Life insurance plans, especially term plans, are based on one underlying principle – “After the death of the breadwinner in a family, the family’s lifestyle should be restored to the level it had been while the breadwinner was still alive.”
Thus, a term plan or life insurance cover, post-retirement may sound counter-intuitive for most people. Why? Because, by the time of retirement all financial responsibilities are over, and you have accumulated sufficient money to maintain your lifestyle. Since you’ve retired, you will not have any income. Thus, technically life insurance does not have anything to cover.
Why Insurance Post-Retirement?
So, when you are not earning (most likely after-retirement) then, where is the need to secure finances for the family? Also, by retirement, you will be comfortably settled in life and so will be your children. You will want to enjoy life by cashing on the benefits of your savings done so far. You will most likely have no debts. You are most likely to have own house, meaning, overall, you are expected to be in a secure circle of life.
There are many reasons why you can likely consider to continue a term plan after retirement too.
1. Liabilities & Spousal Support
What if you want to make sure that your spouse lives a financially independent life after your death too. It can happen so, that, you desire your spouse to live a stress-free life, without financial dependency on children. The retirement age of 60 could be too early to decide to discontinue your term insurance policy.
The times when employees accumulated wealth their whole lives, and only at retirement would end up buying a house, are long gone. With subsidies and efficient lending facilities available, getting a loan to buy your first property is probably easier than trying to accumulate money over next 20 years.
However, borrowing has one disadvantage – it can continue for a long time. Just in case you decide to retire before your loans are over, better continue your insurance cover too.
2. Early Retirement
In other cases, too, like if you take voluntary retirement, say at the age of 55 years to travel the world suppose. Then too, continuing your term plan is wisdom and being prudent so that you can enjoy your life without worrying about your serious financial liabilities like a home loan, or any other debts, maybe a loan on your second home.
3. Children Still Growing Up
Also, if you have had your children late in life, you need to secure your post-retirement death risk, as you may still have dependents including your spouse and your children. Pursuing higher education after gaining work experience is no longer a distant reality and so is the need to get married late in life. Therefore, you may still want to secure- the financial loss of your life- as a top priority.
4. Contributing Even After Retirement
Also, if you continue working after retirement, then you are still a financially contributing person of the family.
5. Cover the Cost of Death
A post-retirement corpus of funds can also relieve your family, including your children, of the financial burden to pay for your funeral expenses or any inherited debts, thus, giving you a respected and a life of great wisdom. If liquidity is your after-life goal, then, a term plan is the best way to secure it.
6. Legacy
The long form of term plan or whole life plan gives you a great choice and a once in a lifetime opportunity, to pass on your wealth to the next generation. You, in a way, provide a legacy to your grandchildren and live in honour and respect throughout your life.
Do You Need A Whole Life Term Plan?
If any of the things mentioned above are in your mind, perhaps a whole life term plan will work for you. Else a normal term plan which covers your life up to the age of 65 or 70 will suffice, here’s why:
– Higher Premium
The premium for term insurance (even without investment component) will be higher than a normal term cover.
– Longer Premium Payment Term (PPT)
Premium payment term on a whole life term plan is usually equal to the term of cover. Thus, you end up paying the ‘high-premium’ even when you are only relying on your accumulated wealth.
– No Surrender Value
Finally, because a whole life term plan is a term plan, and does not carry an investment component, it does not acquire a surrender value. Therefore, even if you want to stop the cover after two decades, you simply stop paying the premiums. The premiums you paid so far are lost.
Thus, if you are planning to buy a term cover, and being enticed by a whole life term plan. Compare the features and premium costs carefully. Avoid unnecessary expenses in your golden years.
