What is Longevity Insurance and Should You Get It?

Saving for retirement is getting harder because people are generally living longer. However, with longer life also comes greater medical expenses and perhaps money for care. When you do not know what your life expectancy is going to be, it is difficult to know how much money you need to save. In recent years more and more insurance companies have introduced longevity insurance.

Longevity insurance protects you against the risk that you will run out of money before you die. It will be paid when you reach a certain age which will give you peace of mind that you will not run out of money if you do live longer than expected. Your retirement plan will be paid as normal and then when you reach a certain age you will also receive payouts from your longevity insurance.

There are a number of advantages of purchasing longevity insurance. Policies are often quite cheap because the insurance company can invest your money over a longer period which means they will get a better return. There will also be policies that the company never has to pay out on because the policyholders pass away before the policy is due to be paid.

Another thing to bear in mind is that the earlier you put this insurance in place, the cheaper it will be. If you are nearing the age when longevity insurance is usually paid then it may be very expensive, if you can get cover at all. The best time to get longevity insurance is during middle age or even earlier. Generally speaking, the more years you have until the longevity insurance would be paid, the cheaper the policy is going to be.

When you know that your retirement plan only has to last you until a certain age, then you can plan exactly how much money you have got to spend every year. This makes it much easier to budget. There may still be unexpected expenses that pop up now and again but on the whole you will know how long you need to make your money last. This does not mean that you should go out and blow the money that you do have, or that you can get away with not saving a lot of money for retirement. It just provides extra peace of mind that you will have enough money to live on if you live longer than expected.

The main disadvantage of longevity insurance is that you may not live long enough to get the benefit that you have been paying into. However, this is a risk that you take when you pay into other forms of life insurance as these policies may not pay out after you reach a certain age. When you are deciding whether longevity insurance is right for you, you will need to weigh up whether the risk of this happening is better or worse than the alternative of running out of money in old age.

Whether you decide to get longevity insurance is an individual choice. You will have to weigh up the pros and cons for your specific situation. This is quite a morbid task because you are basically weighing up the chance that you will live to an old age. There are some things that you might want to look at which will help you to make this decision such as the age that both of your parents lived to and whether there is any history of serious diseases in your family. If you are have a number of years to go before you are even thinking of retirement, then trying to guess when you are going to die can be uncomfortable but unfortunately it is something that you do need to think about.

For some people, the risk of getting to old age and not having enough money to live on is much greater than the risk of paying for longevity insurance that they might not need. As we get older, there may be some expenses that we don’t have anymore such as mortgage payments, but there are increased costs due to health and care expenses. Not having enough money to meet basic essentials is a situation that nobody wants to be in and taking out longevity insurance can help prevent this situation happening to you.


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