Many pensioners feel uncertain about what to do with their life insurance policies as they age. Some are tempted to stop paying premiums while others wonder if they really need to pick up some term life insurance or some whole-of-life cover while they are still in good health.
The general rule would be to keep paying on any policy already in effect unless there is a specified age at which payments are then waived. The benefits from your policy can be passed to those inheriting your estate, or you can actually sell your policy to an investor who will take over the payments and be named as the beneficiary at the time of your death.
Life insurance for pensioners, although relatively expensive, can be a good choice for many retirees for several reasons. This policy only pays out a fixed amount at your death. However, if you are concerned about maintaining the same standard of living for your surviving spouse, a special-needs dependent, or someone else who has been under your care, term insurance can offer that protection. It can cover college expenses, pay off the mortgage or go towards some other designated need.
Unfortunately, your spouse may not qualify for a transfer of your pension benefits upon your death. If access to those pension rights is limited, your loved one may struggle financially after you gone. Life insurance for pensioners can make the difference in the quality of life your loved one is able to enjoy.
Term insurance can also be used to cover end-of-life expenses such as your funeral and burial costs. It can take care of inheritance taxes as well, so that your loved ones do not have additional financial stresses at this difficult time of their lives.
Whole-of-life insurance cover is a new option that is attractive to many pensioners. With more policies coming to market and increasing competition, the prices are becoming more affordable, even to those on a limited income. This hybrid insurance approach is directed towards people who are 50—85 years of age. No physical examination is necessary for acceptance into the programme. However, some insurance companies have qualifying periods of up to one year. If you die during that probationary period, your family will receive only part of the original pay-out agreement.
The most valuable aspect of this type of insurance cover is that this plan can be deliberately excluded from your other assets and therefore, will not be subjected to inheritance taxes, which could be as much as 40 percent of the total policy pay-out. If you ask your agent to have the policy written in trust, it will be exempted from inheritance taxes and the tediousness of going through probate court. Your loved ones will gain immediate access to this money. Whole-of-life insurance policies can be written with a set pay-out at the time of your death, or they can be written as investments. How the invested money performs will determine the actual amount of the final disbursement. Policies are reviewed every five or 10 years.
The ultimate reason for buying life insurance for pensioners in your later years is peace of mind. Knowing that your loved ones can have an inheritance and will be taken care of after your passing is a good feeling.