We all go through life preparing for our future in case of accidents and tragedies. So it’s probably a good idea to buy life insurance when we are young adults and have families and small children that depend on us financially. After all, the whole purpose of buying life insurance is to make sure that our kids, spouse, or relative who depends on us is taken care of in case of our untimely death. But once you retire and your kids have flocked the nest, do you still need life insurance?
This is an important question that you need to figure out based on your present circumstances. For the most part, many people will say that you don’t need life insurance when you are retired if no one financially depends on you for income. If your children are grown and self-sufficient then there is no need to keep a life insurance policy. You also don’t need life insurance if you and your spouse are both retired and living off of steady retirement savings. Instead of paying life insurance premiums, it’s better to save that money for other expenses.
But life is unpredictable and things change. Some active adults continue to work even after their retirement age. If they don’t have any earned income, then experts say that there is no use for life insurance. It would only be required if the retiree’s death lead to a loss of income that his/her family depends on. Family situations change over time as well. If you had a child late in life or care for a family member that has special needs and financially depends on you, then life insurance would come in handy in retirement in case anything happens to you. Also, if your spouse loses part or all of the income coming from your pension or Social Security benefits when you pass away, then it might be a good idea to keep your life insurance to secure their financial future.
Life insurance is not only used for the people who depend on you financially but it can also be used to take care of estate taxes. If you have a successful business and don’t have liquid assets to pay for estate taxes then you can use your life insurance policy tied to your estate to pay for those taxes.
Depending on your situation, there are different types of life insurance policies that you can benefit from like term insurance and cash-value insurance. Term insurance is similar to car insurance. You pay a premium for a set term and it only pays out when you die. It has no value so you can’t cash it out or borrow against it. Cash-value insurance, such as universal life, variable life, or whole life insurance, is a term insurance policy with a cash value. With this type of policy, you pay a fixed amount on your death and a part of your premium goes toward building cash value from investments made by the insurance company. You can borrow against it or cash out. Although you can take money out of this insurance policy, you will end up paying higher premiums than a term life insurance policy.
In the end, deciding to keep life insurance when you are retired depends on your current personal situation. If you still have to provide for your family then it might be smart to keep your life insurance policy, but if that’s not the case anymore then it’s safe to stop paying those insurance premiums and save some money.