I’m retired: do I still need life insurance?

Retiring after many years of hard work is a reward that many people look forward to. It allows you to take time to relax and contemplate life, take up hobbies you’ve never had time for and travel without having to worry about taking time off work.

However, it can also be a time of financial hardship, especially if you were the sole breadwinner of the family. This is why life insurance is an important policy to have in place, even if you are retired. If you pass away, your family will be left to pick up the pieces, which includes paying for your funeral and repaying any debts you may have.

How do I decide to keep my life insurance policy?

Many people wonder whether continuing to pay their life insurance premiums even after retirement age is worth the money spent.

Companies such as AUL provide life insurance policies that are affordable to lower income households, which often becomes the harsh reality of retired breadwinners. If you feel you cannot afford to pay the monthly premiums, you should take certain things into consideration before simply cancelling the policy.

Are you still earning outside income?

If you have retired and are no longer earning any form of income, then keeping a life insurance policy may not be the best decision for you. This is especially true for those retirees who may be living off of their retirement fund or savings.

However, if you are working part-time and earning enough from this to be able to make the monthly repayments, you should consider keeping your life insurance. When you pass away, your family will continue receiving the payouts from your various policies, but this may not be enough to pay off debts, for your funeral or for monthly expenses, which is where life insurance can help significantly.

Are you in debt?

Ideally, once you reach retirement age, you will be living debt free but for many, that is not the case. Your debts can include mortgage, car payments and even student loans for yourself or your children. Being in debt may deter you from continuing to make monthly life insurance payments, but you should, in fact, be doing the opposite.

If you are still paying off these debts, you should take a “better safe than sorry” approach to the situation. Upon your passing, the repayment of these debts falls to your estate and this will put undue stress on your family and loved ones. Life insurance will allow them to pay back these debts and use the remaining money for daily expenses.

Is your family self-sufficient?

If your children are adults and your spouse is still working or has saved enough to be self-sufficient, then life insurance may not be necessary for your situation. Discontinuing your policy can help to cut down on monthly expenses if you are living off of savings and a retirement fund.

However, if you have young children, children with special needs or your spouse is no longer working, then keeping your life insurance policy is a necessity. If your spouse would lose a significant amount of your pension income upon your death, life insurance could help to fill that gap.

How is your health?

Your health is an important factor to keep in mind when thinking about whether you should continue paying life insurance or not. If you know you are healthy and are unlikely to have any serious problems, then you could look into stopping the repayments.

The reality, however, is that once you have reached retirement age, you are more likely to experience health issues. Your mind and body are not what they used to be 20 years ago and if you have any fatal health issues down the line, having life insurance can help your spouse to live comfortably after your passing.

Do you want to leave a legacy?

Many people take out life insurance in order to be able to leave an inheritance for their children or grandchildren. This is an honourable reason for taking it out and can help to contribute to savings, university fees or even a down payment on a house.

Some people, however, do not have children or grandchildren and may want to leave some of their money to their favourite charity after their passing. This is only possible if you have life insurance or savings. Life insurance donations to a charity are income tax-free, which is helpful for charities who often lose money due to this.

Final thoughts

Life insurance is a good investment when you are younger and can help make your later years easier to manage, especially if you experience health problems that lead to unexpected death.