5 Ways to Use Life Insurance in Retirement

For some retirees, life insurance isn’t a necessary expense. This can especially be the case if you have an income plan for both spouses, a clear-cut estate plan, and no dependents. But sometimes life insurance coverage can be a useful part of a retirement plan.

Of course, making insurance coverage decisions can be complicated: buying a new policy is a far cry to adding features to an existing one, and in all cases it’s important to do your homework so that you select the right options for your needs.

Be sure to speak to your financial advisor about your needs and the appropriate solutions. With that in mind, let’s get started.

  1. For long-term care coverage

 If you’ve been reluctant to purchase long-term care insurance but want the benefit of insurance coverage for this possible retirement expense, life insurance can help.

An appropriately structured policy could provide access to a portion of your death benefit to cover the cost of nursing home or hospice care. Oftentimes, this can be accomplished by adding an accelerated death benefit rider to the policy, but there are other options depending on your financial situation and preferences.

  1. To provide a pension replacement for a spouse

Do you rely on pension income for your retirement expenses? In some cases, spouses, long-term partners, or dependents aren’t eligible to receive survivor pension benefits. In the absence of survivor benefits or alternative income sources, life insurance can help offset that loss income.

In fact, in any situation where a family relies on income that is exclusive to a single spouse – whether it’s from a pension, a business partnership, or consulting or other work – it could be worth considering a life insurance policy.

  1. Leaving an inheritance – especially for blended families

There are situations where a life insurance policy is a preferable way to leave money to children, a spouse, or other loved ones. This can be the case in blended families in particular, where meeting the needs of both a current spouse and children from a previous marriage can require a little more planning.


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A life insurance policy that benefits a child can help preserve current assets for the spouse’s retirement while also offering kids a lump-sum inheritance. Of course, this is not the only solution to this type of multi-generational planning process: ask your financial advisor about the options that might be right for you.

Note that this strategy can also be used to leave a charitable legacy. Life insurance policies are simple way to have complete control over charitable donations at death, and in some estate planning scenarios they can be advantageous. Again, it’s not the only solution, so be sure to consider all the options.

  1. Estate planning: Leaving assets free and clear

 A life insurance policy can help untangle some of the more complicated aspects of inheritance. For example, let’s say you want to leave property to your kids, but you still have a mortgage on it. You could simply bequeath it to them, but this can introduce both financial and practical complications for your heirs.

A life insurance policy designed to pay off the mortgage or other debt so that your heirs can take ownership free and clear could help. In planning scenarios where it makes sense, it can simplify the entire process. Speak to your financial advisor to find out if your family could benefit.

  1. Estate planning: Providing the gift of liquidity to your heirs

Using the benefits of a life insurance policy can provide immediate cash flow to heirs, making it easier to pay funeral expenses, taxes, or other costs without having to sell anything off (and possibly pay taxes on the sale, too).

That means your savings can be preserved from liquidation, whether it’s investments, collectibles, or other assets.

If this is an important priority for you, an irrevocable life insurance trust (ILIT) could be a prudent solution. These trusts “own” the rights to your life insurance policy, which can’t be modified or terminated from that point onward. The proceeds go to your trust, bypassing probate and any creditors. It can be useful if you have minor children or want to protect your beneficiaries financially.

If you’re considering going this route, be sure to seek out the advice of a qualified professional to help you assess, design, and execute this planning strategy.

Making prudent choices with insurance

 Though we’ve said it before, in all of these situations it’s important to have an understanding of the costs and benefits of any insurance policy. Take the time to talk through any insurance decision with your financial advisor before making a choice.

And don’t forget that there are myriad other insurance plans to make as you embark on retirement.

Medicare is a critical one: if you’re looking for help in getting started, be sure to download our free introductory guide to Medicare. This quick read will get you up to date on important issues, possible risk factors, and getting started on the decision-making process.

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We can discuss this topic and more at a complimentary appointment. As a bay area retirement planning coaches, we can give you a review and make suggestions based on your retirement objectives.

Important Disclosures

& Associates Insurance Services or United Planners Financial Services (United Planners). The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by United Planners.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk. Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. United Planners does not render tax advice.

Securities and advisory services offered through United Planners Financial Services, member FINRA, SIPC. Pasquale Vitucci, CA Insurance Lic. # 0758212, is an Endorsed Agent of Vitucci & Associates Insurance Services CA Insurance Lic. # 0I06319. Vitucci & Associates Insurance Services and United Planners are separate and unrelated companies.
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Further Reading

An introduction to ILITs: https://www.fidelity.com/viewpoints/personal-finance/can-life-insurance-help