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Life Insurance

Do You Need Life Insurance After You Retire?

13 Jul 2020

Life Insurance by Life Stage

The choices you make today can impact your long-term health, wealth and happiness. Understand the important role Life Insurance can play in key life events.

You’re no longer working and the kids are all grown up. Do you really need your life insurance policy now?

It’s taken a long time but you’re finally free to enjoy your golden years.

You’ve worked hard all of your life and saved for this very moment in your life. The kids are all grown up and they’ve moved out of the house.

Now, it’s time for you to sit back, rest, and enjoy the freedom that retirement brings.

But you remember you’re still paying for your old life insurance policy.

Your mind starts turning. You figure that you’ll likely pass away due to old age at some this point. And with the kids all grown up, maybe you don’t need to have life insurance anymore. It would be one more expense to cross off the list, right?

It would be.

…but are you sure that you don’t need life insurance anymore?

There are many reasons why somebody who’s retired might choose to maintain a life insurance policy. Here are five that show you why your policy is still likley to be worth the money you’re spending on it.

Reason #1 – The Cash Benefit Can Cover Your Final Expenses

When you pass away, you will probably leave behind some final expenses that your family may need to pay for.

Take your funeral as an example. According to information on ASIC’s moneysmart website, this final ceremony can cost anywhere between $4,000 and $15,000. And if you haven’t saved money for that event, your family will need to pay for it.

There are also costs associated with your estate. Your family may also need to pay an inheritance tax in respect of the assets that you leave for them in your will. Additionally, any complications with your estate could lead to further court costs.

These are all things that many families don’t prepare for. But with your life insurance policy still in place, you can help ensure that your loved ones have funding towards settling these final expenses.

Reason #2 – Paying Off Any Debts That You Leave Behind

In an ideal world, you’ll retire with no debt to your name.

Unfortunately, that’s looking like an unrealistic scenario for many Australians. And we can look to figures from the Bureau of Statistics to prove it.

They examined how many people who are on the verge of retirement still have debt. The study found that 47% of people aged between 55 and 64 still have a mortgage to repay. That was in 2015. And it’s more than triple the 14% who had mortgage debt back in 1990.

This shows us that it’s entirely possible that you’ll still have a mortgage to pay when you retire. Not only that, you may also have credit cards and other personal debts to repay. And even if you don’t have a mortgage right now, what if you choose to access some equity? That puts you right back into debt.

If you pass away soon after, there’s the real prospect that you could leave that debt behind for your family.

A life insurance can policy help in the management of this debt when you’re gone. The lump sum you leave behind could pay some or all of it off, meaning your family is under less pressure to find the funds to do it on your behalf.

Reason #3 – Accounting for Other Financial Losses

There’s a definite trend towards Australians choosing to continue working after they reach retirement age.

Moving into a part-time job allows you to generate some extra income, for starters. Plus, work gives you a way to stay active and feel like you’re still engaged with your community.

If you make that choice, you need to consider the impact that loss of income could have on your family. You’re using the income to create a certain standard of living in your golden years.

A good life insurance policy can help ensure that your family doesn’t struggle should you pass away while still working.

Reason #4 – Continued Support for Your Extended Family

Many people take out life insurance so that their families have a degree of financial protection in the event they were to pass away. You want to ensure that your children would grow up comfortably if the worst happened.

But now, your outlook’s changing.

That’s because your children are all grown up. They’ve moved out of your home, have jobs, and started their own families. You begin thinking that they probably don’t need the money that you’d leave behind. And the money you save on premiums could go instead to funding your retirement.

We’d encourage you to think further into the future.

For example, do you have grandchildren? If so, your life insurance benefit could go towards paying for their education. Or, they could use it to pay for the deposit on a home. This also means that your own children may experience less financial hardship later on.

Furthermore, your adult children may not be as financially sound as you’d like them to be. According to a survey from Finder, 61% of parents still provide financial support to their adult children. The benefit from your life insurance could help your kids deal with their debts and make life easier for them.

Reason #5 – The Cash Benefit Could Support Your Preferred Charity

Perhaps your children don’t have any of the financial issues mentioned above.

Even if that’s the case, you can still find a use for your policy’s cash benefit. For example, you may use it to support a charity or cause that you care about.

According to Philanthropy Australia, 80.8% of Australian adults give to charity in some form. This means there’s a four in five chance that you have a cause you’ve actively donated to in your life.

Imagine the difference that the full sum of a life insurance benefit could make to one of these charities if you have validly nominated them as the beneficiary. Your life insurance policy gives you the chance to leave a legacy of helping those who you feel need it most.

Retirement Doesn’t Have to Mean the End of Your Policy

There are many reasons why you may want to keep your policy active when you retire.

Ensuring your family is better placed to handle your final expenses and any debts you leave behind may be the most immediate. However, your life insurance benefit also gives you the chance to leave a legacy. Whether that’s for a charity or your own family is up to you.

Your policy could also provide support for your significant other if you pass away earlier than expected.

So, this leads you to the key question:

To insure or not to insure?

That is a question that only you can answer. You may choose to get some professional advice, or to carefully consider your own needs and circumstances and deal directly with a Life Insurer like NobleOak who can provide you with general advice and product information.

This is general information only and does not take into consideration your individual circumstances, objectives, financial situation, or needs.

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