Should Retirees Have Life Insurance?
The primary purpose of life insurance is to protect your dependents financially when you're gone. By the time you reach retirement, it's unlikely that you'll have many people depending on your income, so why would a retiree want a life insurance policy?
Before delving more deeply into this question, let's take a quick look at the different types of life insurance policy kicking around the marketplace today. The two most common types of life insurance are term life and cash value. Term life is a "pure" life insurance policy: You pay monthly premiums over a set term, and if you die at any point during that term, your beneficiary gets a cash payout. Cash value (which may also be called "whole life" or "variable life," depending on how the policy is set up) combines life insurance with an investment component: Part of your premium goes toward financing the policy's death benefit, while the remainder goes into an investment account that you can either cash out before your death or leave for your beneficiaries.
Just about everybody is better off sticking with a term life policy, rather than one of the cash value variants. First, the insurance component of cash value policies is generally more expensive than that of term life. And second, fees and commissions chew up such a large portion of a cash policy's investments that they'll nearly always perform more poorly than investments in an IRA or even a standard brokerage account.
Source: Fool.com
