Should Retirees Have Term Life Insurance?

Should Retirees Have Term Life Insurance?

Almost every insurance vendor who’s “been around the block a few times” has encountered the question of “why would I buy life insurance if I’m not going to be there to enjoy the payout?”

While this question is not the most agreeable way to fend off a sales pitch, the underlying issue is that this objection reveals that the targeted client lacks a fundamental understanding of their insurance options.  Consequently, their knee-jerk response is an ideal chance to give a lesson in Life Insurance 101.

Bear in mind that this initial response, however direct, is meant to be more-or-less facetious. Nonetheless it warrants a clear-cut approach because the odds are that by the time they reach retirement, they won’t have dependents. Therefore, any professional in the field needs to understand the underlying concerns of this off-the-cuff response. The actual issue to address has more to do with the options available and the coverage that is most advantageous to the individual client. The two main types of life insurance policies that will benefit the majority of people are term life and cash value.

Term life insurance is what the majority of people expect from a life insurance policy. It consists of making regular payments over the course of a specified period of time. Should the policy holder pass away during this period, the named beneficiary will receive a payout.  This policy is a great fit if you have a spouse or other dependent without an income. It’s generally straightforward, and is not subject to additional costs and provisions that more intricate policies would incur.  Furthermore, if the client is unlikely to realistically recover from a significant debt load in addition to having dependents, this will ensure that their family is looked after.  

The other major option available, although usually less recommended, is a cash value policy. Under this type of policy, a portion of the premium is allocated to a beneficiary payout similar to a term life policy, while the rest is invested. This invested portion can then be accessed prior to death or can be passed along to a designated beneficiary. While this added flexibility is very appealing, the associated costs regularly leave the total cash-out value at a much lower level than had the client invested in either an IRA or a brokerage account.  

For more information, please read:
Should Retirees Have Life Insurance? | The Motley Fool

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