The Importance of Life Insurance for Retirees: The Costs of Going Without

September may not be circled on your calendar, but it’s Life Insurance Awareness Month, making it an opportune moment to grasp the significance of life insurance and the perils associated with its absence.

Regrettably, misconceptions about the fundamental aspects of life insurance may be deterring individuals from acquiring the coverage they require. According to Life Happens and LIMRA, two non-profit organizations dedicated to researching and educating about life insurance, over half of uninsured Americans delay purchasing coverage due to uncertainty about what to buy or how much coverage is needed.

However, while this confusion is understandable, procrastinating in securing appropriate insurance can incur costs in various ways. From a purely financial perspective, obtaining life insurance at a younger age is typically more economical. Yet, the potential costs of not having insurance when it becomes essential are deeply personal.

To be precise, what is the value of…

– Knowing your family can remain in your home if something were to happen to you?

– Ensuring your children can pursue their educational aspirations?

– Guaranteeing your debts can be settled without imposing a burden on your loved ones?

Clearly, if one were to affix a price to these benefits, it would be substantial. This underscores the importance of having sufficient life insurance coverage.

So, let’s revisit the issue of people delaying insurance purchases due to uncertainty about the amount and type they need:

How much coverage is adequate? While you may hear recommendations like having life insurance equal to seven to ten times your annual pre-tax salary, this is a general guideline, and individual circumstances vary significantly. To determine your specific coverage needs, you must consider factors such as your current income, your spouse’s income, outstanding mortgage and other liabilities, the number of children, educational expenses, and final arrangements for funerals.

Which type of insurance is suitable? Essentially, you have two primary options: term and permanent life insurance. Term insurance provides coverage for a specified period, typically 10 or 20 years, and is generally more affordable, especially when purchased at a young age. On the other hand, permanent insurance, such as whole life or universal life, comes at a higher cost. This is because it not only offers a death benefit but also accumulates cash value, which can be accessed through loans or withdrawals, providing flexibility to address changing financial needs over time. Your choice between term and permanent insurance should be based on factors such as the anticipated duration of coverage and your ability to afford premiums.

Educating yourself about the benefits, costs, and types of life insurance can empower you to make informed decisions that safeguard your family’s well-being for years to come. So, don’t delay in acquiring the knowledge you need.