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Life Insurance Needs Continue Even After the Kids Are Grown

Term Life Rates for Those in Their 40’s and 50’s Lowest in a Decade

Couples who believe they no longer need life insurance after their youngest child reaches his or her 18th birthday could leave their family vulnerable to serious financial problems, especially if the sole income-earning parent dies.

Term life insurance is a product traditionally purchased to protect the financial future of a surviving spouse and children under the age of 18, and term policies are often allowed to lapse as a couple’s youngest child reaches that milestone,” said Dr. Steven Weisbart, an economist at the Insurance Information Institute (I.I.I.).

"Too many people in their 40's and 50's assume they're too old to purchase this product at a reasonable price.

Yet even couples with grown children, who have set aside college tuition monies and are close to paying off a mortgage, ought to discuss with their insurance agent or broker the benefits of purchasing a new term life insurance policy when their existing one elapses. The most immediate consideration is that a surviving spouse must be at least 60 years of age before receiving Social Security survivor benefits and, even then, the benefits are allocated on a reduced basis. Full Social Security survivor benefits become available when the surviving spouse reaches age 65 or older, depending upon their late spouse’s birth year. Still, these benefits are inadequate to pay for anything beyond basic household expenses. Term life insurance can help bridge the financial gap for the surviving spouse.

“Too many people in their 40’s and 50’s assume they’re too old to purchase this product at a reasonable price. But term life insurance for that age range is more affordable today than it was a decade ago,” Dr. Weisbart noted.

An I.I.I. study released earlier this year found that the annual premium payments are typically around $600 for a 40-year-old male non-smoker who is deemed a “standard” risk and wants to purchase a 20-year term life insurance policy with $500,000 in coverage. A 40-year-old male non-smoker who qualifies for “preferred” rates can acquire the same policy for less than $400 a year. Premium rates for women and younger people are even lower.

Even couples with grown children, who have set aside college tuition monies and are close to paying off a mortgage, ought to discuss with their insurance agent or broker the benefits of purchasing a new term life insurance policy when their existing one elapses.

In determining how much life insurance to buy, the I.I.I. recommends assessing the need to replace “hidden” income that is lost when an income-earning spouse dies. Hidden income is money an employer contributes to an employee’s 401(k) or similar savings plan, or to pay the premiums for a family’s health insurance coverage. These savings plan contributions and subsidized insurance premium payments cost the employer thousands of dollars a year, a financial commitment that, in most instances, reverts to the surviving spouse.

Other important factors to consider as a 40- or 50-year-old considering the purchase of term life insurance include the financial condition and physical health of a senior-citizen parent, the financial commitments that may have been made by a two income-earner household, such as a second residential property, and the day-to-day needs of grown children still living at home.

For those looking to move away from term life policies, permanent life insurance—such as whole, universal and variable life—or annuities can be an attractive alternative.

For more information about life insurance, go to the I.I.I. Web site: http://www.iii.org/life.

The I.I.I. is a nonprofit, communications organization supported by the insurance industry.

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