How is Life Insurance Helpful After Retirement?

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Planning your retirement can be overwhelming. It requires thorough financial and debt management to ensure enough returns to replace your salary after you retire. Relying only on pension schemes and savings is not enough. You need to look for all possible funnels to accumulate funds. Life insurance can be an effective vehicle while planning your retirement.  

Life insurance plans are primarily meant for securing your family against financial shortfalls after your demise. Not many people think of life insurance as an essential part of a retirement income plan. However, life insurance can potentially help you in retirement planning if utilised properly. Having the right life insurance and an appropriate amount of insurance coverage in retirement can accomplish several tasks. It can help to replace your income, manage taxes, provide tax-free cash flow and boost your total returns. 

Additionally, several insurance companies in the UAE offer life insurance retirement plans and whole life insurance that continues to serve you after your retirement. 

What are the benefits of Life Insurance Retirement Plans?

The life insurance plans protect your family during an unforeseen event and help them cope with the situation financially and emotionally. They can also help you with your retirement planning. Here is how they can prove to be beneficial during your retirement. 

Replaces Your Income After Retirement

Life insurance can help in replacing your income so that your family can meet their daily expenses and continue the prior lifestyle. It needs to be the foundation of a solid retirement plan if your family depends on your retirement income. If you pass away in your retirement age, the dependent members still receive the fixed income to bear the expenses. 

Improves Your Return and Asset allocations

With interest rates dipping down every passing day, bonds and cash deposits are not attractive investment options. However, people still need safer investments and liquid funds in their retirement income portfolios. As the bonds offer lower interest rates, substituting it with life insurance can be a wise choice. Also, holding a bond has higher downside risk. A person planning his retirement should consider whole life insurance that offers bond-like returns without any downside risk. 

Keeps Your Retirement Savings on Track

After retirement, most couples catch up on their savings. Retirement savings have less scope of growth and can fall short in case of some emergencies. During this phase, if you die, the surviving members could end up being severely short on retirement savings. Therefore, buying a term insurance plan for 10-15 years for both your spouse and yourself before retirement can protect the retirement savings. Additionally, term life insurance is inexpensive and would not put a financial burden on you. Among several options available, you can choose the term insurance plans suiting your requirements and fall within your budget. 

Protects Your Lifestyle  

Rising inflations can reduce your savings value and would result in degrading your lifestyle. Having an income source in addition to your retirement savings will help you maintain the lifestyle you always had. 

How to Use Your Life Insurance for Planning Retirement?

Similar to a retirement savings plan, you need to plan your life insurance retirement plan in two stages, namely the accumulation phase and distribution phase. Firstly, you need to accumulate funds while you are still employed. Subsequently, you can earn income from the accumulated wealth. 

The Accumulation Phase 

You can choose whole life insurance that provides survival and death benefits. It provides regular income after the premium payment tenure is over and the funds are further invested to grow over the period. You will receive survival benefits lifelong as an additional income resource. 

For having tax benefits or defined assurance, you can choose an endowment plan which provides an assured minimum amount irrespective of market performance or fetches you the guaranteed amount. The minimum guaranteed amount is referred to as participating endowment plan and the fully guaranteed amount is called a non-participating endowment plan.   

If you are capable of taking higher risks for more returns, you can opt for unit-linked insurance plans. The plan offers you better returns and helps you save funds against your retirement. You have the luxury of planned tax-free returns. 

Depending on your financial requirement, you can choose a specific life insurance retirement plan and accumulate wealth during your employment years. The insurance company utilises these funds into equities to amplify your benefits and the returns are set according to your risk appetite. 

The Distribution Phase

After your retirement, you can enjoy the benefits from your accumulated wealth. The insurance companies may also provide you with the option to encash a percentage of the total amount at once or you can opt for regular payouts.

Annuity Plans for Retirement Planning

Annuities are specially designed insurance plans that provide regular income as well as death benefits throughout your whole life. Annuities can be effective insurance for people closer to their retirement and offer additional income resources in addition to your retirement savings. Hence, opting for an annuity as life insurance for retirement can be a wise choice. Some benefits of annuity plans are mentioned below. 

  • The policyholder’s beneficiaries receive the purchase price upon his/her death. 
  • Several insurance providers also offer joint annuity in which the policyholder’s spouse continues to receives the regular income even after his/her death. 
  • You can also opt to invest in an immediate annuity with your retirement savings. The insurance company will start providing you with the pension after one year from the premium payment date. 
  • Individuals with few years remaining for retirement can opt for deferred annuity plans. They can pay the insurance premium in regular or single payout over a fixed tenure, and once the tenure completes, they start receiving a regular income. 

Can Whole Life Insurance Be helpful in Retirement Planning?

Whole life insurance provides coverage for an individual’s life  for up to 100 years of age. The policyholder receives the regular payouts once the premium payment term is over. In case of the policyholder’s untimely death, the death benefit is paid to his/her beneficiaries along with the accumulated bonuses. Thus, whole life insurance can also be an effective tool for income replacement and is a beneficial choice for retirement planning.


Securing numerous sources of income during retirement is always a better choice to tackle challenges in the later years of life. It not only ensures you a better lifestyle but also keeps you financially stable. Life insurance retirement plans can be very useful while planning your retirement. However, you must consider your financial needs and situation before selecting a life/term insurance plan for retirement.

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