Fact CheckedIf you’re looking for family life insurance, you aren’t alone. However, you should know that the best life insurance for older people may not be the same as for younger people.
Sadly, far too many don’t buy life insurance when it’s cheap and easy.
The older we get, the closer we get to the end of our natural lives, so obviously, life insurance becomes more expensive. That’s why I encourage all my clients to purchase life insurance when they consider it necessary.
So, let’s take a look at what you need to know if you’re buying a policy for your family now!
“A survey released Thursday commissioned by Royal Bank of Canada found that 96 per cent of parents were subsidizing children aged 18 to 35 and 48 per cent were still helping kids age 30 to 35. RBC raises the question of whether parents are helping their kids with money that should be going into their retirement saving, which is valid.”
Parents financially supporting thirtysomething kids? It’s happening, The Globe and Mail
Reasons You Need the Best Family Life Insurance & How to Get It
Life insurance is a great tool! It provides you with a safety net to protect the people you care about from the financial devastation that a death can cause. Too many assume life insurance is for young parents.
While this is the norm, there are many exceptions to this rule, and finding the best life insurance policy for the various people in your family is essential.
So let’s check out the many reasons your kids or even your parents may need coverage right now:
1. Income Replacement
This is the one of the biggest reasons for families to think about life insurance. What happens if a breadwinner dies prematurely?
A term life insurance policy is the most affordable way to make sure that your family isn’t left destitute in this event. Remember, if you’re gone, so is your pay-check. A fast rule of thumb is to have 10 times your salary in coverage.
1. A Second or Third Career for Grandma or Grandpa
People are living longer AND working harder. Retirement isn’t what it used to be.
Many clients opt to start businesses they dream of later in life. When you have kids, it can be challenging to take chances. That’s why that government job with benefits looks pretty damned good when you’re raising your family.
Hey, you even get paid time off.
That being said, when your children fly the coop, everything changes. You no longer have all the responsibility you once had.
If you launch a business because you’re entrepreneurial, you take on a lot of responsibilities. Maybe you have a loan, employ people, maintain a lease, or have a partner. No matter how you slice and dice it, chances are you have financial obligations.
A life insurance policy can protect your loved ones and business associates from damage if you die unexpectedly. This is an excellent reason to take out a life insurance policy; many banks require it as collateral for a loan.
2. Life Insurance for Children & Newborns
Purchasing life insurance for newborns or children may seem… dark. But I am here to tell you it offers several benefits that provide long-term security. One of the primary advantages is guaranteed insurability. Your child will have coverage later in life, even if they develop health issues that could make obtaining insurance difficult or costly later in life.
Additionally, securing a policy at a young age locks in lower premiums, potentially saving them money down the line. For policies like whole life insurance, there’s also the benefit of cash value growth. This can be a savings or investment vehicle for your kids to access later.
Then, we have the topic no one wants to talk about. In the unfortunate (and unlikely) event of the child’s death, life insurance can cover funeral and burial expenses, easing the financial burden on a family.
Finally, life insurance can establish a financial legacy by providing funds for purposes such as education, purchasing a home, or other future needs as your children reach adulthood.
3. A Second Family
Divorce is common, and sometimes people start a second family. If that’s the case, maybe have younger children you want to care for.
People involved in second marriages often want to ensure ALL their children are acknowledged when they move on to the pearly gates. Life insurance is an excellent way to adjust any inequity.
This approach can protect a new wife or husband if you pass away unexpectedly.
4. Estate Planning
Everyone wants to pass on an inheritance to their family. It’s one of those things we all dream of.
Family life insurance is a terrific tool for achieving this goal. If you have money, you can use a life insurance policy to pay taxes, leave money to your favorite charity, and/or preserve your wealth for the next generation.
Another great trick is to consider a joint last-to-die policy to cover potential liabilities. In a marriage, when the 1st spouse dies, assets typically rollover to the surviving spouse. A joint-last-to-die policy pays out on the death of the 2nd spouse to take care of taxes, estate costs or to leave money behind for kids and grandkids.
