The kids are all grown, and finally it’s just the two of you. Your life is changing, and you are making decisions about what pieces of your former lifestyle should remain the same and what should be altered. There are some items you will decide to let go, but make sure your existing life insurance coverage isn’t one of them.
Why do you need insurance at this time in your lifeyou ask?
Here are ten reasons:
- To accomplish financial goals - If your children are financially dependent on you because they are still in college, life insurance can help fund their education even if you aren’t around. Keep in mind that Social Security benefit payments for a surviving spouse and children cease when students finish high school.
- To care for dependents - Life insurance will continue to provide for your parents and disabled adult children if you die before they do.
- To buffer you from the Social Security "blackout period" - Social Security pays no benefits from the time the youngest child leaves high school until the surviving spouse applies for retirement benefits. This period is called the "blackout period," and it can cause extreme financial hardship to the surviving spouse if there is no income stream. Life insurance provides much needed income.
- To supplement reduced Social Security survivor’s benefits - If a spouse begins receiving Social Security survivor benefits earlier than the full-benefit age, their monthly benefit will be permanently reduced. In addition, because their spouse died early, salary increases that might have increased Social Security benefits were not applied to their record. A life insurance policy can help make up for these losses.
- To supplement lost retirement savings - If a spouse died before retirement, they didn’t earn salary increases that might have increased employer pension benefits and/or IRA contributions. A life insurance policy can help make up for these losses too.
- To meet commitments that were made at a time when there were two incomes - Financial commitments like mortgages or loans are based on the combined income of a two-paycheck couple. If each spouse has life insurance the survivor can continue to meet those commitments.
- To pay for unexpected expenses - Funeral and burial costs, final medical expenses, estate administration and estate taxes aren’t always anticipated. Life insurance prepares you for these costs no matter when they happen.
- To create a financial emergency fund - If a family doesn’t have an emergency fund equivalent to at least six months of income, they could be extremely vulnerable if one of the wage earners dies. This lack of funds could also impact the family’s ability to obtain credit. Life insurance can be the family’s emergency fund.
- · To supplement lost income if a spouse dies after beginning Social Security benefits - Each spouse receives a check for his or her Social Security retirement benefits. The earner with the larger pre-retirement income gets a benefit based on that income. The spouse with the smaller, or no pre-retirement income gets a benefit based on their own earnings, or half of their spouse’s Social Security benefit, whichever is greater. When one spouse dies, the larger retirement benefit continues, but the smaller one stops. Life insurance can make up for this income loss.
- To provide for charitable causes - If you want to ensure your favorite charities get money after your death, you can designate some or all of your life insurance benefits to this purpose.