have as many large financial obligations isn’t necessarily a reason to stop paying for life insurance as you head towards retirement. In many cases, those who are nearing or who have reached retirement have more reasons to keep life insurance than to get rid of it.
End of Life Medical Expenses
Many of us enter retirement healthy and end up ill near the end of our lives. Health insurance rarely, if ever, covers 100% of our medical needs, especially if a patient opts for experimental treatment in order to prolong life. This means your family could be left with thousands of dollars in medical expenses upon your death.
Your Family isn’t Self-sufficient
Are your spouse and children able to take care of themselves financially? If your children are still in college or shouldering student loans while living at home, they will struggle significantly without you. Your spouse may not be able to continue working, or may, at an older age, not have the job skills to replace your income. Your life insurance will ensure the family lives comfortably during this transitional period.
As you enter retirement you may consider downsizing your home and living a more refined life. Your life insurance policy may have equity that can often be borrowed against. You might, for example, take out a loan in order to live in a temporary location while selling your main home and finding a new one. There is an interest penalty associated with borrowing from your own life insurance, and any unpaid amounts owed will be deducted from the death benefit.
If you are subject to estate taxes, your family may find it difficult to pay those taxes while keeping your property and estate intact. Life insurance becomes liquid immediately upon your death, ensuring the funds your family will need to pay your taxes are readily available.
Death and Burial
Your life insurance will give your family the funds needed to pay any funeral expenses associated with your death, if you have not made these arrangements in advance. These available funds will make it easier for your spouse to make your final arrangements without fearing financial insecurity.
Life insurance is something you definitely need when you are younger and have significant responsibilities, but your responsibilities don’t end with your working years. Talk to your insurance agent or financial advisor about the possibility of adjusting the amount you carry, but don’t get rid of all your life insurance when you retire.