• Larry McDonald

Life insurance--for retirees?

Life insurance planning for anyone, retiree or not, is grounded in the need. Just because someone is retired it does not put them in a unique category with regard to what is available or how to obtain it. As with any significant change in life status, retiring in this instance, it is only prudent to re-assess the need and plan accordingly. Age and health status are the main considerations in any life insurance discussion, with a reasonable request for the face amount given the financial situation and lifestyle factored in as well.

Consequently, a thorough needs assessment that evaluates income replacement (replacing a pension or social security is just as valid as replacing a paycheck), estate taxes, dependent needs, (college for both children and/or grandchildren), charitable endowments and final expenses should be done to determine the need for life insurance in retirement.

The two basic forms (and the variations thereof) of life insurance, term and permanent, are available to retirees just like any other individual. What works best is, again, based upon the need. A term insurance policy that rents the protection for a specific amount of years is just as viable for a defined duration as a permanent universal life policy that could be used for estate taxes or to leave a financial legacy for the heirs.

A unique consideration that retirees have that is based upon their age, financial status and health, is to assess any current coverage for utilization in their planning. Often, existing term insurance policies can be converted to permanent policies to satisfy life-long needs. This is particularly valuable if their health status is such that obtaining new coverage is either not possible or cost prohibitive. A $500K term policy for example, which was obtained decades ago could be converted to a lesser face amount based upon the long-term, permanent need, with no medical underwriting, and the rates would be based upon current age. This is a guaranteed provision that many policies offer and a great way to plan around health challenges.

If a retiree is looking to purchase new coverage, then a thorough analysis and underwriting of their health conditions will be required, which is standard in any life insurance application. A recent physical is a must, else one will be required as part of the underwriting. Adjustments to lifestyle that will increase longevity are prudent at any point, but late in the game changes will not get you much immediate consideration when trying to offset a lifetime of habits that work against longevity. The cardinal sin is to have been given medical advice and not followed up on any plan of action and let the high blood pressure or elevated cholesterol, for example, go unchecked. Any hope of obtaining life insurance will be significantly impacted and most probably impossible, until that is rectified.

I some cases the only remedy would be to obtain a guaranteed issue life insurance policy. These policies, as you can imagine, are basically for final expenses, and have many provisions that, unless you have no other options, restrict payouts and hedge heavily in favor of the insurance company. This is no surprise as the risk is high and it is all about the numbers.

This is not a place for lifeinsurance.com. Meet with a qualified life insurance professional who can completely asses your needs and is capable of integrating it with your financial planning, or one who can coordinate with your financial professional to counsel you on your best holistic planning. Retirement life insurance planning is critical to the legacy you leave and to leading the empowered life you have worked so hard to provide.

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