Templin said that married couples are all too aware that wives typically outlive their husbands. So if the husband has a pension or an annuity, when the time for retirement comes, he will take the maximum payout on that policy so that the couple can have as much income as possible to enjoy during their remaining years together. Then, when the husband dies, the wife will be left with the death benefit from the life insurance policy to live on for the rest of her life.

"It really just allows [the client] to spend down more of his retirement asset, because he knows that the day that he dies his spouse will get that insurance benefit," said Ronnie Huie, CEO of Huie Financial Services.

He also noted that in dual income situations, couples may want to consider purchasing a life insurance policy for the wife, as well, to make sure that all income streams are covered.

New cash benefits

If a client purchases a permenant life insurance policy at a young age, the policy has several decades to accumulate cash value. According to Mark Carruthers, an independent certified financial planner, this could provide an opportunity for the client to take an essentially tax-free loan out of the policy.

However, Carruthers said that he hasn't seen many people take advantage of this option.

"In my personal experience, many of my clients haven't had their policy long enough to take advantage of this option," he said. "But with colleagues who've been in the business a bit longer, when a couple either gets divorced or has a job loss, it seems like the insurance is always the first thing to go."

Carruthers said that defeats the purpose of protecting their income for so many years. In fact, he often cautions clients against using life insurance as a means of protecting both their beneficiaries and their own retirement — because if something happens and those premiums don't get paid, that's two income streams that have been jeopardized.

Annuitizing cash value

Another way that clients can take advantage of their life insurance policies in retirement is to split their policies and annuitize a portion of the cash value to use for emergency expenses or to help fund their retirement. Templin said this strategy was particularly effective for people who may want to save some portion of the death benefit for their beneficiary, but may not need as much as they originally established in the policy.

He refers to this as a chopped plan; the cash value gets annuitized to create an income stream that the individual never outlives, but a portion of the death benefit is still in place.

"Typically those policies are decades old," Templin said. "Somebody who's now 75 or 80 years old who had those policies puchased in their 20s or 30s, they’ve matured for 30 or 40 years. They bought them to cover maybe their children, but those needs aren’t there any more, so the death benefit isn’t needed as much as it was previously."

Switching buckets

Some clients may be concerned about investing in life insurance, particularly a permenant life policy, which may cost them quite a bit in additional premiums. But Huie said it's not often a matter of spending additional money; it's just about switching the buckets where current investment money is being allocated.

He related the story of a client who purchased a policy that was guaranteed paid in 10 years. They funded the policy by paying five years' worth of payments from his 401(k), and the other five years was taken from his pension.

Shortly after, the client was diagnosed with a malignant brain tumor and passed away. His wife used the benefit to pay for her mortgage, purchase an annuity, and set up a fund for her sons to attend graduate school.

"Permenant life insurance is not the answer to everything," Huie said, "but it is another arrow in your quiver. It’s another tool in your toolbox. I don’t have anybody that goes to the country club, goes golfing and says 'Boy my life insurance is sure kicking butt!' But every one of my clients is glad that they have it."