The empty nester phase is that welcome time in life that fits nicely between the end of what are usually life’s biggest challenges and the retirement years. No, you’re not yet enjoying retirement, but at the same time you no longer have to worry about raising children, putting them through college, building a career or acquiring the major trappings of life, such as a house and cars.
With all of that struggling behind you, your financial obligations in life begin to lighten up. As a result, you may begin to wonder if you even need life insurance anymore? After all, at this point in your life, all the major obligations have been met. So do you really need life insurance when you’re an empty nester?
There are a lot of compelling reasons, probably more than most people think.
Providing For Your Spouse
If you’re married, you will still need to provide for your spouse. Even if your spouse is largely self-supporting, his or her life will be at least somewhat impaired – financially speaking – as a result of your death.
At a minimum, it will mean that your income will no longer be available in the household. That can have a negative impact on your spouse’s living arrangement, even forcing the abandonment of the marital residence in favor of a less expensive space.
But there are also retirement considerations to be aware of. If you still have another 10 or 15 years before retirement, your death will mean that your income will no longer be available to be contributed to retirement savings. If you are providing the larger amounts of retirement savings that you and your spouse will be relying upon, then a life insurance policy could help to make up for the loss of savings after your death.
Social Security income is another important consideration. Your death will mean your benefit will not be available to your spouse at retirement. That may leave your spouse with a less than the expected monthly income. Life insurance proceeds could be used to create a nest egg – or even a scheduled income distribution plan – that will make up for the lost Social Security benefit.
Providing For Your Adult Children
It’s no longer true, if it ever was, that children become completely financially independent upon reaching a certain age. This seems to be especially true today, since so many marriages end in divorce, and so many careers last less than a lifetime.
Life insurance may represent your final financial gift to your adult children. It could be an important opportunity to create a financial “reset” after a difficult time, that could include divorce, a career crisis, or even a major health event.
And even though you are an empty nester, you may still have one or two children still in college, requiring a contribution from your income. Life insurance proceeds could make up for the lost income, and the difference between graduating and not graduating for your child.
You may also want to make some sort of a provision for the college education of your grandchildren, if you have any. Higher education is only getting more expensive over time, and you can rest assured that any money you bequeath to your children for the education of their children will be welcomed.
To Meet Specific Obligations
Even though many of the most challenging obligations of your life may be in the rear view mirror, there are usually one or two more that you just sort of learn to live with. Following your death, that obligation may not be so easy for your suddenly single spouse.
For example, if you still owe a mortgage on your home, life insurance proceeds can be used to pay that off. You may have a similar situation with car loans, business loans, or even an excessive level of credit card debt. There may also be student loans which you have cosigned that you will want extinguished upon your death, so that they will not be an ongoing obligation for your loved ones.
To Cover Estate Taxes
This isn’t a concern if you are married, since no estate taxes are due when your estate is passed to your spouse. But if you are single, or you believe that you may outlive your spouse, you may want to have a life insurance policy specifically for the purpose of covering estate taxes.
This will be primarily for people with high value estates, and if you fall into this category, having life insurance to cover the liability will be an absolute necessity.
You may also want to consider having life insurance for the purpose of providing some sort of bequest to people who will not be included in your estate, but for whom you want to make some sort of provision.
To Pay Uncovered Medical Expenses
It’s not an exaggeration to say that we have a medical crisis in America today. The cost of healthcare is rising across the board, and health insurance companies are using various strategies to make medical premiums more affordable. Part of that involves relentless increases in premium rates. But the flip side is the reduction of benefits in several forms.
For example, consumers have become almost conditioned to expect higher deductibles and co-payments. But not always as obvious are service exclusions. A health insurance company may decide not to cover certain procedures. This is becoming more pronounced as new procedures are introduced, and insurance companies are reluctant cover them, often citing them as “experimental”.
Some companies are also making it more difficult to go “out of network”, where the insured may be subject to much higher deductibles than they would be in the case of in-network treatment.
It all adds up to higher out-of-pocket medical costs, even for those who have decent health insurance policies. The situation can be even more pronounced in the event of death as the result of a prolonged illness. Uncovered and out-of-pocket expenses for treatment lasting months or years can run into tens of thousands of dollars.
Your best provision for your loved ones in that case will be a good life insurance policy. It can help clean up the expenses left behind, that your medical insurance did not fully cover.
When you add it all up, you need life insurance just as much as an empty nester as you do at any other time in your life!
