Rethinking Life Insurance After Retirement

The Evolving Purpose

At the heart of every insurance recommendation is an insurance needs analysis. During retirement the needs don’t vanish—but they may evolve to match a new set of risks and priorities.

Debts may be paid down and children may be financially independent, but clients may be setting their sites on other goals, such as making sure those kids will inherit the family cottage without an unmanageable capital gains tax burden. Or perhaps creating a charitable gift for a school, hospital, place or worship, or other meaningful cause.

For a number of seniors, term insurance may still have a place. For example, to help protect those who are retiring with a mortgage, or to meet support obligations that may arise as the result of a “grey divorce.”

Insurance can also be used to manage family dynamics. Imagine, for example, that only one child wanted to have continued access to the cottage, or that two children wished to participate in the family business, while a third did not. Clients can use insurance to ensure assets are distributed equitably in order to reduce family friction in the estate.

Retirement is prime time to ask probing questions, not just about a client’s present situation, but also their future vision—and update their insurance needs analysis accordingly.

Strategic Scenarios for Retaining Life Insurance

Here are four scenarios where life insurance may be highly relevant in retirement:

1. Estate Planning and Wealth Transfer

Life insurance can ensure heirs receive their intended inheritance without needing to liquidate valuable or illiquid assets such as rental properties, family businesses, collectibles, or items with sentimental value. Life insurance provides a tax-free cash payout, which can be used to quickly and efficiently supplement and customize inheritances.

2. Covering Estate Taxes and Final Expenses

Insurance can be used to cover funeral costs, a final tax bill, and any outstanding debts. For clients with significant non-registered investments or secondary properties, the capital gains tax bill upon death can be steep. Life insurance can offer a simple way to cover these liabilities, which can help beneficiaries avoid selling assets under pressure. The cost of pre-funding these tax liabilities with an insurance policy is often a fraction of the cost of liquidating assets in the future.

3. Supporting a Surviving Spouse

If your client’s pension or retirement income will drop significantly upon their death, their spouse could be left with a financial shortfall. A life insurance policy can help bridge that gap, maintaining financial security for the surviving partner.

4. Leaving a Legacy or Charitable Gift

Some clients wish to leave a lasting impact through charitable donations. Life insurance can amplify their gift, allowing them to leave more to a cause they care about. In addition, if a registered charity is named as both the policy owner and beneficiary, the client may be eligible to receive a charitable donation tax credit for the premiums they pay while they’re still alive. Charitable tax credits are available for up to 75% of taxable income while living, and 100% of income in the year of death. This means it may be possible to eliminate taxes at death and replace the value of the donated asset for heirs with insurance.

Balancing Goals and Financial Considerations

Retirement planning is about trade-offs. Clients must weigh the cost of premiums against the potential value of their coverage. In many cases, a well-maintained policy complements their financial plan by reducing estate risk, enhancing charitable impact, and offering flexibility in wealth distribution

However, not all policies are worth keeping. It depends on the type of policy, the client’s health, financial situation, and goals. Here are some factors to evaluate:

Policy Type

Term life often expires or becomes prohibitively expensive after a certain age. It’s usually not kept into retirement unless it’s still affordable and there is still a need that is best met with term insurance. Permanent insurance, such as whole life or universal life, can build cash value, offer lifetime coverage, and support estate planning goals.

Premiums vs. Value

Compare ongoing premium costs to the potential benefit of the policy. Is there a need for insurance? Is insurance likely to be more effective than investing to meet that need? Is the policy paid-up or close to it? Is the client still insurable, or would replacing coverage in the future be difficult or costly? Could the cash value be used for retirement income or policy loans?

Tax Implications

Life insurance death benefits are typically tax-free, making them ideal for estate planning. Discuss with clients how a policy might offset future tax liabilities and preserve assets—quickly and without triggering additional taxes.

Some clients may benefit from converting a term policy to a permanent one, leveraging the tax-deferred growth of cash value, or integrating insurance into their broader wealth accumulation and management strategy.

Key Questions to Ask Retired Clients

To guide your clients to the best decisions, consider asking:

• Is there a need for money at death (taxes, equalization, specific bequests)?
• Do your current assets have the liquidity to pay for those needs?
• Is Are your current estate subject to taxes?
• Do you still want to leave a financial legacy?
• Will your spouse or dependents face financial hardship without your income?
• Do you have a strategy to cover the taxes that your estate will face?
• Has your health or insurability changed since you purchased the policy?
• Is the policy aligned with your current retirement and estate goals?

Life insurance in retirement isn’t just about protection, it’s about purpose. When used strategically, it can solve specific financial challenges, offer peace of mind, and contribute to a client’s broader vision for their legacy.

As a trusted advisor, you have the opportunity to reframe life insurance for your retired clients. With a thoughtful analysis of their needs, policies, and goals, you can help them decide whether to keep, modify, or surrender their coverage, and show them how life insurance continues to serve them well beyond their working years.

The’re something special when your relationship-building skills and expert advice come together with high-quality life and health insurance solutions from Beneva to help your clients live better than ever—in retirement and beyond.