We must be aware the primary reason to get own life insurance is meant to replacement of one’s income and financial security for the financial dependents to survive on. This means life insurance is not only a covering of family’s running expenses, but also secures our future financial goals, such as children’s higher education and marriage, paying off any debt and the most probably leaving a large estate for our beneficiaries. Being a financial planner, we have in the past, recommended that people must buy pure-term insurance plan with adequate coverage till their retirement age usually up to 60-65 years. While making financial plan of any individual, we have perceived that children would have been grown and gone, the debt would have been paid off or have minimal debts. Hence, all financial responsibilities have been gone off. However, we have traced out unavoidable financial circumstances in which a person may need insurance coverage well even after retirement which are being discussed here. That is, why some insurers have been introducing most policies that cover one up to 75-80 years on the ground that your family may be still financially dependent on your income.

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Paying off debts

Generally, most bankers are used to allow the tenure of loan by the age of 60-65 i.e. up to your earning years. Sometimes, the debt is so abundant and in many cases, we have seen Indians are getting retired with more debt than in the past. This debt may come in many different forms like lines of credit, credit cards loan and even huge housing loan or may owe money to a friend or relative. In such case, it is pertinent to opt for longer-tenure term plan to cover all these entire debt. While carrying debt in retirement, the proceeds from your life insurance policy can be utilized to repay the balance amount instead of having to liquidate assets sometimes at times when you do not intend to sell.

Income for your dependents

In many cases, your spouse is dependent on your pension income and you find that your spouse would lose a large portion of income upon your death. In another case, you had children late in life or have a relative with special needs who’s still dependent on you for your income. In that case, it definitely vouches the need that you must have an insurance cover until your dependents to be self-sufficient and all of your income to make ends meet remaining your financial goals. Typically this income stream will be provided by the income earned on additional investment assets. Life insurance will work as your capital that will result in the additional income to cover your lost retirement income.

Inadequate Post-retirement corpus

This critical situation creates the sever need for life insurance in post- retirement. If you seem to be difficult to survive with existing accumulated retirement corpus while you are alive and that situation may be worse for your spouse to go it alone even after your death. In that case, having a large amount of life insurance will be a way of providing necessary retirement assets for your spouse after you’re gone. Though you will not able to enjoy the benefit, it could mean make the bridge the gap between a reasonably comfortable retirement and very difficult living conditions for your spouse in the event of your death.

Covering Funeral and medical expenses

Life insurance cover is critical when your death would cause a financial hardship for your survivor(s). But many retirees want to keep continue to pay for coverage that they may not need, simply due to force of habit and want to make the provision need for money to pay for final expenses like funeral expenses and medical expenses. Though they have sufficient health insurance cover, there are always apprehensions on reimbursement of medical expenses which are subject to co-payments and deductibles, or are not covered at all. This is especially hold true with end-of-life medical treatments that are often experimental and not covered by your insurer. These expenses can add huge burden on your spouse with several lakh of rupees in medical bills which remains unpaid even after your demise. While those bills might be paid out of your investment assets, the result will be getting a smaller investment base at a time when your loss will create other financial obligations. Having adequate life insurance is a way of making sure that those expenses would not disturb the assets that your spouse will be living on for the rest of his or her life.

Leaving money to your children

You may have sufficient financial resources and assets to provide for your spouse, children and grand children survival, you may still want to generate additional assets to leave something to your loving family. In rare cases, what if your spouse is live another 15 years or more after your demise, particularly if he or she is significantly younger than you are. Even a large corpus of retirement assets could be diluted if your spouse lives that long. And with inflation causing an ever rising cost of living that is more than a remote possibility. In such case, you could in help of life insurance policies set up specifically to pass the money to your children upon your death. Your spouse would continue to live on your joint retirement assets, but you’ll still have left a financial provision for your children.

Evaluation of your circumstances

Start your evaluation of your financial circumstances after getting retirement while considering length of your financial goals, tenure of paying off debts, future liabilities provisions, medical expenses and generation of additional assets, get insure yourself accordingly as best suits your long-term plans. Obviously, list as outlined above may not be exhaustive but it does represent some of the key uses of life insurance even after retirement which could be proved an excellent tool in the overall financial planning process. Always remember, life insurance cannot be an alternative to retirement savings. Use this information, only to build a comprehensive retirement plan to avoid these unpredictable contingent liabilities.

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an M.com from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at info@prudentfp.in
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