What to do with life insurances as you age
Written by Glen James
Host of the Retire Right & money money money (formerly my millennial money) podcasts & author of The Quick-Start Guide to Investing.
As you get older, your financial situation and priorities shift—kids grow up, debts get paid, and your superannuation may be looking good. So, what happens with life insurance? For many, life insurance was a safety net for big debts, dependent children, and income protection. But in your 50s and beyond, that need may change.
Let’s talk about when it might be time to reduce, cancel, or keep life insurance as you approach retirement.
When is a good time to reduce or cancel life insurance?
Life insurance is meant to protect those who depend on your income or help cover large expenses (like a mortgage). But if your mortgage is paid off, your children are financially independent, and your super is in good shape, you might not need as much coverage. Ask yourself: if I were no longer here, would anyone face financial hardship? If the answer is no, it could be time to reduce your coverage—or cancel it. Many in their 60s find they’re financially stable enough that life insurance becomes less necessary. Just ensure you’re comfortable with the financial position you’d leave behind.
How insurance inside super changes over time
Most super funds include default life insurance, often ‘unitised’ cover, which decreases in value as you age. Interestingly, the cost often increases as you get older, even as the coverage drops. If you’re nearing retirement and your super insurance is shrinking but costing more, it may be worth reviewing your coverage. Speak to your super fund or financial adviser to see if it still makes sense or if other options are better for you.
Why you might want to keep some coverage
You may still want some life insurance to cover funeral costs, medical bills, or to leave a small legacy. Instead of cancelling it, you could reduce it—e.g., from $500,000 to $100,000 for final expenses. If you plan to keep working into your 60s, maintaining some income protection or disability insurance may also be important. Nearing retirement doesn’t always mean your financial responsibilities vanish immediately.
Self-insuring: is it time?
As your wealth grows, you might decide to ‘self-insure’—relying on your savings, super, or assets to cover future costs rather than paying insurance premiums. If your mortgage is paid off and children are independent, you could downsize the house if needed, giving you more control and reducing costs. Just make sure you’re comfortable with the risks involved.
Insurance in your 70s and beyond
Most life insurance policies (especially those in super) expire or become very expensive by your 70s or 80s. You might find continuing a policy doesn’t make sense anymore. If you want coverage into your 70s, there are specialised policies like whole-of-life insurance, though these are now rarer. For most retirees, super and savings are enough to meet their financial needs by this stage.
A yearly review: stay on top of it
Your insurance needs change as you age and your financial position evolves. It’s smart to review your life insurance each year, and also reassess other types like income protection or health insurance. Small adjustments could save you on premiums and ensure you’re only paying for what you really need.
One last thought: don’t forget funeral costs
A common reason to keep life insurance is to cover funeral costs. However, paying high premiums just for a funeral might not be ideal. Funeral bonds or pre-paying for your funeral could be cheaper and more straightforward alternatives. If you have funds available, they’re worth exploring.
I also shared my thoughts on private health insurance recently here, in case that’s on your mind too.
