When your children reach adulthood, you may gain an extra bedroom to use as a craft room or manacle, have less laundry to do and be able to take that second honeymoon you always dreamed about. But then come the financial considerations, such as what life insurance you may need now that the children have spread their wings.
The life insurance required of an “empty nester” are vastly different from those of parents with young children, but they aren’t negligible. You may still require a policy, but of a different type or altered coverage level.
The continuing need for life insurance
Among the myths that surround life insurance is that, automatically, you no longer need coverage once your children are adults. While life insurance is a near-necessity for parents of young children, you may still need a policy when the kids grow older, for the following reasons:
1. You may now be helping your children with their expenses
Gone are the days when young adults could become homeowners in their 20s. While the average age of first-time homebuyers was 29 in 1975, it’s now 38. Rising housing prices and cost of living increases make it harder for young adults to make ends meet. In fact, the Pew Research Center reported that 44% of young adults between the ages of 18 and 24 received financial help from their parents in the past year.
If you’re helping your child with their finances, such as contributing to their rent or covering some of their student loan payments, you’ll likely need to maintain a life insurance policy. That way, the kids could continue to receive financial support after you pass away – and they still have big bills to pay.
2. You have other dependents
Even if your children are financially independent, you may still need a life insurance policy if you have other dependents. If you’re providing financial support or care for a disabled or elderly relative, for example, life insurance can provide for their continued care.
Medicare and Medicaid don’t cover the cost of room and board if a loved one needs to be an assisted living facility, and these facilities cost an average of $54,000 per year, so it’s a significant consideration when deciding what life insurance policy is best for you.
3. One parent stayed home with the children
If one person stayed home as a caregiver and the other worked, life insurance for the person who worked can be particularly important. That’s because the family will likely depend on receiving survivor benefits from the worker’s Social Security account – and those may not be a viable, continuous source of income.
Families are eligible for Social Security survivor benefits if the child is 18 or younger. However, the benefits stop once the child reaches adulthood, and the surviving spouse isn’t eligible for benefit payments until they are at least 60 years old.
A life insurance policy can bridge the gap between these periods, allowing the surviving spouse to make ends meet.
4. You want to cover your own final expenses
If you were to pass away, would your children be able to cover your burial expenses without taking on debt? Even if you have substantial assets, your children cannot tap into the estate until after the probate process is completed. Instead, they’d have to cover burial expenses out of pocket, and then submit claims for reimbursement from the estate.
Unless your children are on solid financial footing, that can be a significant hardship. According to the National Funeral Directors Association, the median cost of a funeral with burial and casket is $8,300.
A basic final expense policy can help relieve some of the financial stress, and cover any end-of-life costs.
5. You want to take advantage of potential riders
A life insurance policy is an excellent way to get added protection for other emergencies besides death. Thanks to life insurance endorsements, also known as riders, you could get the following protections:
Long-term care: Long-term care insurance helps with the costs of long-term care for those who need help with daily activities, like bathing or eating. Standalone long-term care policies are increasingly rare; few companies sell these policies, so purchasing a life insurance policy with a long-term care rider can be a critical safeguard.
An accelerated death benefit: Accelerated death benefits, also known as living benefits, allow you to use some of your benefits while you’re living if you become disabled or develop a terminal illness.
Types of insurance for empty nesters
As an empty nester, you may need to purchase new coverage or adjust an existing policy. You can choose from the following insurance types:
Term
Term insurance is the least expensive form of coverage. It provides insurance for a limited period, such as 10 to 20 years, and your beneficiary only receives the policy death benefit if you pass away during this period. Term policies can have riders, but they don’t build cash value.
As a parent of adult children, term insurance may be best if you only need affordable coverage for a limited period, and expect to have enough assets to cover major expenses later.
Permanent
Permanent life insurance lasts for as long as you’re alive, so long as you pay the insurance premiums on time. Permanent policies tend to be much more expensive than term coverage, but these policies may build cash value over time.
Permanent life insurance can take several forms:
Whole life: Whole life policies provide a death benefit and build cash value. They tend to have level premiums, so the premiums are steady throughout your lifetime.
Universal: Universal life insurance offers more flexibility than whole life coverage. You can use accumulated cash value to cover some of your premiums, and you may be able to adjust your death benefit amount if your needs change.
Final expense: Final expense policies are relatively small policies that usually provide $50,000 of coverage or less. They are intended to cover your burial or final expenses, and they are often guaranteed issue, meaning you can’t be denied coverage based on your health.
Obtaining peace of mind with life insurance
As a parent, your finances and lifestyle may change significantly once your children reach adulthood. When your children become adults, reevaluating your life insurance policy and adjusting your coverage can ensure you have the right protection for your current situation, and plan for the future.
If you’re looking for a life insurance provider, check out our selections for the best life insurance providers.
According to a report from Money.com, many people believe that once their children are grown and out of the house, they no longer need life insurance. However, this is not always the case. In fact, as an “empty nester,” you may still need a life insurance policy for a variety of reasons.
Firstly, you may still be financially supporting your adult children. With rising housing prices and cost of living increases, it is becoming more common for young adults to receive financial help from their parents. If you are contributing to your child’s rent or helping with their student loan payments, a life insurance policy can ensure that they continue to receive financial support after you pass away.
Additionally, if you have other dependents such as a disabled or elderly relative, a life insurance policy can provide for their continued care. Medicare and Medicaid do not cover the cost of room and board in assisted living facilities, which can be a significant expense. Having a life insurance policy can help cover these costs and ensure that your loved ones are taken care of.
Furthermore, if one parent stayed home to care for the children while the other worked, life insurance for the working parent is crucial. This is because the family may rely on survivor benefits from the worker’s Social Security account, which may not be a continuous source of income. Once the child reaches adulthood, these benefits stop, and the surviving spouse may not be eligible for benefit payments until they are at least 60 years old. A life insurance policy can bridge this gap and provide financial stability for the surviving spouse.
In conclusion, while the type and level of life insurance may change as your children grow up and leave the house, it is still an important consideration for “empty nesters.” Whether you are helping your adult children financially, have other dependents, or have one parent who stayed home with the children, a life insurance policy can provide peace of mind and financial security for your loved ones.
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