Retirement and Life Insurance

Sometimes, it is hard for people to gauge whether they need to buy life insurance or not. Just like in any kind of cash transaction, you must define the need that you have in order to assess whether the purchase is valid. This is the same technique that is required when you are checking if life insurance is a wise investment for you to make in your retirement age.

People who are preparing for retirement in their future must assess the financial goals that they have, as well as the financial situation. If you and your spouse possess a business that would still be generating a substantial amount of income monthly even when one of you suddenly dies, then you probably do not have to buy life insurance. The same is true if you are alone and have no other family that must be taken care of when you have to leave.

Strange as it sounds, the reason for this is very simple. Life insurance products and plans are not designed to place a guarantee on your “life”.  They are products meant to ensure that a future financial risk will not have to befall your partner and your children, people you will leave behind when you die.

When you are facing retirement age and there are no financial loss that is potentially faced by heirs (or you do not have them, in the first place), then it is better for you not to buy life insurance.

If that is the case, then when is it advisable to secure a life insurance plan? You are a prime candidate for a life insurance when:

• You are one half of a couple in your prime years, still saving up for your retirement years;
• You are a retiree and your death can cause a corresponding loss of income stream for the family you will leave behind;
• You are a parent with young children;
• You belong to a family with a large and illiquid estate that is subject to huge estate taxes; and
• You are a business owner, or a key employee in a business.

Depending on which scenario you are looking at, when you belong to any of the mentioned categories above, then it is important for you to buy life insurance product to decrease or eliminate the potential for financial loss by the family you will leave behind.

How will you determine which insurance coverage you should purchase?

If the financial loss that you have identified is only limited to the interim years between now and your retirement, then your risk is decreasing as you approach retirement, when your savings and investments are increasing. This means that you only require coverage for potential financial loss during the time that you have not yet reached retirement; in such a situation, it is best to go for term life insurance which will cover you for the identified period.

However, if you have a successful practice or business that can potentially be subjected to huge estate taxes upon your death, then you must opt to go for a permanent insurance, or whole life insurance that will kick in action when you die and provide a cash stream for the family to pay off the estate taxes and insure them against financial risk. Whole term insurance is also your best bet if you wish to be sure that the coverage will pay out.

Those are simple rules to guide you when you think about financial preparations for your retirement years. Remember that retirement does not automatically dictate that you procure life insurance policy. Your financial situation and need will dictate it, not your age.