Do You Need Life Insurance After Retirement?

After retiring from your job, you might wonder, “Do I need life insurance after retirement?” Well, the answer depends on a few factors. You may want insurance coverage if you’re leaving behind a family or substantial expenses after your passing. However, if no one is dependent on your income or you don’t have any debts, a life insurance policy may not be necessary.

If you’re considering buying or changing your life insurance policy at retirement, there are a few things you’ll want to consider as you shop around. 

Here’s how to determine if you need life insurance after 65 and what to expect when choosing a policy after retirement. 

Life Insurance After Retirement

You might seek life insurance after retirement for the following reasons:

• Supporting loved ones: You may leave behind a spouse, children, or parents who need care. You’ll want to consider future expenses, such as your family’s medical bills, college tuition, weddings, etc.
• Final expenses: Your family will need funding to cover your funeral costs, as caskets alone can cost between $2,000 to $10,000, according to the Federal Trade Commission. This cost doesn’t include other expenses, such as basic services fees, transportation, embalming, use of the funeral home for viewing, etc. There may also be leftover medical expenses from any treatments you received before your passing. Certain life insurance policies may cover any fees if you ever face any legal woes.  
• Debt: You may have some debts that a life insurance plan can cover. “For example, if you pass away with an outstanding mortgage balance, a life insurance payout can help your family avoid inheriting that debt,” says Rikin Shah, a licensed life, health, and disability agent and the founder and CEO of GetSure. 
• Estate planning: If you have estate assets, a life insurance policy may be beneficial. Adding a life insurance plan to your estate can build cash value and provide tax-free money to your heirs.
• Long-term care: Certain life insurance policies may cover long-term in-home or nursing care if you cannot complete daily activities through insurance riders. Insurance riders, also known as endorsements, amendments, or “scheduling an item,” means adding a specific item to your life insurance policy.

Can Employer Policies Transfer Your Life Insurance After Retirement?

If you received life insurance as part of your employee benefits, you may wonder what happens to your life insurance when you retire.

“Typically, employer life insurance policies do not transfer after retirement, although a few may offer a conversion option to an individual plan,” says Mike Raines, a life insurance agent and the owner of Raines Insurance Group. “Since most employer plans are group contracts, they typically do not transfer.”

If you can “port” your life insurance policy from your employer, you’ll be responsible for the monthly premium and have the chance to renew or end the coverage. 

How Much Life Insurance Do You Need after 60?

The amount of life insurance coverage varies by person—needs differ. If you’re looking for a ballpark number for a life insurance premium, you can do a needs analysis. This will help identify your problems as well as the causes and solutions.

If you determine life insurance could help you, use a needs calculator to estimate the coverage you need to support your family. Several providers on our list of best life insurance companies, including ReliaQuote and Esurance, have a free online calculator.

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Recommended Life Insurance Policy Types for Seniors

The life insurance policy you choose will also affect your payments. There are two primary types of life insurance seniors may consider: term and permanent or whole life.

Term life insurance is a policy that provides coverage for a set period, usually between 10 and 30 years. “If your expenses are temporary (meaning they have an end date), you need temporary (term) life insurance,” Shah explains. “College tuition for a child is an example of a temporary expense.” 

With term insurance, you’ll pay the same premium rate for the entire length of your policy unless you choose to change it. If you, the policyholder, passes during the term, your beneficiary will receive the death benefit. A death benefit is a payout to the beneficiary of your life insurance policy. 

Permanent or whole life insurance provides coverage throughout your life, as there are no set terms. “If your expenses are permanent—i.e., your family will have to pay them no matter when you die—you need permanent (whole life) insurance,” Shah says. “Common permanent expenses include final expenses, such as funeral costs and estate-related legal fees.”

Whole life insurance policies are typically more expensive than term life insurance. The death benefit is given to the beneficiary regardless of when you pass. In addition, the cash value of the death benefit continues to grow at a constant rate.  

Determining Life Insurance Costs for Older Adults

If you’re over 60, there are several factors that affect the costs of your premium and your life insurance eligibility:

• Age: This is the most significant factor regarding your life insurance policy coverage. The older you get, the likelier the insurance provider will have to pay out your policy, leading to higher premiums.
• Gender: Women live longer than men, so they tend to pay lower premiums for life insurance policies.
• Health: Your health impacts life insurance premium costs. If your medical conditions affect your life expectancy, the insurance provider may increase your premium. 
• Tobacco Use: If you abuse alcohol or drugs or have in the past, you’re more susceptible to developing health problems. Insurers see this impacting your life expectancy, leading to higher insurance rates. 
• Driving Record: A clean driving record appeals to many life insurance providers, as it shows you’re not involved in reckless driving, such as driving under the influence or having multiple speeding tickets. 
• Family Medical History: If you have family members who have serious illnesses, specifically genetic ones, you may face higher insurance rates. 

When Do You No Longer Need Life Insurance?

As you enter retirement, you may be unsure when to stop life insurance. In certain instances, you may not need to purchase a policy. 

“If no one depends on your income, you do not have outstanding debt, and your family has enough money to cover your final expenses, you likely do not need life insurance. Also, if you do not have kids and you do not take on debt, you’ve eliminated two of the major reasons people buy life insurance.” Shah explains.

Other Insurance Options for Retirees

If you don’t want to pursue a life insurance policy, other options are available to support you and your family.

Homeowners or Renters Insurance

These insurance types can help protect your property and/or its assets. Typically, these policies cover loss of property and possessions and liability coverage. Please be aware that coverage needs may change after your retirement. For example, if you construct a gazebo or move family members into your home, you may want to adjust your liability limits. 

Umbrella Insurance

This insurance policy provides coverage beyond your homeowner’s or renter’s and car insurance. With umbrella insurance, you can get additional protection for your assets. These insurance policies are quite cheap, with an average cost of around $150 to $300 annually for $1 million of coverage. 

Disability Insurance

You may be eligible for disability insurance through the Old-Age, Survivors, and Disability Insurance (OASDI) program. This program provides monthly stipends to retirees based on their contributions to Social Security when they were employed. 

If you don’t qualify for the program, you can purchase private disability insurance through an insurance provider. 

Long-term Care Insurance

A long-term care insurance policy covers what your health insurance plan doesn’t. It can cover the costs of care if you have a chronic medical condition, disability, or disorder. With a long-term care insurance policy, you may receive reimbursement for care delivered at your home, a nursing home, an assisted living center, or an adult daycare center. 

Health Share Plan

Health share plans are affordable alternatives to a typical health insurance plan. With a health share plan, people with shared religious beliefs put their money together to help each other cover medical costs. 

Supplemental Spousal Liability Insurance

Supplemental spousal liability insurance policies provide coverage if you suffer an injury in a car accident and your spouse is at fault. With this insurance policy, you can get compensation from your insurance provider due to your spouse’s responsibility for the car crash.

Annuities

An annuity plan is a popular alternative life insurance for retirees. Annuities are contracts with an insurance company that promise a steady income stream to the annuitant after retirement. You can receive a lump sum or a series of payments over time. 

Next Step

If you need assistance finding a life insurance policy after retirement, compare the plans offered by reputable life insurance providers. Then, contact an independent insurance agent or consultant or speak with a financial advisor to formulate a plan for your expenses.