If you own a life insurance policy, chances are you bought it to protect your loved ones—from the loss of income if something happens to you or to cover your debts and final expenses. Life insurance is an important part of an overall financial plan. But once you’re retired, do you still need the coverage? Consider the questions below to help you decide what’s right for you.
What kind of policy do you have?
Term insurance provides coverage for a set period of time (usually 10 to 30 years) and can allow family members to pay off the mortgage, fund college education or reach other goals if you died prematurely. Once those obligations are taken care of, you can cancel the policy, but you would get no money back. It’s worth thinking through your decision with a financial advisor before you cancel coverage. Life insurance can often be used for other purposes or may be converted to a permanent policy.
Permanent, or “cash value” insurance includes a savings portion that offers potential tax-deferred or even tax-free growth over time. If an unexpected expense arises, you can access your policy’s cash value through full or partial withdrawals or by taking out a low-interest loan against your policy. Besides leaving money to those you care about, you can also donate the proceeds to a favorite charity. Permanent insurance is also popular with small business owners and people with large estates, since survivors can use the cash to pay estate taxes or provide liquidity for the business. If you have a permanent policy for estate-planning reasons, you should consult a financial advisor or estate-planning attorney before making any changes.
Who depends on you financially?
Do you have children, grandchildren, parents or a spouse who depend on your income? Many people buy life insurance to protect a growing family during their working years. If your kids are self-sufficient and you have steady income from Social Security, a pension that pays a benefit to a surviving spouse, or other retirement assets, you may not need the insurance. On the other hand, if your spouse would lose your pension income if you died, or if you have a special needs child, keeping your policy may give you peace of mind.
Do you have debt?
Based on a recent survey by American Financing, 44% of Americans between the ages of 60 and 70 have a mortgage when they retire, and 32% expect it will take more than eight years to pay it off.* If you find yourself in that statistic, or if you’re still paying off other debt, keeping your policy may be a wise move.
Should you buy life insurance if you don’t have it?
If you have a mortgage, debts or other liabilities, or just want to leave money to your children or grandchildren, you might consider purchasing a life insurance policy. Keep in mind, as you age premiums tend to increase. Consider speaking to a financial consultant to make an informed decision.
In sum, if the reason you initially bought life insurance no longer applies, you may want to cancel your policy. If others would be financially harmed if you died, if you have estate-planning needs or want to ensure you leave money to people or causes you care about, then keeping your policy may make sense.
Whether you’re retired or not, TIAA can help you understand your options and how life insurance may fit into your overall financial plan. For more information, call the Insurance Planning Center at 877-276-9429, weekdays from 8 a.m. to 8 p.m. (ET).