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Financial Basics · Insurance & Protection

Life Insurance

Life insurance pays a tax-free death benefit to your beneficiaries when you die. The main types are term (temporary, cheap), whole (permanent, expensive, cash value), universal (flexible permanent), and variable (permanent, invested).

By the TRRP Editorial TeamUpdated 2026SSA · IRS · CMS data

Definition

Life insurance pays a tax-free death benefit to your beneficiaries when you die. The main types are term (temporary, cheap), whole (permanent, expensive, cash value), universal (flexible permanent), and variable (permanent, invested).

Why it matters in retirement

Most retirees are massively over-insured. If your kids are grown and your mortgage is paid, you may not need life insurance at all. But there are specific situations — pension max strategies, estate liquidity, second spouse protection — where a policy still makes sense.

Key numbers · 2026
Term policy (65M, $500K, 10yr)
~$150/mo
Whole life (65M, $500K)
~$1,200/mo
Death benefit income tax
$0 (federal)
Estate exemption (2026)
$15M
Pros
  • Tax-free death benefit
  • Estate liquidity
  • Replaces pension survivor benefit cost
  • Whole life cash value grows tax-deferred
Cons
  • Whole life commissions often 80%+ of year-1 premium
  • Illustrations rely on optimistic assumptions
  • Term coverage ends before you die (by design)
  • Most retirees don't need coverage at all

Common mistakes

  • Buying whole life at 60+ when term + investing is mathematically better
  • Keeping a $1M policy after the mortgage is paid and kids are grown
  • Canceling a paid-up whole life policy (losing the tax-deferred cash value)
  • Naming your estate as beneficiary instead of individuals (creates probate)
The part most people miss

If your spouse doesn't need your income to survive and your estate is under the exemption, you likely don't need life insurance at all. "Buy term and invest the difference" still wins 9 times out of 10.

When you’re ready

Want help applying life insurance to your situation?

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