CHENNAI: The concept of owning a life insurance arises when one wants to replace potential income loss that his/her family could suffer from in their absence.

Therefore, ideally, a policyholder must be one of the breadwinners of the family. But when one retires, the value of his life in monetary terms is reduced in relevance. However, retirees might also derive some benefits out of a whole life insurance.

“Ideally, life insurance would be deemed unnecessary in the post-retirement stage. But if a person has debts, dependent spouse or children, or if he/she has to pass on a legacy, one can benefit out of converting their existing term insurance into a whole life insurance,” says Sukanya Soundar, a Chennai-based financial consultant.

Ploughing back any taxable proceeds or interest that may arise from the maturity of a retirement account (like the public provident fund) or deferred annuities into a life insurance policy might be an efficient way to avoid tax liability.

Further, when one wants to leave behind a legacy for their immediate family or alma mater, the death benefit or the payout from life insurance policy is much higher than the premium one would pay during his/her lifetime post-retirement, Soundar said.

Opting for a life insurance policy with an accelerated death benefit rider might also be a prudent option, the consultant says.

The accelerated death benefit is offered in select policies, where a portion of the payout can be withdrawn prematurely if the insured develops a terminal illness and does not have enough liquidity at hand.