Life Insurance Needs After Retirement

 In the late sixties, after my USAF stint and looking for work, a recruiter for MLPF&S made  me cool my heels for two hours in the dead of winter in his unheated downtown Detroit reception room. Needing a job I walked across the street and signed a contract as a life insurance agent. A few years later I began my self-study for my securities license. At the time life insurance companies wanted nothing to do with investments and stock brokerage firms wanted nothing to do with insurance. Banks, on the other hand, slobbering as always, wanted to get into both. Today everyone does everything and you can’t tell the players without a scorecard. It’s gotten so that many agents and brokers now specialize and it isn’t often you run into someone who does everything from investments to insurance, and does it well.

Life insurance products have gotten complicated and for the purpose of this blog I won’t get into the why’s and what-for’s. Suffice to say sitting down with an insurance agent to discuss the purchase of a simple policy may make a vein ligation a more enjoyable experience.

For most Boomers the need for life insurance expires when the mortgage is paid, the lads and lassies leave the house and the dog dies. The focus then becomes on reducing cost of living and maximizing the use of investment dollars for retirement income. So why do some retirees still own and pay for life insurance? There are a few reasons:

1. To replace the loss of social security and/or pension income upon the death of one spouse or the other.
2. Pay off those nasty credit cards, a mortgage or second.
3. Pay for final expenses which can run about $25,000 for a swell send-off to about $10,000. This may also include some medical bills.
4. Estate tax if you’ve accumulated more than three million in assets.
5. An extra amount to give to charities, church, grandkids or college/university.
6. The newer policies also have riders for long-term care living expenses which help in the total insurance premium outlay department.

Owning insurance past 60 can be a bit on the pricy side unless the policy was purchased earlier. Buying pure term, while less expensive initially, can escalate in price faster than Glenn Beck can uncover a conspiracy. Still paying for life insurance need not be a budget breaker. For small face amount policies there are choices available from the local credit union or converting a portion of your employer’s group insurance. A spousal rider may also be converted and carried as an individual plan once the employee retires.

Probably the best method to pay premiums on existing insurance is use one of the non-forfeiture provisions available in all cash value policies. The insured may request a paid up policy using the cash value of the old policy- usually $10,000 of cash will provide a $20,0000 paid up policy. Or, the insured may have the dividends and interest used to buy paid up additions of life insurance rather than reducing premiums or allowing them to accumulate.

When shopping for new insurance make sure the company has a grade A claims paying ability and get several quotes. (One agent can usually do all that for you). You can get that info on-line at A.M. Best Company or ask the agent for a Best report. Also, be aware that some of the newer policies have clauses which allows the company to increase premiums to stratospheric levels, which would probably happen at the most inopportune financial time for the insured.

Finally, stay away from policies that mix equities with life insurance. If the investment side collapses you will find yourself with higher premiums or less insurance. The entire concept of insurance is for the insured having someone else accept the risk.

Review and update policies, beneficiaries and other cash values associated with the insurance as you would any property. Don’t worry if you lose or misplace a policy and keep it where the beneficiary can get their hands on it. Locking it up in a safe deposit box may seem prudent but often cash is needed to pay bills and waiting to get the policy out of a safe deposit box may only cause needless grief.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.