LEVEL LIFE INSURANCE IN RETIREMENT.

Why Would I Need Level Life Insurance Into Retirement?

Is level life insurance something that is necessary or even sustainable into retirement? I plan in helping you make that decision for yourself in the next 2 minutes.

Death is an expensive undertaking. Funerals aren't cheap and if you want the Kapiti Pipe and Drum Band to march the casket down Kapiti Road that is going to cost. Should those costs come from pension savings that can't be replaced or from a Life Insurance Policy?

A level life policy to age 100 is a great way to make sure that death doesn't cause financial hardship to the survivors or the deceased children. You might think that it doesn't matter to you, but Life Insurance is never about the insured, it's about those left behind. They are the ones that will be left with a bill to pay.

So what are these costs that will need insured?

1 – There will be that funeral to pay for

Currently a basic funeral will cost about $10,000, maybe $7500 for a creamation. So said the Funeral Industry Trends Report said in 2023. If you are retired and on a fixed income, taking this amount from retirement savings, knowing that it couldn't be replaced may cause additional stress. In 50 or 60 years time how much will a funeral cost? Maybe there will be some amazing sci-fi way of cheap funerals but I imagine there will still be a funeral industry to pay.

2- Gather the Clan

Most people would like to see family and have family around if possible. Likewise family will want to come to you to see their parent and grand parents for a last time. This may involve flights, accommodation, and unpaid leave and a terrible choice for a young family living abroad. Leaving some money aside for family to come and visit might be a good idea. An affordable Level Life Insurance Policy into retirement would prevent that.

3 – Keep the Estate Running

A single person may have other costs to consider. Money for a funeral as well as enough to keep the estate going until it can be disposed of. Rates, insurance and maintenance needs to be paid for as will any professional or lawyers fees. It will take many months to organise disposal of assets and that would be an additional expense on family. Insurance into retirement if taken young enough could be very affordable.

4- Survivor Support

Most people have a plan of what will happen if the other one dies. These plans will cost money and that money needs to be there to start things moving. Decorating the house up to selling to downsize, estate agent fees, professional fees, incidental costs. What is actually a small amount a week could make a huge difference then.

5- Terminal illness

People are vital well into their retirement and get upto all sorts of great stuff. A terminal illness could trigger a Life Insurance claim delivering money to make a few more dreams come true. Visit family or bring them to you, go see some memorable sights, make the most of time.

6- Medical Costs

There may be medical treatments, travel costs, health insurance excess and other expenses being acrued in the months and years before death. If these have been taken from limited savings that can't be replaced it will put additional stress on the survivor and the remainder of their retirement. Putting aside a little for that on a level life insurance designed to last to the end could be very inexpensive.

7- Leave a little something

We all hope that we will do well. That our retirement shall be full and care free. We wont need a life insurance as the millions will cover it and there will be plenty left for our statue. While it's not impossible, it's not too expensive to hedge your bets and in the best case you can donate it all to your favourite charity? I'm sure they would be greatful.

Does a Level Life Insurance Policy into Retirement Make Financial Sense?

Is $100,000 of Life Insurance enough for all these eventualities? Perhaps not, if you take inflation over the decades, so you can apply for a more inflation proof number if you wish. The other option is to allow the amount to increase with inflation but remember that also means the premium will probably increase. If you are going to do that it is wiser to pick the larger amount at the earlier stage.

It is very inexpensive, a $100,000 Level Life Policy for a 30 year old female is under $6 a week. As long as she pays the $6 a week she will be covered for $100,000 until she dies. Yeah, it's more expensive but at age 52 then you are making a saving and before you've hit 65 you'll have paid the same across the whole policy. To be fair at age 65 most people will have cancelled their stepped life policy as it will be too expensive. It will be over $23 a week at todays prices, while the level life policy will still be the same premium.

A $100,000 level life insurance policy will cost under $20,000. This is an investment that pays out five times on death. Sure you could put $6 a week into a high interest account for 70 years, but would you? Of course if you die or become terminally ill at any time it will allow a claim to be considered.

I Can Just Get This In The Future, Right?

There is a time limit on this, rates are based on your age. By age 50 it may be too late for it to make financial sense, but nothing to stop us looking.

If you are worried about the problem of inflation eroding the amount of cover, there are ways around that and you should definately speak to an insurance adviser. Just make sure they are independent.

Cover Yours Ltd (FSP769531) and Marc Hamilton (FSP306046) are registered Financial Service Providers and you can search the register here. Marc Hamilton is a member of the FSCL Disputes Resolution Service. Cover Yours Ltd and Marc Hamilton’s disclosures can be found here or by emailing marc@coveryours.co.nz