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Life Insurance and Retirement

Updated: July 2018

Life insurance for retirees works the same way as most term or permanent policies: If you pass away, the death benefit is meant to help replace your income and help your beneficiaries pay for your final expenses.

When you retire, you may lose your employer-provided life insurance plan, so you may want to look into purchasing a plan of your own. Having your own life insurance policy in place is a good idea if you have debt, like a mortgage, or a spouse who depends on you financially.

Whether you're nearing retirement or you're a recent retiree, there are a few things to consider as you shop for life insurance, including:

  • The cost of the policy
  • The length of the policy
  • The cash value feature of a permanent policy

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How Much Life Insurance Can I Afford?

Choosing a life insurance policy that works with your retirement budget is likely your goal, but CNN Money says that premiums on a new policy will likely be much higher than when you were younger.

Permanent life insurance is generally more expensive than term insurance. That's because it has a cash value component and because it stays with you as long as you live, as long as your premiums are paid.

Term insurance can also cost more to purchase as you age, according to CNN Money. As you near retirement, however, you may be able to get by with a shorter term (the length of time your insurance stays in place, such as 10 years) in order to purchase a more affordable policy.

Some term life insurance policies and whole life insurance policies offer fixed premiums and death benefits. If you're on a fixed retirement income, that may help prevent you from shouldering unexpected increases.

How Long Will I Need A Life Insurance Policy After I Retire?

Even if you feel secure with your financial status for retirement, your assets may have to last for many years. Depending on your lifestyle and health costs, you could end up spending a great deal of your savings and investments. Although you won't need to worry about expenses after you die, your surviving spouse, adult children or grandchildren might — especially if they rely on you financially.

Your specific circumstances may help determine the length of policy you select, according to LifeHappens. For instance, if you have 10 years left on your mortgage and it would be challenging for your spouse to afford that payment on his or her own, you might choose a term policy that ends when your mortgage is paid off. If you have adult children or grandchildren who will depend on you indefinitely for financial assistance, you might choose a longer term policy.

Will I Need a Source of Emergency Funds?

It's tough to know what unexpected financial needs might pop up during your retirement years. Most types of permanent life insurance policies include the cash value feature, which may be used as a source of emergency savings that you can access while you're still alive.

You may be able to take out a loan from the cash value in your policy1. If, for instance, you face a medical crisis that your health insurance doesn't fully cover, you could borrow from your cash value to help pay your expenses. Having a source of emergency funds may be helpful when you're on a fixed income. Wondering which type of life insurance policy could help you meet your specific financial goals once you retire? An experienced life insurance agent can help you decide.

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This content is for informational purposes only and may not be applicable to all situations.

This life insurance information is provided for general consumer educational purposes and is not intended to provide legal, tax or investment advice. Allstate life insurance issued by Direct General Life Insurance Co., 911 Chestnut Street, Orangeburg SC 29115; Allstate Life Ins. Co. & Allstate Assurance Co., 3075 Sanders Rd, Northbrook IL 60062; American Heritage Life Ins. Co., 1776 American Heritage Life Dr., Jacksonville FL 32224. In New York, life insurance issued through Allstate Life Insurance Company of New York, Hauppauge NY. Life insurance also offered and issued by third party companies not affiliated with Allstate. Each company is solely responsible for the financial obligations accruing under the products it issues. Product guarantees are backed by the financial strength and claims-paying ability of the issuing company.

Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA). Registered Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. 877-525-5727. Check the background of this firm on FINRA's BrokerCheck website (

1Loans or partial withdrawals can reduce the policy's cash value and death benefit, increase the possibility of policy lapse and may result in a tax liability. Consult a tax advisor for more information on the tax treatment of loans or withdrawals from a life insurance policy.
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