Paying for life insurance in retirement isn't always easy, especially on a fixed income. However, insurance can be a valuable financial tool — both for yourself and for your family members. Here, we'll examine the costs associated with life insurance and strategies to manage them with your retirement income.

Life Insurance Costs in Retirement

To maintain a life insurance policy, you need to pay your insurance company premiums every year. If you stop paying, your coverage will end. The costs will depend on the type of policy, which include:

• Term: These policies are less expensive but have a set expiration date. For example, a five-year term policy will end after five years.
• Permanent: Permanent policies are more expensive but don't expire. So long as you keep paying the premiums, they can last the rest of your life.
• Guaranteed issue: If you have health issues and don't qualify for regular life insurance, there are guaranteed issue policies. They cost more per month, limit how much coverage you can buy and won't pay out for death within the first two to three years in exchange for skipping the health exam.

Government Support for Life Insurance Costs

The government provides little support for life insurance. It's not included in any major programs, like Medicare.

If you were previously part of the military, you could qualify for coverage from the VA, which the government helps pay for. If you worked for the government as a federal employee, you'll be provided life insurance as a workplace benefit; one-third of the cost will be covered and you'll pay the rest.

If your Social Security check is larger than your spouse's, they could replace their payment with your larger one when you die. The program will also make a one-time $255 payment to your heirs when you pass away.

Reasons to Maintain Life Insurance in Retirement

Given the costs and lack of government help, you may wonder if it's even worth having insurance in retirement. While the answer will depend on what you can afford and your financial plan, here are some reasons why life insurance could help:

• Final expenses: The median cost of a funeral was $7,640 in 2019, according to the National Funeral Directions Association. Life insurance can help cover this so it doesn't fall on your family.
• Unpaid bills: If you pass away with outstanding bills for health care, credit cards, taxes or anything else, your life insurance could pay them off.
• Income replacement for your spouse/partner: Your spouse may depend on your extra Social Security check and pension. Life insurance would give them more retirement income.
• Inheritance: Life insurance can also create an inheritance for your younger family members to assist with costs such as college tuition.

Strategies to Pay for Life Insurance Costs

Here are a few strategic ways you can cover the costs of life insurance in retirement:

• Focus on what you can safely afford: If down the road you can no longer afford your life insurance premiums, your policy will lapse, and you won't get anything back for your money. If you buy a policy, make sure it's one you can comfortably pay for on a fixed retirement income.
• Start early: The younger you when you enroll, the lower the costs will be when you lock in that rate. Plus, you won't have to worry about future health issues disqualifying you from enrolling.
• Consider a single premium policy: If you have savings in the bank or a retirement plan, you could take out a lump sum to pay off a policy all at once, which is known as a single premium policy. That way, you won't have an ongoing insurance bill.
• Discuss with your family: Your family will be impacted by your life insurance decisions. Discuss with them as they may be willing to help pay.
• Use your own savings: If you don't want to buy life insurance, another option is to put aside a chunk of your net worth for final expenses. Just make sure not to spend this reserve.

As you review your strategy, consider speaking with an insurance agent about how best to cover the life insurance costs for your retirement.