Fidelity Life: Do Empty Nesters Need Life Insurance?

Many believe that life insurance is mainly for families who need to provide for their kids if one of the parents has an untimely passing. The death benefit can help the family pay for funeral costs and replace the deceased income to provide for the children.

However, empty nesters should still consider looking for life insurance quotes. Life insurance policies can offer plenty of benefits, even when all the kids move out. This article will dive into a few reasons empty nesters should get life insurance, then cover a few policy types to consider.

Reasons why empty nesters should get a life insurance policy

Here are three reasons empty nesters should consider investing in a life insurance policy:

1. To create a financial safety net

According to LIMRA’s 2022 Insurance Barometer Study, 44% of Americans say they would experience financial hardship within six months if a primary wage earner passes away. Life insurance can create a financial safety net for the policyholder’s partner. If the insured passes away during the policy term, the surviving partner receives a substantial death benefit to replace the deceased’s income, cover expenses, and pay off debts.

2. To build wealth

Permanent life insurance policies come with a cash value growth component, with part of each premium going into this component. The funds grow tax-deferred at a specific rate, depending on the permanent life insurance policy type.

Once the cash value gets large enough, policyholders can withdraw from it or borrow against it with favorable loan terms. If the policyholder surrenders their policy, they get the cash value minus surrender charges. Ultimately, this allows policyholders to use life insurance as a wealth-building tool.

3. To pass down more wealth

Death benefits are generally tax-free, making them a key part of estate planning for many empty nesters. Empty nesters can name their heirs as life insurance beneficiaries, allowing their heirs to receive more wealth by potentially reducing estate taxes they may otherwise pay on other assets.

Life insurance policies for empty nesters

Empty nesters who want life insurance should consider one of the following policy types:

1. Term life insurance

Term life insurance is an affordable policy that covers policyholders for a fixed period, generally 10 to 30 years. Beneficiaries receive the full death benefit if the policyholder passes during the policy term. Keep in mind that policyholders must get a new policy to maintain coverage if they outlive their existing policy.

2. Permanent life insurance

Permanent life insurance is more expensive than term life insurance, but coverage lasts for life. As explained earlier, it also comes with the cash value component that allows the policyholder to build wealth.. These policies can work well for empty nesters who want guaranteed coverage and have more complex financial goals.

3. Final expense insurance

Final expense insurance is a small permanent life insurance policy designed for end-of-life expenses, like hospital bills and funeral costs. The death benefit is smaller compared to other permanent life policies, but premiums are cheaper, and it still comes with cash value. Additionally, coverage lasts for life.

4. Guaranteed issue life insurance

Guaranteed issue life insurance lets policyholders get a small life insurance policy without taking a medical exam. Guaranteed issue life insurance coverage lasts for life, and policyholders can build cash value. However, they may come with reduced benefits in the first three years. If the policyholder passes away during this period, their beneficiaries don’t receive the full death benefit — instead, they may receive the premiums the policyholder paid. Overall, these can be good for policyholders who may be disqualified by a medical exam or for policyholders who want to skip it.

The bottom line

Just because the kids are out of the house doesn’t mean empty nesters should avoid life insurance. On the contrary, it can help them create a financial safety net, build wealth for themselves, and pass more of that wealth down to their heirs. Term life insurance might be the right choice for those who don’t need the wealth-building aspects and want to save money without sacrificing coverage. On the other hand, permanent life insurance is great for people who want lifelong coverage and wealth-building potential.

Meanwhile, final expense insurance can work well for those who only need to cover end-of-life expenses. And finally, guaranteed issue life insurance can be a good idea for those who want to avoid the medical exam. Regardless of policy type, empty nesters should spend some time shopping for multiple quotes to get the best coverage for their budget and needs.

Media Contact Information

Laura Zimmerman, Chief Marketing Officer

[email protected], (312) 288-0068