Do you need life insurance after you retire?

Whether you've recently retired or are approaching retirement, you may be wondering whether you should continue carrying life insurance after you're done working. 

People often think of life insurance in the context of working and raising a family—at first glance, it might seem unnecessary after you're done working and your children have grown up. Meanwhile, if you have an employer-sponsored life insurance plan, it will likely go away after you retire. Does it really make sense to purchase a new policy?

The short answer is yes, it is still in your best interest to carry life insurance even after retirement. With a better understanding of how life insurance after retirement works, you can make an informed decision for your (and your family's) needs.

The benefits of life insurance after retirement

Insurance helps pay for your expenses so your heirs don't

For starters, life insurance can help with a variety of expenses down the road. If your kids are grown, you may not need to worry anymore about who's going to pay for their education if something happens to you. However, you probably do have other expenses that may fall on them if you're not covered. This can include final expenses, such as the cost of hospital bills and a funeral. When you consider that the average funeral costs more than $7,000, it's easy to see how quickly these figures can add up.

Likewise, if you're still making payments on your mortgage when you pass, your life insurance policy can help pay off the remainder of your balance so your loved ones aren't left to deal with that. If you'll be giving assets to loved ones after you pass, your life insurance policy can even help cover estate taxes, which can be significant depending on the size of your estate.

A life insurance policy can also cover other expenses, ranging from outstanding student loan debt to legal fees from the probate process.

Insurance can help transfer your estate to your heirs

Like an interest-earning bank account, whole and universal life insurance policies accrue cash value over time. This means that if you're transferring a sizable amount of assets to your descendants, you can save money with a life insurance policy that will cover estate and inheritance taxes. This, in turn, helps to ensure that parts of your estate aren't sold off to pay these expenses instead.

And since whole and universal life insurance policies accrue cash value over time, you can also use the policies themselves as a way of bequeathing money to your beneficiaries.

What kind of life insurance should retirees get?

There are 2 main types of life insurance: term and permanent. Term life insurance is more common among younger families, as policies are only in place for a specific period—typically when children are not yet independent. While this coverage generally comes with guaranteed death benefits, it does not come with a guaranteed cash value.

On the other hand, a permanent life insurance policy is usually the better fit for those who are retired or approaching retirement. With this type of policy, your coverage is in place until benefits are collected, so you don't have to guess what the term should be. Likewise, these policies carry a cash value.

Permanent life insurance comes in 2 varieties: whole life insurance and universal life insurance. Not sure which is right for you? We suggest speaking with an experienced life insurance agent for a personalized recommendation.