What a spouse loses at the first death
Retirement income is usually built for two. When one spouse dies, the household keeps the larger Social Security check and loses the smaller one. A pension taken as a single-life payout stops entirely. Many expenses, like property tax, insurance and the house itself, do not get cut in half.
Taxes often go up too. After the year of death, the survivor usually files as a single person, with narrower brackets and a smaller standard deduction, on not much less income. Life insurance is one way to fill that gap.
Common reasons to keep or buy coverage in retirement
- A spouse would lose a pension or the smaller Social Security check.
- You want to leave a specific amount to children or grandchildren, separate from whatever is left in the accounts.
- You own a business and a partner would need to buy out your share.
- Most of your savings are in traditional IRAs, which your heirs will pay income tax on when they withdraw.
- Your estate is large enough to owe federal estate tax. The exemption is $15 million per person in 2026. California has no estate tax of its own.
Term or permanent
Term insurance covers a set number of years and is the least expensive way to cover a temporary need. It gets expensive to buy after 65 and often ends before it is needed. Permanent insurance, such as guaranteed universal life or whole life, is built to last for life and costs more per dollar of coverage. For a lifelong need, like protecting a surviving spouse or leaving an inheritance, permanent coverage is usually the fit.
Before you cancel an old policy
Stopping payments on a policy you have carried for twenty years may not be the best move. Depending on the policy, you may be able to reduce the death benefit and stop paying premiums, exchange it tax free into a policy or annuity with long-term care benefits, or, if you are older and the policy is large enough, sell it to a third party for more than the cash surrender value. Get the in-force illustration from the insurer before deciding.
What I look at with clients
I map what each spouse’s income looks like the year after the other one dies. If there is a gap, we look at whether insurance, a pension choice or a change in the investment plan is the least expensive way to close it.
Questions people ask
Is life insurance worth it after 65?
It is worth it when there is a clear job for it: replacing income a spouse would lose, paying taxes heirs will owe, funding a business buyout or leaving a set inheritance. Without one of those jobs, many retirees can let coverage go.
What is pension maximization?
Taking a pension’s larger single-life payout and using part of the extra income to buy life insurance that protects the spouse instead of choosing the joint-and-survivor payout. It only works if the insurance costs less than the difference and the policy stays in force.
Can I use life insurance for long-term care?
Some permanent policies include riders that let you draw part of the death benefit early for long-term care. You can also exchange an existing policy into a hybrid policy with care benefits without paying tax on the gain, if the exchange follows IRS rules.
Pete Alexander plans retirement income, asset protection and insurance for families in Fremont and the East Bay, and co-wrote Crash Proof Wealth with Brett Kitchen. More about Pete.
This guide is general information. It is not tax, legal or investment advice or a recommendation to buy any product. Figures and rules were checked on October 25, 2026 and can change. Talk with a qualified professional about your own situation.