Retirement comes not only with a change in lifestyle, but also with a change in your financial situation. If you've invested wisely and have a good retirement plan, you can maintain your standard of living and enjoy your free time doing all the things you couldn't do when you were working full time.
However, for a lot of people who do not have adequate savings, retirement can be stressful, and they may still have to work part-time to meet their financial obligations.
As you transition to retirement, an important consideration is whether or not you need life insurance. Usually, people buy life insurance to protect themselves and their families should they lose their income. Still, you may need life insurance when you retire in the following situations:
You Have Debt
When you retire and rely on a pension, money may be tight, and it can be challenging to pay off any debt. If you die without paying off your loans, your family will become responsible for this debt which will likely be a financial burden.
Also, if you have any loans that someone cosigned for you, the co-signer will be responsible for repaying your debt. Having life insurance will relieve your loved ones of this burden as they can use your life insurance to settle your unsettled debt.
You Still Support Your Children and Spouse
If you still support your children and spouse, having life insurance will protect them from financial difficulty when you die. Many people may still work part-time even after retirement to support their families. When you die, your life insurance will replace your income, so your family is still taken care of.
To Cover Funeral Costs and Final Expenses
If you have the death benefit, your life insurance will cover the costs of your funeral, estate taxes, and estate settlement costs so that your heirs don't have to pay for these expenses.
This is particularly useful if you own many assets, as the taxes will be high. Having the death benefit is also a way to leave an inheritance for your heirs, who will be paid out when you die.
Type of Life Insurance
Life insurance can be divided into two main types: term life insurance and permanent life insurance. Before buying a policy, it is helpful to learn more about term life insurance and permanent life insurance. This way, you can pick the right one that will suit your needs and that of your loved ones.
Term Life Insurance
Term life insurance is a plan that will protect your family for a set number of years, usually between 10-30 years. Its purpose is to protect a family with dependent children from a loss of income.
When the policy expires, it loses its value, and there is no longer a death benefit even if your beneficiaries have not made any claims. Except ceasing paying the premiums, you need to do nothing as the policyholder
This type of life insurance is the more affordable option, and its terms are flexible. In most cases, the premiums are level, meaning they remain the same for the duration of the policy's term.
This can be a good option if you still have dependents like a spouse or children or if you have debts like a mortgage. However, keep in mind that the maximum number of years you are eligible to take term life insurance decreases as you get older.
Permanent Life Insurance
Permanent life insurance will not expire as long as you pay your premiums. However, it is more expensive and less flexible.
On the plus side, it is seen as an investment as it grows in cash value. Since it is an investment, you can use it as collateral to take out a loan. It also includes the death benefit; you can withdraw from it while alive. Depending on the type of policy you buy, the premiums can be fixed for the duration of the policy.
Usually, when you're younger, the premiums are likely to be lower, so if you bought a policy when you were working or had a policy through your employer, it is probably worth keeping to benefit from the savings feature as well as the lower premiums.