From Young Adult to Empty Nester: How Your Life Insurance Needs Evolve
Life insurance an instrumental tool for financial security, offering a potential safety net for your loved ones should you pass as well as other possible benefits you can use in your lifetime.
Unfortunately, however, many don’t give it a lot of thought, dismissing it when they’re young and then fail to revisit it once they do purchase a policy. Instead, consider life insurance as your devoted friend, changing with you through every phase of your life. Review this guide to help ensure that you have the necessary protection at every turn.
Twenties and thirties
These years are often all about beginnings: emerging into adulthood, finding your footing in your career, and maybe even getting married or having your first child. All this excitement may push getting life insurance to the bottom of your priority list, especially if you’re generally healthy. But you never know when a sudden illness or accident could strike, potentially burdening your loved ones with financial obligations even if you don’t yet have a family relying on your income. For instance, they’d still be left with the funeral costs, and a cosigner for your private student loans would assume all responsibility for them. Life insurance may offer a financial safety net to lessen their strain.
Additionally, life insurance is generally cheaper when you’re younger. Premiums for many policies, including term life and whole life, are locked in at the time you purchase the policy. This means that the younger and healthier you are when you buy, the lower your premium will be for the entire term of the policy. So not only will you benefit from having coverage in place should the unexpected happen, but you’ll also save money in the long run. Here are the two main types of coverage to consider.
Term life insurance
This option may be most ideal for this stage of life due to its affordability. For a very competitive premium, term life provides a death benefit should you pass within the designated period—usually ten, twenty, or thirty years, at which point your coverage ends. Some policies are convertible, meaning you can switch to a permanent plan later on without a medical exam if, say, you start a family and need more long-term coverage.
Permanent life insurance
As the name indicates, this life insurance provides coverage for the duration of your life. In addition to a death benefit, permanent policies offer a cash value component, which grows over time. It is accessible via loan or withdrawal; just note that anything you take out permanently or don’t pay back before your death would be deducted from the death benefit. The two primary types of permanent life insurance are whole life and universal life. The former offers more guarantees (e.g., a set benefit, premiums, and interest rate on the cash value) and the latter more flexibility, allowing you to possibly adjust your premiums and death benefit as needed. Although permanent life policies generally cost more than term life ones, this can be a good option if you have long-term financial goals, such as purchasing a house, that you could use the cash value for.
Forties and fifties
These years represent a period of career development, greater financial stability, and looming college costs for your kids. Such changes may necessitate revisiting your life insurance to verify that it still suits your circumstances and goals. Consider these steps as you look to fortify your current financial health and plan for the future.
Review your life insurance needs
Whether you’ve previously purchased a policy or not, consider the various choices available and which may suit your needs best. For instance, if you chose term life when you were younger, it may no longer provide sufficient coverage or be ending soon. In either case, it may be worth converting to a permanent policy, if your term policy allows. During midlife, the combination of guaranteed death benefit and cash value growth may be quite helpful, allowing you to tackle future financial goals like supporting your grandchildren through college.
In addition, assess whether your current death benefit amount would be enough to cover all your financial obligations, which may have increased if you took on a mortgage or had more kids. Just note that if you are converting a term policy, you may need to go through the underwriting process again—meaning you’ll be reevaluated for risk and have to do a medical exam—if you want to raise your death benefit.
Consider adding riders
Riders are optional add-ons to either term or permanent insurance (though some may not be available for both) that may provide benefits and coverage beyond the death benefit. Though they do typically increase your premium, they can provide extra peace of mind for certain situations. A great one to consider at this stage is a long-term care (LTC) rider, which may allow you to use the death benefit to pay for LTC expenses, depending on the qualifications. Keep in mind, though, that like with increasing the death benefit when converting a term policy, you may need to undergo the underwriting process again if you choose to add in riders after purchasing a policy.
Sixties and beyond
Retirement should be rightfully focused on leisure and savoring your golden years, but various financial concerns, such as rising health care costs, can get in the way. If you selected a whole life policy earlier in life, the total cash value can be quite useful, especially since you may not be as concerned about reducing the death benefit now that you’re no longer supporting dependents. You can withdraw or borrow this money to pay for unanticipated expenses, augment your pension, or book that Alaskan cruise you have always wanted. Connect with your insurance agent or financial advisor to create a strategy for maximizing the cash value.
For seniors who don’t have a policy, it may be worth it to consider simplified issue life insurance. It is similar to term life since it offers a death benefit for a certain length of time. The main difference is that it uses a streamlined application process that doesn’t require a medical exam. Even though they may not rely on you financially anymore, this can ensure that your loved ones don’t have to stress about covering expenses like funeral costs. This option may come with some limitations, though—certain ones, for instance, may require you to have the policy for two years before the death benefit would pay out. So make sure to do your research to make sure it will meet your needs.
Life insurance is an ongoing road trip that requires frequent adjustments rather than a one-time buy. Review your coverage often to make sure it continues to meet your changing needs. Reach out to a life insurance agent to go over your requirements and your available choices so you can pick that right policy to give you and your loved ones peace of mind all throughout your lifetime.