The basic premise of a term policy is to offer comprehensive financial aid to your family, in case you are no longer there to provide for them. Therefore, it is advisable that you should purchase a term plan as early as possible during your lifetime. That said, however, does it make sense for you to buy term insurance if you are nearing retirement?
Theoretically speaking, the later you buy the plan, the higher the premium amount you would have to pay. So, in all fairness, term insurance might not attract you much especially if you are in your late 40s or 50s. Also, age is a common deterrent when it comes to offering insurance cover, from the insurers’ perspective. However, there are circumstances where purchasing a term policy will make sense.
Therefore, you need to prudent as well as an alert when investing in a term insurance plan (irrespective of high premium). To help, here are some important considerations.
1. Affording Premium Payments after Retirement
Usually, the pension received upon retirement is sufficient to support you cover your necessary living expenses for each month. However, if your kids are financially dependent on you or you have unpaid debts and debts, you would have to effectively plan your finances so that the burden doesn’t fall on your family.
Assess the Extent of your Expenditures
It is vital for you to assess the extent on current expenses so that you can determine the future costs and handle your debt. To get the exact figure, you must first make a note of your housing costs, utility payments (like electricity, water and gas), transportation cost, food and clothing expenditure, and any other sundry expenses that you may incur after retiring.
Take Inflation into Account
Inflation is a crucial factor that will creep in with years and subsequently, raise the cost of living post-retirement. In accordance with the inflation rate, therefore, you must make sure to match your pension pay-out. Otherwise, you would not be able to meet expenses, let alone to pay the premium for your term policy.
2. Can You Pay Only till Retirement?
Ideally, individual in their 60s or nearing retirement would have no reason to buy or extend their life coverage. Financial advisors usually advise planning your investment portfolio in such a way that your term cover usually ends by retirement.
However, if you choose to work after retiring and there is an income to protect, then buying or extending the term-cover makes sense. Overall, you need to assess your financial needs and income protection goals before agreeing on a term plan beyond retirement.
Relief from Liabilities
Further, a post-retirement corpus of funds would also be beneficial for your family, relieving them of any financial burden to pay for any inherited debts or your funeral expenses. Buying a term insurance policy from reputableinsurer, therefore, would help you make sure that you have a respected and a proper send-off,after living a life of great wisdom. Also, insurers like Max Life Insurance offer tax and other benefits along with term insurance. Therefore, compare and check the benefits before buying your plan.
Put simply, if liquidity is your after-life goal, having a term plan would be the best way to help secure it.
3. Would You Need It?
For most individuals, buying term insurance at a ripe age, say post-retirement, is not an easy task. First, your age will deter your chances of finding the right term insurance plan. Second, even if you do manage to find one, you would have to undertake stringent medical tests to prove your fitness.
And third, term plan premiums skyrocket after you cross the 40-year age mark. So,you would have to think diligently before acting.
Term insurance is crucial if your children are financially dependent on you. Nowadays, this is a typical scenario due to marrying late and having kids later in life. Thus, by the time you reach 60, your children are probably still studying.
You want your spouse to be self-reliant. Therefore, in case you don’t have any source of income, except your pension, you would need term insurance to help your spouse be financially independent.
Usually, significant financial liabilities such as home loans stretch till 30 to 40 years. Therefore, if you have a home loan or any other such pending financial debt, you need to make sure that your family doesn’t have to feel the brunt of your liabilities, should something untoward happens. The proceedings from the term plan would be helpful in paying off all outstanding debts on your behalf.
Be Smart, Retire Happy!
The times when working individuals accumulated wealth their whole lives, and then used the money to buy a house only at retirement, are long gone. Instead, people believe in living in the moment, enjoying life when the time is right. That said, people are also prudent when it comes to planning for their future, especially retirement and putting their money into smart investment plans.
Therefore, if you wish to make sure that you have a stress-free life beyond retirement and your spouse doesn’t have to be financially dependent on your children, you may have to think about buying or extending your term policy. The retirement age of 60 years, would,therefore, be too early to decide to discontinue your term plan.