As you settle into middle age, you may find yourself managing more obligations than ever before. Marriage, children, a mortgage, home insurance and car insurance are just some of the regular responsibilities that Gen X-ers face. Born between 1965 and 1981, Generation X is one group that may be thinking more about the need for life insurance.
“Gen X has a tremendous need for life insurance,” says Corinne Kligmann, a partner at Utah’s Lift Financial. “Many are helping elderly parents or supporting grown children. Some don’t expect to have any Social Security. Collectively as a group, Gen X-ers have lost a great deal of their net worth between 2005-2010 due to the financial crisis. All of this has created a great deal of pressure on this generation that could be largely alleviated by simply adding adequate life insurance planning.”
As a family finance expert and on-air contributor, Andrea Woroch describes the impact that a life insurance policy can have on your family’s finances. “Carrying any type of debt poses a huge financial burden to family members, including your spouse or kids or even your parents,” she explains. “Life insurance can ensure these debts are resolved in the event of your unexpected passing, so they don’t become your loved one’s debt to deal with.”
Jordan Shanbrom, an experienced life insurance broker at California Life Coverage, explains how life insurance can assist Gen X-ers in further detail. “For the most part, they are still working adults who provide for their spouse or for their adolescent children,” he says. “If the working Gen X-er dies, their income is lost. A lot of Gen X-ers are also homeowners, and if their spouse or children are left with a mortgage payment they can’t afford, the house will be lost. Having at minimum 5 years of income replacement in the form of life insurance is a must.”
When it comes to life insurance, everyone has different needs. Generation X has a specific set of factors they may want to consider when they are searching for life insurance.
Why Gen X-ers needs life insurance
Generation X is in a stage of life that includes numerous responsibilities. Life insurance may help to provide peace of mind that your loved ones will be taken care of should you pass away.
Kligmann offers her analysis based on her experience working with Gen X clients. “Generation X is a generation that understands the value of hard work, is very adept with technology, and has some experience levels that give them wisdom, along with their above-average education levels and a strong desire for work-family balance,” she shares.
Although Gen X may be excelling in several areas of life, they may be falling behind when it comes to life insurance. “One area that they do seem to be lacking is in life insurance,” Klingmann affirms. “They have been busy creating their careers and families, and it seems that somehow, they missed the memo that helped them understand the deep need for life insurance and in general, many of them have delayed or ignored this aspect of their financial planning.”
“Most people don’t start really thinking about life insurance until they’re in their 40s to late 50s,” comments Travis Price, a Medicare and final expense insurance agent. “This 15-20 year period is when your average human starts to have health issues. Furthermore, the period of ‘middle’ age starts creating sharper increases in life insurance premiums.”
This is of special concern given that life insurance for Generation X can provide a number of benefits to your family. Should you pass away, life insurance could help your loved ones with:
- Mortgage payments: If you still have a mortgage, a life insurance policy might help your family make the monthly payments if you pass away.
- Daily expenses: Should anything happen to you, your life insurance policy’s death benefit could help your beneficiaries pay the bills.
- Education: Higher education is often expensive. Your life insurance policy could help fund college for your children and might even eliminate the need for them to take out student loans.
Dr. Jeremy Britton, CFO of BostonCoin, offers his advice. “Insurance may be seen as a ‘necessary evil,’ but it is the price of securing your income for yourself if you get sick, or securing income for your family if you die,” he explains. “Like any insurance, you hope you will not use it, but it is there if you need it. Possibly it will give you and your family peace of mind and a few tax deductions, as well.”
Types of life insurance for Gen X-ers
Generation X-ers may have varying life insurance needs. There are several types of life insurance that could help Gen X-ers support their financial goals. When considering what type of life insurance is right for you, there are several factors to consider.
“For Gen X-ers in great financial standing, getting a simple term to overcome taxes when they transfer their wealth to their children is a must, especially if passing away early is a common occurrence in their family genetics,” says Shanbrom. “If, on the other hand, their genetics shows they will outlive their 80s, they should look toward getting a permanent life insurance policy that will stick around and pay their family when they pass away.”
Term life insurance
Term life insurance is a temporary form of life insurance. It typically lasts anywhere from 10 to 30 years, depending on the policy you choose. You can renew your policy, but the premium will be assessed based on your current age, meaning that the price you pay may increase as you get older.
“A term life insurance policy can ensure your family’s bills, childcare and college costs are covered,” Woroch shares, “but also can ensure your elderly parents have the care they need when you aren’t there to ensure it’s taken care of both, physically and financially.”
Whole life insurance
Unlike term life insurance, whole life insurance does not have an expiration date. A type of permanent life insurance, your whole life insurance policy will never expire as long as you make the necessary payments to keep your policy active.
Whole life insurance also enables you to accumulate cash value, a feature that term life insurance does not offer. Cash value is an option that many Gen X-ers find especially attractive, since it allows you to borrow against the policy or even withdraw money without paying it back, although your death benefit amount may be reduced.
Final expense insurance
Another possible option for Gen X-ers is a final expense policy. These are essentially small whole life policies, with death benefits usually around $25,000, that are designed to take care of end-of-life expenses. Final expense policies generally do not require medical exams and may be a good option if you find yourself unable to obtain other types of life insurance due to health problems.
Life insurance riders for Gen X-ers
No matter what type of life insurance you choose, a standard policy may not meet all of your needs. This is where life insurance riders can help. A life insurance rider is an amendment to your life insurance policy that adds extra protections that might better suit your family’s needs.
“Life insurance riders are contractual adjustments to a normal life insurance contract, ones that may improve benefits should a specific event happen,” says Price.
There are several kinds of life insurance riders that Gen X-ers might want to consider.
Disability waiver of premium rider
A waiver of disability premium rider could protect you should you become disabled. If you have this option on your policy and suffer a qualifying disability, your premium payments could be waived for the duration of the disability.
Accelerated death benefit rider
An accelerated death benefit rider may allow you to access part of your policy’s death benefit while you are still alive. With this rider attached to your policy, you may be able to receive part of your death benefit if you are diagnosed with a terminal illness.
Long-term care rider
A long-term care (LTC) rider may also enable you to access your life insurance benefits ahead of schedule. When you add this rider to your life insurance policy, you may be able to use the funds to pay for extended medical care, such as a nursing home, private nurse or another type of long-term care.
Frequently asked questions
What is the best life insurance company for Generation X-ers?
Gen X-ers have numerous options for life insurance, but the best life insurance company will vary based on your personal rating factors like your age, health and budget, as well as what kind of policy and riders you are interested in. Working with a life insurance agent and getting quotes from numerous companies could help you find a company that meets your needs. If you have a current life insurance policy, you may be able to adjust your life insurance if you find a company that better fits your needs.
How much does life insurance cost for Gen X-ers?
The cost of life insurance is different for each person. Life insurance companies base premiums on a number of personal rating factors that are specific to each individual. Factors like your age, medical history, current health, where you live, how much coverage you choose and even your hobbies can affect how much you pay. Pricing will also reflect what kind of life insurance policy you choose, with permanent policies generally costing more than term policies.
How much life insurance do I need?
The amount of life insurance that you need depends on what you want your policy to provide for your loved ones when you are gone. You may want to consider if you just want your loved ones to be able to afford to pay for your funeral or if you want to provide enough money to pay off debts or leave a financial gift to someone.
“My suggestion is that you calculate your annual income from now until retirement and use that as a guideline,” offers Dr. Britton. “If you have a dependent partner and/or children who are relying on your income for the next 20-30 years, paying off the existing debt will not be enough; you need to consider future debts such as costs of school, college and buying groceries in 2045.”