Many people think they don’t need life insurance in retirement, especially once the kids are all grown. Whether you’re approaching retirement or are already there, and are thinking life insurance isn’t necessary after all the kids have moved out and the house is paid off, you may want to rethink your decision.
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Here are five reasons getting a life insurance policy is a smart move.
Funeral and burial costs have risen dramatically over the years, with the average funeral now costing between $7,000 and $12,000, according to Lincoln Heritage Funeral Advantage. Not to mention other end-of-life expenses, such as medical bills from the final illness. A final expense life insurance policy can come in handy in such situations. It doesn’t only cover funeral or cremation expenses but also medical and legal costs.
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Life insurance would make the most sense in retirement if you have dependents who still rely on you for financial support. Whether you’re supporting your adult kids, grandchildren, or a disabled family member, life insurance allows you to continue providing for them, even after you’re gone.
Also, if your spouse would lose a significant amount of your pension income upon your passing, life insurance can make up the difference. This can give you peace of mind knowing that your loved ones are protected financially.
Many retirees carry debt into their golden years. This can include remaining mortgage balances, credit card debt, car loans, or student loan debt. When you pass away, your debt doesn’t go away. Your loved ones may be responsible for all your debt balances. Life insurance proceeds can help cover outstanding debts so that your family doesn’t have to use their own money or sell assets to pay what’s owed.
If you have a large estate, your heirs may be responsible for estate taxes when they inherit your assets. Life insurance can provide the liquidity needed to pay these taxes without forcing your heirs to sell family assets. This is especially important if your wealth is tied to illiquid assets. While federal estate taxes only apply to estates worth more than $13.99 million per individual in 2025, some states have lower estate tax thresholds.
Life insurance can be a great tool for making meaningful donations. Naming a charitable institution or a non-profit organization as your beneficiary in your life insurance policy is one of the most common ways to donate your proceeds. Other ways to donate include gifting your policy or policy dividends and charitable riders.
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