Do You Need Life Insurance After You Retire?
Most of us are covered by our employers under their life insurance plans. It comes as part of the benefits package, and most of us would not give it a second thought until retirement day.
The consequences, however, change when you retire. If there is no one dependent on you financially post your retirement, then you may not need a life insurance plan.
The primary purpose of Life insurance schemes is to cover loss of income. In the event of an insured primary wage earner passing away, the insurance company would be liable to cover death benefits among other things depending on the terms of the policy.
Financial planning can be overwhelming given the number of policies in the market and their complicated terms. Let’s find out what are some of the common scenarios that would require you to get a life insurance policy.
Brantley Whitley from The Insurance Pro Blog explains, “When you retire, you have the option to continue paying for the life insurance you had while you were working or buying your own policy that is not connected to your employer.”
Are You in Substantial Debt?
Ideally, you would want to pay off any debts before entering retirement. However, that is not the case in reality. Senior citizens in the United States over the age of 70 have seen their debt rise nearly 543% from 1999 to 2019, according to the Federal Reserve Bank of New York.
If you have co-signed the loan with your spouse or children, they will be liable to face the burden of the loan in the event of your death. A life insurance policy would ensure that your co-signers or family don’t face financial hardships in such a case.
Permanent Life insurance Policies
A large number of people opt for Life Insurance solely for the purpose of receiving death benefits. Permanent life insurance policies on the other hand offer you accelerated death benefits. These policies allow the insured person to avail some of the proceeds of their insurance policy under special circumstances.
If the insured person is diagnosed with a terminal illness or requires urgent medical intervention, having a permanent insurance policy can drastically lift the weight of financial constraints. In case you end up paying more than the agreed amount of the policy, insurance providers will allow you to access this cash value plus the relevant interest on that amount. In most cases, you will not be eligible for cash value benefit in the early years of the policy.
A Way to Facilitate Legacy Goals
Do you wish to leave your children or spouse a financial legacy after your passing? A life insurance policy can help the appointed beneficiaries receive tax-free death benefits. This will also negate the need for a judicial process that decides who gets what in your family.
If your spouse or children are dependent on you financially after retirement, a life insurance policy is the safest bet you can make. This is especially helpful in cases where a spouse stands to lose the pension income.
Indexed Universal Life Policies (IUL’s)
Indexed universal life policies fall under the category of permanent insurance schemes. These policies promise you lifetime income in retirement along with some other benefits like:
- Long term medical care coverage
- Terminal illness coverage
- Disability coverage
- Tax-advantaged wealth transfer options
If you can keep your policy from lapsing by making timely payments and not withdrawing from your insurance account, the beneficiaries will be entitled to a tax-free death benefit. In the meantime, your policy’s cash value will grow unaffected and can be used to generate a side income through provisional loans.
With IUL’s, a portion of the policy is allocated to a sector of the stock market. Although the gains on these policies have an upper limit, the cash value of your policy is protected in case of the market underperforming.
Protecting your loved ones is fairly easy provided you stay on top of your financial goals. Don’t hesitate to consult professional estate planners and tax experts to get an idea of your financial status. Careful planning is key to ensuring a safe and sound transition to retirement.