Life Insurance Needs by the Decade

A large percentage of Americans are either uninsured or under-insured for life insurance. Employers that offer voluntary life insurance offer their employees a way toward a more secure financial future.

Americans bought $1.881 billion worth of voluntary life insurance in 2013, an increase of 22 percent over 2012. Still, a large percentage of Americans are either uninsured or underinsured for life insurance.

Who Needs Life Insurance and Why?

The Millennial Generation: A survey by The Hartford found that members of the millennial generation—generally defined as those born in the 1980s to the early 2000s—consider adulthood as beginning when they find their first “real” job (51 percent) and begin to make their own financial decisions (50 percent).

Although these cash-strapped young adults might not have dependents who rely on their salary, many have substantial debt from college loans. The United States Department of Education, which oversees federal student loans, will discharge (forgive) a student loan if the borrower dies or becomes totally and permanently disabled and unable to work at all due to mental or physical disability. It will also forgive parent PLUS loans due to the student’s death or disability, or the parent’s death. Private lenders have no such guidelines, so if something happens to these young adults, their next of kin could become liable for their student loan debt. Although some private lenders have compassionate review procedures, policies vary from bank to bank.

Voluntary term life insurance—which costs very little for a young, healthy adult—can protect a borrower’s family until the student loans are paid off.

Generation X: Most members of Generation X—the generation after the Baby Boomers—are now in their early 30s to early 50s. During these peak earning years, many also take on additional financial obligations, including spouses, children, mortgages and car loans. Many in this generation lack the life insurance protection they need to pay off their debts and help their families maintain their lifestyles if something should happen to an income earner.

In addition to the obligations listed above, members of this generation should consider the following when calculating their life insurance needs: private school and college tuition expenses, additional medical and care expenses for special needs children, possibility of deteriorating health (and insurability) later in life. For some Gen Xers, particularly those who lack employer-provided retirement plans and who lack the discipline to save, this could be the appropriate time to buy a whole-life policy. With time, a whole life policy builds a savings fund, which insureds can borrow against or withdraw for any reason, such as paying a child’s college tuition or funding retirement expenses.

Baby Boomers: The generation that promised to change the world is at least changing the world of retirement. Although the oldest boomers are now 68 and eligible for Social Security, many have opted to stay in the workforce past the traditional retirement age of 65. Because many members of this generation lost significant savings and home equity during the Great Recession, they might have too much debt to comfortably enter retirement. Life insurance can ensure a surviving spouse can pay off debts and maintain his/her lifestyle.

Many boomers find themselves the “sandwich generation”—supporting their teen and young adult children and simultaneously caring for elderly parents. The extra responsibilities these mature adults face make having adequate life insurance particularly important. Increases in longevity have made term life insurance surprisingly affordable for healthy older adults. When calculating their life insurance needs, these individuals should consider how long their family obligations will last, their debt, and the possibility of future declines in health and insurability.

The Benefits of Voluntary Insurance Plans

When you offer voluntary life insurance to your employees, they can choose the type and amount of coverage that meets their needs and budget. Voluntary life is optional and completely employee-paid, so the employer has no direct out-of-pocket costs. Other advantages of voluntary life include:

  • Paid-up life insurance. While most group life insurance terminates at retirement, voluntary plans can provide continuing benefits, and policies that are paid up provide coverage with no additional premiums.
  • Portable benefits. Voluntary plans allow employees to retain their coverage at the same rates if they leave the company, with billing handled directly between the insurance carrier and the individual.
  • No medical questions. Coverage up to a specified amount is guaranteed, even for employees or dependents with health problems, with additional coverage available on a simplified basis.
  • Extra resources. Voluntary life insurance policies can provide access to additional money for retirement income, college costs and emergency funds.

We can work with your employees to help them determine what type of coverage and how much is best for their needs, then handle enrollment and administration. For more information, please contact us.