17 Reasons Baby Boomers Need Term Life Insurance
You may have heard that people nearing or in retirement don’t need their life insurance policies anymore. That would be a good story if it was true. Americans are living longer, and additional financial responsibilities are accompanying longer lives. Term life insurance gives loved ones the financial protection they need to respond to continually rising costs if you’re no longer here to help provide for them.
If you’re nearing retirement or already retired, you might need life insurance—often, term life insurance—in a host of situations.
1. Have children under age 18. Americans are having children later in life. This means people in their 60s may still have dependent children at home or in college. Term life insurance premiums increase as you age. Still, the cost of buying this pure life insurance coverage is often less than premiums for whole life insurance, which has a cash value component.
2. Support boomerang kids. Having adult children doesn’t automatically protect you against the cost of children. They are the gifts that keep on giving. You might want to help a married child with a down payment on a home. Or perhaps your adult child has boomeranged home due to a job loss or change in career direction. Term life insurance protects your income when parental responsibilities require more from you financially, whether you expect them or not.
3. Have an adult child with special needs. Parents of children with special needs often have significant financial responsibilities. Term life affords a financial cushion to help loved ones meet these needs if a breadwinner is no longer around.
4. Plan to continue working or are still working past normal retirement age. Term life—or any life insurance—is designed to provide a financial cushion if you’re no longer here to provide for loved ones. Many people who work past normal retirement age do so because they have to. It only makes sense to own financial protection to potentially replace some of that income.
5. Owe significant debt. Even older Americans who have owned a home for a long time may have a large mortgage left to pay. A combination of refinancing and falling real estate values that haven’t fully recovered yet has left many retirees with large mortgage balances. Parent loans for their children’s education, second home mortgages and other debt add to a large, cumulative unpaid tab. Term life’s death benefits can help loved ones pay these bills.
6. Lost your group life insurance coverage. If you recently retired, you likely left behind employer-provided life insurance benefits. You may still need these benefits, and an individual term life policy can provide them.
7. Need ready funds for final expenses. A smallish term life insurance policy could be enough to pay all of your final expenses, and even leave some money left over for other bills. Term life that is labeled final expense insurance is also available to people whose medical status might otherwise disqualify them from owning life insurance. Final expense insurance won’t pay full benefits for at least the first two years of coverage, but it provides an alternative for the otherwise uninsurable.
8. Want to leave something behind to help heirs pay death tax benefits. You might not think this applies to you if you learned that federal estate taxes don’t kick in until there’s over $5 million of assets in a taxable estate. But hold on. Some states, like New Jersey, have their own estate tax structure. The Garden State’s estate tax trigger begins at only $675,000. That’s about the cost of the mid-sized house in some of New Jersey’s pricier neighborhoods. The state also has a separate inheritance tax that begins at a paltry $500 in assets.L
9. Leave your life insurance policy as a legacy to loved ones. Even if you have few assets, you can leave a little something behind for loved ones with term life insurance.
10. Want more bang for your buck. The death benefits of a term life insurance policy are generally included as part of a taxable estate, but are usually income tax-free. You can’t say that about most investments.
11. Pay long term care costs for a widowed spouse. Life expectancies continue to rise. In 2014, an average 65-year-old will live another 19.3 years. The downside to longer lives and medical advances is higher costs for long term care. Some medical conditions will either disqualify you from long term care insurance or make premiums prohibitively expensive. In this scenario, a widow could use a life insurance policy’s death benefits to help meet long term care costs.
12. Want to convert your term life into a whole life policy. If you’re healthy, some term life policies offer attractive terms to convert to a cash-value, whole life insurance policy. Over time, whole life insurance builds a cash component, from which you can make withdrawals. Term life doesn’t offer cash value.
13. Use it to back a business loan. If you need a business loan, your policy may allow what’s known as a collateral assignment of the policy to a lender. This serves as security for the loan. And starting a business isn’t uncommon for Baby Boomers. Entrepreneurs age 54 and older account for about three out of every 10 business startups.
14. Use it to equalize an estate. You may need to consider this when one child takes over your business, but another is out of the business altogether. Your business has value, which you might pass on to your one child. What will your other child receive when you’re gone? If you don’t have the assets to equalize your estate, you can use life insurance benefits to even the score.
15. Want financial protection with options. What happens if you have a financial or health setback and can no longer afford your term life insurance premiums? Your policy will remain in force if it includes a waiver of premium in case of disability. What if you want an increase in death benefit or a decrease in benefit and premiums as you age? There are policy options that can help you achieve these goals, too. Talk to your life insurance professionals to learn about these and other options, called riders.
16. Want predictable premiums. Term life’s premiums increase every few years as you age and can become expensive in later years. However, your life insurance provider may offer the option to convert to level-premium term life, which offers level premium payments year after year. This will ensure your payments remain the same anywhere from five to 30 years into the future.
17. Need your policy’s death benefit while you’re alive. Most states allow life insurance settlement companies to buy consumers’ life insurance policies at a discount. The company makes premium payments and eventually receive the death benefit, while you get cash now. Why consider this? Simple. You either don’t need or don’t want the policy anymore, or you need cash now more than beneficiaries need a future death benefit. Most settlement companies prefer whole life policies, but some will consider term life policies that you can covert to whole life. Learn more here.
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