11 Benefits of Life Insurance While You Still Live and When You Retire


Contrary to popular belief that life insurance becomes less valuable should a policyholder reach retirement age, life insurance is needed by retirees more than ever. When a person retires, the main goal is to reduce unnecessary expenses.

Nonetheless, life insurance must not be regarded as a necessary expense because it also offers lots of benefits while you are still living.

Benefits of life insurance while you are still living

The majority of us think that we can only make sense of our policy after death and that we do not have any personal gain from it while we still live. Wrong. Life insurance has as many benefits while still alive as when you are no longer here physically.

1) Tax reward

One type of life insurance is permanent life insurance that pays your beneficiary when you die at whatever time. It is a form of lifelong protection, given that you are paying your premiums. Such a policy grows a tax-deferred cash value. The growth of this cash value is guaranteed, and its value will never decline.

Also, your beneficiary will receive the money tax-free. Another tax benefit of your insurance is using it in paying for estate or realty taxes. This ensures that your heirs will be entitled to your assets and not necessarily to taxes.

2) Loan collateral

Another benefit of building your cash value is using it as collateral if you want to obtain a policy loan from your insurance company or any loan type from a bank. You may secure the highest loanable amount possible even when you have a low credit score.

Further, you may borrow against your cash value any time you want and regardless of its purpose. If you cannot repay the loan, including the interest, the borrowed amount will be deducted from the amount paid to your beneficiary when you die.

3) Dividend payment

Although not guaranteed, some insurance companies offer dividends. Dividends can be in cash or credits that you may use to build the policy’s cash value further.

You may also use this in paying your monthly premium or your loan or buying more coverage. Extending your coverage is also called paid-up additions. Reinvested dividends also grow tax-advantaged.

4) Flexible fund

Not only for your retirement or your children’s education, but a policy also gives you instant access to the money you need. Aside from the cash that you may obtain through your dividend or a loan, you have the option to surrender the paid-up additions or terminate the policy and let the insurer surrender the cash value as an annuity. You may choose to receive the annuity for a specified period or for like.

The annuity is your guaranteed income that you may use in investing in a business, purchasing a house, or designating it as an emergency fund. If you need to handle an emergency, surrendering your policy and receiving your cash value in a lump sum is also possible.

5) Legacy opportunity

Not everyone can leave a legacy. Most of us are thinking of what we can provide for our spouses, children, and other heirs financially. Life insurance coverages present an opportunity to continue the business you built for decades in the case of your sudden demise.

If you support a local cause or have a choice of charity, you may name the organization as your sole or one of your beneficiaries.

Benefits of life insurance when you retire

Here are some of the reasons to keep your life insurance even after retiring from work. Protection is at the heart of this matter. Thus, if you don’t want your loved ones to suffer after you die, you might as well continue paying those monthly premiums.

1) Continuing the ‘bank of you’

Being a retiree doesn’t mean that your children and grandchildren can no longer rely on you financially. Based on the study conducted by LIMRA Secure Retirement Institute, about 63% of American parents still give support to their youngsters. If you can no longer support them financially, can you afford to borrow from loan sharks? Your life insurance can be the source of the fund that your daughter needs, for instance.

Another good thing about this is that withdrawals are tax-advantaged as long as the withdrawal is not more than what you have paid initially for the cash value.

2) Taking care of your spouse

When a senior citizen under pension dies, his or her pension dies with her. What will happen to the surviving spouse, especially when the person is not receiving a pension every month? Good thing if the deceased spouse’s pension has a survivorship option.

If it doesn’t have any, the life insurance will serve as the replacement for the lost pension. Life insurance is an asset. However, it can also be transformed into other income streams.

3) Taking care of a special-needs child

After you left this world, who can you entrust your special-needs son or daughter? No one will readily accept such a big responsibility, but care facilities. With this, continued care must be arranged early on. For instance, you may use and fund a special-needs trust through your life insurance.

This trust can be used for extra care other than what the government provides. Through a trustee like the care facility itself, the trust will be spent based on the child’s needs.

4) Equalizing estate

If you have four children and your son wants to take over the family business and nothing else while your daughter wants your jewelry collection, how will you divide your assets among them? Your life insurance could be the answer.

It provides liquidity to the estate so you may come up with the money that is the equivalent of the family business, vacation home, art collection, etc. In this way, everyone is treated fairly.

5) Protecting estate properties

If you own several real estate properties, you are liable to pay estate taxes; otherwise, the government will seize the properties if you fail to pay these. It would be best to preserve these properties for your heirs, and you can do this through your life insurance.

Thus, insurance can protect your assets against liabilities.

6) Paying off debts

LIMRA also discovered that approximately 64% of retirees aged between 65 and 74 are still paying installment debts, including a vehicle loan and a mortgage loan. You don’t want your loved ones to inherit your debts when you die.

What’s worse, they may end up living without a house and a car because they cannot sustain the monthly repayments. Life insurance is an assurance that all your debts will be covered.

In strengthening your financial position, it is about time to look for life insurance. However, look beyond the essential death benefits that the policy offers. Think of your policy as an asset that appreciates as you grow older. This is an accessible and flexible asset that provides you with exciting benefits that you and your loved ones may enjoy while you are still here with them.


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Mommy Iris

I'm a lifestyle and mommy blogger from the Philippines. Pinay Ads was created to share bits and pieces of my life and my family. I have a wide array of interests that include entertainment, movies, music, gadgets, traveling, food, baking, and more. So, I hope you’ll stick around and enjoy reading!