Last updated: November 25th, 2022
Reviewed by
Rebecca Thrift
Licensed Insurance Agent
However, this often no longer applies postretirement, so you may wonder if maintaining your life insurance policy is necessary. This guide explores whether you need life insurance after you retire and what factors to consider.
Table of Contents
Whether you need life insurance after you retire depends on your financial and family circumstances. Life insurance exists to replace your income and prevent your family from experiencing financial distress if you pass away. If you’ve retired with enough savings to live comfortably, you may not need life insurance as you have no earned income to replace. Your spouse or family members can continue receiving payouts from your retirement savings following your death.
However, there are some circumstances when retaining live insurance coverage is a good idea — especially if your spouse, children, or other family members rely on you financially. Answering the following questions can help determine whether life insurance in retirement is necessary for you.
If you die while receiving Social Security retirement payments, your beneficiaries will likely be entitled to survivor benefits. However, these benefits won’t entirely replace the Social Security payments you received before death.
Therefore, it’s worth checking how much your family would receive in survivor benefits to determine if it will meet their financial needs. If it won’t, purchasing or maintaining life insurance to meet the shortfall could be a wise option.
A small amount of debt is unlikely to cause issues for your family if the value of your estate and savings far outweighs the amount you owe. However, they could find themselves in financial difficulty if you die while owing significant amounts. In this situation, maintaining adequate life insurance coverage would allow your surviving spouse or family members to pay off any outstanding mortgage or other debts after you pass away.
There are several other potential advantages to having life insurance after you retire, even if you’re debt-free and your family and spouse are financially independent. For example, maintaining a life insurance policy could relieve your beneficiaries of the burden of paying estate taxes after your death. Many retirees also choose to purchase life insurance to cover end-of-life expenses, such as funeral and burial costs.
Many of the same considerations apply when deciding whether to maintain life insurance after age 65. It may not be worth paying for life insurance if you’re retired, debt-free, and have no financial dependents. However, life insurance could be worth considering if you’re still working and paying off debts or supporting a spouse or child.
Obtaining life insurance after you retire is more expensive because you pose a higher risk to insurance companies as you get older. As you have a higher risk of dying during the policy’s term (or earlier in the policy) than a younger adult, there is a significantly higher likelihood of the insurer having to pay out. Insurers mitigate this risk by charging higher premiums to older adults.
The following table illustrates the average cost of a 20-year term life insurance policy with a $500,000 death benefit at different stages of your life:
As the table shows, the cost of a new 20-year policy increases more than threefold between the ages of 60 and 70 — the age range when most people hope to retire. You’ll want to weigh the relatively high costs of life insurance against the potential benefits to decide if it’s worth the outlay.
Another factor that could make purchasing life insurance more expensive postretirement is preexisting health conditions. Problems with your health could result in higher premiums or even make it impossible to obtain traditional life insurance.
In this situation, you could consider a guaranteed acceptance life insurance policy, which does exactly what it says. Insurers selling these plans guarantee to accept any applicant meeting their other eligibility criteria, regardless of their health status, and you won’t need to undergo a medical. However, these policies are significantly more expensive than regular life insurance and tend to offer low coverage amounts.
Brian is the founder and CEO of Insurist and carries Life, Health, and Property & Casualty licenses in all 50 U.S. states. Since 2013, Brian has been a member of Million Dollar Round Table, a designation for the top 1% of financial advisors worldwide. Brian has been featured in Yahoo! Finance, Money.com, Entrepreneur.com, Life Happens, Forbes, MSN, and Good Financial Cents. Brian’s goal is to show customers the best products, the quickest answers to their questions, and provide expert advice.
I've worked for Safeco and Liberty Mutual as a sales agent and claims adjuster for the last five years. My claims experience is primarily auto insurance, but I am licensed to sell auto and property insurance (homeowners, condo, renters, long-term renter, etc) currently.
