Retirement is a good time to review your finances, including any life assurance and critical illness cover you have.
The right level of protection will depend on your circumstances, your family and what you want your money to achieve. Cover that made sense when you were working may no longer be necessary. Equally, losing protection provided through your employer could leave an important gap in your financial plans.
So, do you still need life assurance or critical illness cover when you retire?
Start by reviewing the cover you already have
You may lose insurance benefits that were provided through your employer or business when you stop working. This could include death in service benefits, private medical insurance or other forms of protection.
Before retirement, it is worth checking what cover you have, when it will end and whether you can continue any existing policies personally.
You should also consider whether you still need the protection. Your circumstances may have changed considerably since you first took out the policy.
Do you still need life assurance?
Life assurance generally pays a lump sum when you die during the term of the policy. It is therefore usually designed to protect the people who depend on you, rather than provide a benefit to you during your lifetime.
The important question is: what would you want a lump sum paid on your death to achieve?
For example, you might want to:
- provide financial security for your spouse or children
- cover funeral costs
- repay a mortgage or other debts
- provide funds to meet an inheritance tax liability
- leave additional money for your loved ones.
Your reasons for having life assurance may change when you retire. You may have built up sufficient savings and pension assets to provide for your family, meaning that you no longer need the same level of cover.
On the other hand, if your family would face a financial shortfall without the policy, keeping some life assurance could still form an important part of your plans.
What about critical illness cover?
Critical illness cover is different because it can provide a lump sum while you are still alive. Usually, this is paid following the diagnosis of one of the specified illnesses covered by the policy, subject to its terms and conditions.
Again, it is worth asking yourself what you would want the money to do.
For example, you might use a payout to help pay for private medical treatment or make changes to your home. Adaptations such as installing a stairlift or widening doorways could make it easier to continue living at home following a serious illness.
The value of this type of cover will depend on your circumstances and the resources you already have available.
Think carefully before cancelling existing cover
It can be tempting to cancel insurance when you retire, particularly if you are looking to reduce your regular outgoings.
However, getting new cover later in life can be more expensive. As we get older, the likelihood of experiencing the events we are insuring against increases. Existing medical conditions or other factors can also affect whether you are able to obtain cover and what it might cost. Some policies also have maximum age limits. This means you should consider the decision carefully before cancelling existing cover. Once a policy has ended, you may not be able to replace it on the same terms, or at all.
How much insurance do you need?
There is no single answer to how much insurance you should have in retirement.
The aim should be to have enough protection to meet your needs, while keeping the cost affordable.
Your circumstances are likely to be different from those of your friends, family or colleagues. You may have different levels of savings, pension income, debts and other assets, as well as different responsibilities towards your family.
The key is to understand what risks you want the insurance to protect against and whether the potential benefit justifies the cost.
Review your protection as your circumstances change
Your needs can change as you approach and move into retirement. Your savings, pension arrangements, debts, family circumstances and plans for the future may all be different from when you first arranged your cover. Tax rules and legislation can also change over time.
A regular review can help you check that your protection remains suitable and continues to fit with your wider financial plans.
What should you do before retiring?
Before you retire, consider:
- What insurance do I currently have?
- Which policies are provided through my employer or business?
- Will any of this cover end when I retire?
- Can I continue any existing policies personally?
- What would happen financially to my family if I died?
- Would my family need a lump sum to repay debts or meet other costs?
- What would I need financially if I suffered a serious illness?
- Do my savings and pension arrangements already provide enough financial security?
- Can I afford to maintain the cover?
- Would taking out new cover be more expensive or difficult because of my age or health?
These questions can help you understand whether your existing protection still has a purpose.
Get advice on your protection needs
There is no standard answer to whether you need life assurance or critical illness cover when you retire. The right decision depends on your personal circumstances, your family and your wider financial plan.
Our independent financial advisers can review your existing protection alongside your pensions, investments and other assets. They can help you understand the options available and whether your current arrangements continue to meet your needs.
At Tees, our financial advisers work closely with our legal teams, giving you access to financial and legal expertise under one roof. Our wealth management team provides advice on protection for you and your family, as well as pensions and retirement planning.
If you are approaching retirement, a review of your insurance could be an important part of making sure your wider financial plan is still right for you.
This material is for informational purposes only and does not constitute an offer or solicitation for the purchase or sale of any financial instrument. It is not intended as accounting, legal, tax, or investment advice. Past performance is not indicative of future results, and all investments carry risks, including the potential loss of capital.
Tees is a trading name of Tees Financial Limited, authorised and regulated by the Financial Conduct Authority (FCA), Registered number 211314, and registered in England and Wales (Company number 4342506).
