The Importance of Choosing the Right Life Insurance Policy for Your Retirement Years

Life insurance has its benefits, and choosing a manageable life insurance policy is a critical step in your retirement planning.

It can help your family cover end-of-life expenses, funeral and burial costs, and pay for estate taxes. It is essential you select a life insurance policy that could benefit you and your family in your retirement years. Here are a few options to review with your financial professional.

 

The Most Common Types of Life Insurance Include:

 

1. Term Life Insurance

This type of life insurance does not build a cash value and has a temporary coverage length of anywhere from 1 to 30 years. There is a fixed death benefit, and it is generally a less complex, lower-cost choice compared to some of the others. Coverage for term life insurance varies, however, it could be significant depending on its structure. People tend to buy enough to cover their working years should they die early. The money can then help their surviving spouse with day-to-day short-term financial responsibilities, like the mortgage or paying for their children’s education.

Pros: It is generally the cheapest and simplest type of life insurance.
Cons: Beneficiaries won’t get a payout if you outlive your policy.

 

2. Variable Life Insurance

This type of insurance is a permanent life insurance policy with what is known as a cash value account using invested money, generally in mutual funds. Having the cash value invested in assets like a mutual fund opens it up to market volatility risk as it may rise and fall in value like a stock. If you prefer, there is the option to portion a part of the premium to a fixed account, so you are guaranteed a rate of return helping to mitigate some of the market risk. Variable life insurance also pays a death benefit to your beneficiaries after you die.  

Pros: Returns of variable policies may provide tax-free income.
Cons: These policies are considered more volatile than other forms of life insurance.

 

3. Whole Life Insurance

This a permanent form of insurance that generally lasts for your whole life as long as the premiums are paid. Your premiums also remain the same throughout your life as well as the amount of your death benefit. Another benefit to whole life insurance is the cash value component. When you pay your premium, a portion of that payment gets applied to insurance costs, and the remaining portion goes into a cash value account. The cash will accrue over time based on the rate determined by the policy and when it reaches a specific amount you are able to borrow from that account.

Pros: This type of insurance is less complicated than some of the other permanent choices, plus you are generally covered for your entire life, and you can grow a cash value account.
Cons: It is more costly than the cheaper term life insurance option.

 

4. Universal Life Insurance

Universal life insurance is a type of permanent life insurance that gives you the opportunity to adjust your premium payment amounts and potentially greater cash value growth over time. When it comes to universal, there are different types to choose from, and it is critical that you understand which works for you. 

Pros: This type of insurance may be cheaper than, for example, whole life insurance.
Cons: Not all universal policies guarantee you will have cash value growth.

 

5. Burial Insurance

A type of policy designed to cover the expenses your loved ones would be responsible for in the unfortunate event of your death. Your coverage should last your whole life as long as you make payments. Payment options can usually be either monthly or in one large sum annually.

Pros: Because it typically doesn’t require a medical examination, this may be a suitable option if you have a pre-existing condition that prevents you from a whole or term life insurance policy. Another benefit is no restriction on how the payout can be used.
Cons: These policies are often expensive, and there may be up to a two-year waiting period to get signed up. If you die before the waiting period ends, your beneficiaries won’t get anything.

 

Consult your Financial Professional

There are several types of life insurance, and each may impact your financial situation and goals differently. Consider consulting your financial professional to review your life insurance options in preparation for retirement and ensure your family is cared for.

 

 

_{Important Disclosures:}

_{This material contains only general descriptions and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.}

_{All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.}

_Sources:

_{Variable Life Insurance (investopedia.com)}

_{5 Different Types of Life Insurance - NerdWallet}

_{Understanding Universal Life Insurance – Forbes Advisor}

_{What Is Burial Insurance? | Progressive}

_{Whole Life Insurance: Pros and Cons (investopedia.com)}

_{This article was prepared by LPL Marketing Solutions}

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