Life Insurance After Retirement


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Once you retire, it can seem like the need for life insurance goes away. Your children are grown and have their own jobs, your spouse has Social Security coming in every month, you have low or no loans, and your bills are a little smaller than they were when you were working. Even in this situation, when you pass, there are still going to be costs that your family is going to have to find the money to pay for. The purpose of owning life insurance in retirement is to create immediate funds for your survivors to pay for final expenses. This can include funeral costs, any debt that might remain, and income replacement for your spouse. If you already have life insurance in force, that is great. It is important to make sure you have enough to cover your family’s needs. If you don’t have life insurance or you don’t have enough, we have solutions for you outlined below!

How much life insurance should I have in retirement?

At a minimum, Cardinal suggests that our clients have a $25,000 policy. In the chart below, we break down what this would pay for.

Income replacement is essential even when you are not working. If you are married, your spouse is still going to lose some of the Social Security money that was coming in every month. Even though they will get to keep the larger check, one check will go away while the bills almost remain the same for their living situation. Just because you are gone does not mean the cable bill or electricity bill is going to be cut in half. If you are single, your family is not going to be able to sell your house and possessions right away. Some of your bills are going to stick around for a while. It is essential to leave your family at least a small pool of money so they can pay these bills.

Can I qualify for life insurance  in retirement?

If you are under 85, no matter your health conditions, there is a policy you can qualify for. In policy 3 below, you will see that it has no underwriting. That means they do not ask any health questions. It is going to be more expensive than policies where you would have to answer some health questions, but if you have no other options, it becomes a great choice.  Other policies have simplified underwriting or full underwriting; you can see examples of those types of questions in this post. Every company is going to have different health questions they ask. That is why it is important to work with an agent who represents multiple companies. If you have a condition that disqualifies you from one company, they will be able to put you with another. They are also going to be able to make sure they find a policy that fits into your budget.

How much does life insurance cost in retirement?

The cost of life insurance is going to vary depending on how much coverage you want, your age, and what type of policy you want.  Policies that pay $25,000 at death are going to have lower premiums than policies that pay out $100,000. The policies below can be scaled for a higher death benefit.

Below we go over 4 examples from “The Complete Cardinal Guide to Planning for and Living in Retirement Workbook” of actual policies we sell our clients. All of these are run for a female who is also a non-smoker and wants $25,000 worth of coverage.  Men are more expensive than females since statically they die at a younger age (on the other side of this statistic, long term care insurance is more expensive for women). If you are a smoker, the prices will be significantly higher.

Policy 1

Policy 1 has a $25,000 death benefit with full underwriting, which means the life insurance company will examine you from head to toe. At these rates, you are allowed to have some minor health issues. If you have significant health conditions, they will charge you more or possibly turn you down for the policy.

Policy 2

Policy 2 is the same as Example 1, but with higher premiums because there is no head-to-toe exam. It has simplified underwriting, which means the life insurance company will ask you some limited health questions and issue the policy if you pass.

Policy 3

Policy 3 is life insurance available to anyone, ages 50 to 85, regardless of their health. We have written these policies on people with cancer, kidney dialysis, heart disease . . . you name it. Since there is no health questions, you can also smoke and get this policy for the same premium as a non-smoker.

During the first two policy years, the benefit payment for death due to any reason other than accident is a full refund of all premiums paid plus 10% interest. If death is due to accidental reasons, the full face amount is paid.

Policy 4

Policy 4 is for people who do not want to pay premiums monthly or yearly. One single premium is paid in the beginning and the policy pays $25,000 at your death. The health underwriting is a few simple questions—no exam!

This single-premium policy also allows you to access the $25,000 death benefit to pay for long-term care while you’re still alive.

Life insurance is an important piece of a complete retirement plan. It can even be combined with long term care insurance like in policy 4 (this is called hybrid long term care) which knocks out two birds with one stone! As always, make sure to consult an advisor who can look at your complete retirement puzzle, not just one piece.

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