Is post retirement life insurance worth the investment?

GrownUps accepts no responsibility for decisions made by Members or any other persons as a result of using or relying on any information on the GrownUps website. GrownUps does not give any financial advice or make any recommendation of any product or service.

When the kids have left the nest, the mortgage is paid off and your superannuation fund is padded out nicely, the concept of life insurance can seem like overkill. But while conventional wisdom says no, the reality is that post-retirement life insurance can actually be a savvy move.

Before you cancel your policy it pays to factor in your current financial situation, your long-term goals and the financial consequences of an unexpected death. Only then will you be able to accurately determine your life insurance needs.

So how could you benefit from post-retirement life insurance?

Post-retirement mortgages

Owning a home may be the Kiwi dream but according to the latest statistics from BNZ almost a third of New Zealanders won’t have paid off their mortgages by the standard retirement age of 65. The shock bank report reveals the rapidly growing ‘grey’ borrowers trend and confirms that debt isn’t just reserved for younger generations.

Inheritance for loved ones

Retirement is an incredible milestone but it’s all the more rewarding if you can enjoy your Golden Years with the knowledge that you’ll still be leaving an inheritance for your loved ones. With life insurance you can enjoy the freedom to live your chosen retirement lifestyle, without feeling guilty about short-changing your loved ones if something goes wrong. Whether it’s treating the grandkids to a weekly movie, splurging on a Hawaiian getaway or buying yourself a new set of wheels, life insurance gives you the freedom to spend the money you worked so hard to acquire.

Smooth sailing for heirs

From daughters to second cousins, life insurance smooths over so much more than simply your funeral. For some people, post-retirement life insurance is a way of unlocking tax free death benefits for heirs. For others, it serves as an asset that can be used to balance out the distribution of an estate, or offer a financial cushion to a surviving spouse. Another common motivator is concern over delays in the asset liquidation process. From selling property to locating wills, life insurance provides emergency cash that can be used to cover the expenses that can pile up when someone dies.

Funding your funeral

From covering expenses like a coffin and flowers to flying family home from overseas, life insurance bolsters your loved ones with financial support when it’s needed the most. With the average funeral costing anywhere from eight to 10 thousand dollars, this is definitely not an expense you want to hand down to your grieving loved ones.

Replacing lost income

Life can be cruel, and it’s all too common for one half of a couple to be spirited away just as retirement becomes a reality. As well as heartbreak, this can leave the remaining partner high and dry when it comes to financial freedom, especially if the deceased was still working beyond retirement. With life insurance you’ll enjoy the total peace of mind that if something happens supplementary income will continue to roll in.

Access to long term age care

Aged care can be surprisingly expensive which means that as well as life insurance you may also want to consider long-term care insurance. This eliminates the risk of a partner becoming unexpectedly sick and depleting the joint nest egg to pay for nursing home care.

Common motivators

At the end of the day everyone has their own unique needs and concerns. People buy life insurance policies for a host of different reasons, with some of the most common outlined below;

A better alternative

Of course, not all retirees are in the same boat. Often, cancelling a life insurance policy can make a lot of sense from a financial standpoint. For example, if you’re paying tens of thousands of dollars in annual premiums for a relatively low life insurance policy the cash could potentially work harder in a tax-deferred investment account. Similarly, a healthy and financially sound with a healthy investment portfolio couple could stand to benefit from downsizing to long-term care insurance and opting out of permanent life insurance.

Ultimately, every decision you make concerning life insurance requires an open mind and meaningful financial planning. This empowers you with knowledge and choice, which means you can make an educated decision about your health, your lifestyle and your legacy.