Most personal finance bloggers or gurus would say that Retirees or near retirees no longer need insurance, however, like most personal finance advice when you start applying real life situations the hard and fast rule starts to crumble. There are situations when retirees or near retirees should have life insurance and just like my view on purchasing life insurance on a child one just needs to think about it logically to come to the same conclusion.
Protecting A Survivor’s Income
Life insurance is often used to replace a lost source of income. The easy situations is when a retired couple has one spouse receiving income from pension which does not continue or is substantially reduced at the time of said spouse’s death. You would be surprised how often I see a couple who has chosen the single life option but has absolutely no way to replace that income if the spouse predeceases.
If one can agree that we should protect an income stream shouldn’t we then try to replace the cost of living adjusted Social Security? If you have a couple living nearly check to check what would happen if one of those checks just stopped suddenly? At a time when things look the worst.
Solving a Liquidity Need
Maybe we aren’t protecting an income stream but rather protecting against a fire sale. When one spouse dies there is often an understandable need to flee to safety. Providing a lump sum, in cash, for a widow or widower may provide the need for safety without selling assets.
Just like helping a widow or widower with a liquidity, life insurance may provide liquidity to help out heirs conclude your estate. Regardless of whether you are going to be hit with a State Estate Tax or the Federal Estate Tax the collecting agency has no interest in your real estate, property, jewelry, etc. The agency wants pure cash usually within 9 months.
I am sure there are other situations but those 4 are probably the easiest examples of when a retiree has a permanent or near-permanent problem that can be solved with life insurance.