When you are close to reaching retirement, you start thinking of ways to reduce your expenses. The lack of a steady monthly income means that you will have to make certain changes to your lifestyle. Even if you have planned your retirement in advance, you may still be looking for ways to trim big expenses.
One of the expenses you may be thinking of cutting back on is the premium payment on your life insurance policy. And while it’s true that for most people it doesn’t make a lot of sense to carry life insurance during their golden years, there are a few reasons why that particular rule of thumb may not apply:
If You Have Special-Needs Children
There are many situations wherein you may still be financially supporting your child even when you are well into retirement. If you have a special needs child then your insurance could provide you with the income required to take care of them.
If You Lack Sufficient Medical Insurance
You may enter retirement completely healthy but there is always the off chance that you could fall seriously ill in subsequent years. It is a known fact that medical expenses can be quite high, especially if you are hospitalized for a long period of time or require specialized treatment. If you die but your medical insurance only covers a small portion of your expenses, then the payout from your life insurance policy could help your family make those payments.
If You Have a Hefty Mortgage
When you buy a home, your goal is probably to finish paying the mortgage before you retire. However, you may not be able to do so. In some cases, you may have also refinanced your mortgage. It goes without saying then that you probably owe your bank significant amounts of money each month, but you do not have a monthly salary to help you with the same. And while you may have already planned how to make these payments, things may not always go as planned. There are situations you may need to think about even if it pains you to do so. Such as, what happens if you suddenly pass? Will your spouse or your family members be able to continue the mortgage payments?
If You Need an Alternative Borrowing Option
If you’re looking to buy a second home or renovate your current home since you now have the time, you know that the expenses will be high. You may have to look out for a short-term loan to help you with alternate accommodation while your home is being renovated. This is where your life insurance policy will come in handy. More often than not, your insurance policy may have an equity component that you can borrow against. Of course, you should keep in mind that there is a penalty associated with borrowing against your policy and any unpaid amount will be deducted from the final death benefit amount.
End of Life Expenses
As much as you and your family may hate to think of your passing, it is financially prudent to be prepared for this. If you haven’t made plans to take care of your funeral expenses in advance, then the funds that are made available on your death will give your family the money required to cover funeral expenses.
For most retirees, life insurance is just an added expense. Remember, fixed deposits are risk-free investments. If you have very little debt, a steady source of income post-retirement, and a self-sufficient family, you can very well be tempted to say goodbye to your life insurance policy. But keep these reasons in mind and don’t pull the trigger on your policy without thinking through it first!
Photo Credit: David Hilowitz