Once you purchase this policy, the growth isn’t taxed, and the payout goes to beneficiaries tax-free!
This is an excellent tool if you have a cottage that you want to keep in the family. A medium-sized cash-value life insurance policy can cover any capital gains tax due on the cottage.
It’s nice to know a family tradition will continue when you’re long gone.
5. Gift From Beyond the Grave
OK, the will is done, and your kids are cared for, but life has changed.
You have grandchildren now, and they are growing up fast. You’d love to leave them something, but you’re unsure where it will come from.
Maybe you want to help them get through university or give them a head start. A life insurance policy is perfect for this.
You can purchase a small permanent policy that gives them a nice chunk of change to let them know you’re thinking of them. Thanks, Grandpa and Grandma!
6. Final Expenses
Funerals are costly. I think this is one of the most underestimated costs people encounter.
If you don’t plan for your burial, this burden will be left to your family. When you’re talking about $10 – $20K, it can be a real financial punch in the gut, especially when they’re dealing with the emotional devastation that comes with loss.
So, if you’re looking for family life insurance, you may want to buy a small permanent plan that will cover these funeral costs. For approximately $60 per month, a healthy 60-year-old male, non-smoker, can buy a $20,000 life insurance policy to cover final expenses.
Many carriers offer smaller amounts of coverage, down to $5000. After all, some protection is better than none and many consumers are now opting for low-cost cremations.
Family Life Insurance: Types of Coverage Available
Now that you know why you may need life insurance, let’s consider what products are offered.
Of course, term life insurance is the best-known type of coverage.
You pick a term length (10, 20 or 30 years) you need protection for, a dollar figure that works for your situation, and pay a premium guaranteed to remain level for that term. It’s a great way to go; if you’re young, it’s cheap.
Life Insurance Gets More Expensive as You Age
The problem is that your term premiums become more expensive as you age. It makes sense because you’re a higher risk to insure as the likelihood of passing away increases as we get older.
This is one reason term insurance won’t necessarily work in your ’60s and ’70s.
There’s a point where it becomes too costly, and permanent insurance becomes more viable. You’re also left with nothing if you survive your term.
Short-term coverage for ten years or less may still work to cover a loan or something, but you have to do the math. Even then, it depends on your age, as specific insurance terms aren’t available beyond certain ages.
For more about this, check out my post on term life insurance for senior citizens.
Family Life Insurance Coverage Until You Die
This brings me to permanent insurance. This coverage lasts until the day you die, but as you can imagine, the premiums are substantially higher.
However, if you’re looking to benefit a family member financially, this is a good choice because as long as you pay your premium, they will receive a tax-free lump sum.
If a member of your family happens to have any medical conditions, a simplified issue or no medical exam policy is the way to go. These policies are also an excellent way to cover funeral costs.
“However, individuals who have health issues do have options for securing life insurance coverage. Life insurance with no medical exam can be a smart choice for those who might not otherwise qualify for coverage. It is important, though, to consider how these types of policies work, the strength of the insurance company offering coverage, the cost of coverage, and the length of time the coverage is in place before accepting a new policy.”
Why You Should Contact Policy Architects If You’re Looking for the Best Family Life Insurance
If you’re looking for the best life insurance policy for your parents, yourself, or your kids…
…my best advice is to give Policy Architects a call.
We have all the information you need. Every case is very different, so I can’t give generalized advice to elderly or young parents looking for life insurance coverage.
It all depends on your financial situation, medical condition, the period, and the amount of coverage you need. These variables radically change the advice I give.
One thing I want to stress, however, is if you:
- have a young family or a spouse that depends on you financially
- have debt
- want to help your loved ones cover your funeral and/or financial obligations, or
- want to leave some cash to people you care about
….Life insurance is an awesome tool.
The key is to ALWAYS speak to an independent agent. There are tons of creative ways to address personal circumstances.
