Life insurance for Generation X

Why Gen Xers need life insurance

Gen Xers are probably finding themselves at a time in life when financial responsibilities are abundant. Because of this, life insurance could become an essential part of your financial toolkit, offering security and peace of mind that your loved ones will be protected should the unexpected happen.

For many in Generation X, the thought of relying solely on Social Security in retirement is becoming increasingly concerning. In fact, according to a recent Corebridge Financial survey, 54 percent of Gen Xers are very concerned that Social Security benefits won't be enough to cover their living expenses in retirement. Additionally, a significant majority – 62 percent – worry about whether Social Security will even be available by the time they retire. This uncertainty makes life insurance an even more critical component of your financial planning, providing a reliable source of income for your family that doesn't depend on external factors.

Life insurance can serve multiple purposes for Gen Xers, such as:

• Supporting your family’s future: Life insurance can provide your spouse or partner with the financial means to continue raising your children, covering everyday expenses and helping them until they’re financially independent.
• Securing your business: For business owners, life insurance could be a vital tool for ensuring business continuity. It can fund buy-sell agreements or be used as collateral for loans, helping keep your business stable during difficult times.
• Covering lifestyle-related expenses: As your income grows, so do your financial commitments. Whether it’s maintaining a second home or covering other significant financial obligations, a robust life insurance policy can ensure that your family isn’t burdened by these expenses.
• Managing daily expenses and education costs: The death benefit from a life insurance policy can help your family cover everyday bills or fund your children’s education, reducing the need for student loans.
• Providing peace of mind as the sandwich generation: As you care for both your aging children and aging parents, life insurance can offer a financial safety net that ensures everyone who depends on you is taken care of, easing the stress of balancing multiple financial obligations.

Given the realities of modern financial planning, Generation X is at a pivotal point to reassess their financial strategies. Life insurance provides a versatile and reliable way to secure your family’s future and help ensure that your loved ones are not left to face financial uncertainty alone.

Types of life insurance for Gen Xers

Life insurance for Gen X isn’t one-size-fits-all. At this stage in life, your needs could range from protecting growing families to securing a business or leaving a financial legacy. Understanding the types of life insurance available is key to choosing the right coverage that aligns with your goals, especially as you approach your 40s and 50s when life insurance rates start to climb.

As you age, life insurance premiums typically increase, especially if pre-existing conditions come into play. However, affordable coverage is still within reach if you compare quotes from multiple insurers and work with a knowledgeable broker. By exploring different options and leveraging expert guidance, you can find a policy that fits your budget and needs.

Term life insurance

Term life insurance offers coverage for a specific period, making it a practical option for Gen Xers looking to align their insurance with key financial milestones. Whether covering the years until your children are financially independent, paying off a mortgage or securing your family’s future during your peak earning years, term life insurance could provide the flexibility to meet those needs.

Rather than viewing it as a temporary solution, think of term life insurance as a tailored approach to protection. It allows you to choose the duration of coverage that best fits your financial plan, ensuring that you have the right amount of protection when you need it most.

• Customizable coverage periods: Policies typically range from 10 to 30 years, allowing you to select a term that matches your specific financial obligations, like the length of your mortgage or the years until your children finish college.
• Affordability: Term life insurance is often more affordable than permanent life insurance, making it accessible for those who want significant coverage at a lower cost.
• Renewability: Many term life policies offer the option to renew your coverage at the end of the term, although premiums will be recalculated based on your age at that time.
• Convertibility: Some term policies can be converted to a permanent life insurance policy without a medical exam, providing flexibility if your long-term insurance needs change.
• Predictable premiums: With a level-term policy, your premiums remain fixed for the duration of the term, making it easier to budget and plan your finances.

Permanent life insurance

Unlike term life insurance, which is designed to cover you for a specific period, permanent life insurance provides lifelong protection. This means your policy remains active for your entire life as long as you continue to pay the premiums. With coverage typically extending to a maximum age of 95 to 121 years, permanent life insurance offers the security of knowing that your loved ones will receive a payout whenever the time comes, regardless of when that may be.

Permanent life insurance isn’t just about the longevity of coverage; it also offers additional financial benefits that can be particularly appealing for those looking to build a comprehensive financial plan. Here’s a closer look at the key types of permanent life insurance:

• Whole life insurance: Think of this as the foundation of permanent life insurance. Whole life policies offer fixed premiums, a guaranteed death benefit and a cash value component that grows over time. For example, if you’re looking to ensure your family is financially secure, whole life insurance provides predictable stability. Plus, the cash value can be accessed in the form of policy loans if needed, whether for a child’s college tuition or unexpected medical expenses. However, borrowing against it accrues interest and can reduce the death benefit.
• Universal life insurance: This type of policy is ideal for those who need flexibility. With universal life insurance, you can adjust your premiums and death benefits as your financial needs change. For instance, if you receive a significant bonus one year, you might choose to pay more into your policy to increase its cash value. Conversely, during leaner times, you could reduce your premium payments temporarily. This flexibility makes universal life a versatile option for those who anticipate fluctuations in their financial situation.
• Variable life insurance: If you’re comfortable with a bit more risk and are looking for investment opportunities, variable life insurance could be the right choice. This policy allows you to invest the cash value in various sub-accounts, similar to mutual funds. While this means the value of your policy can grow based on market performance, it also introduces the potential for losses. For those with an investment-savvy mindset, variable life insurance offers a unique blend of life insurance and financial growth potential, making it a compelling option for those who want to actively manage their policy’s value.

Final expense insurance

Final expense insurance, often referred to as burial insurance or guaranteed-acceptance insurance, is a type of coverage typically available to individuals between the ages of 50 and 85. It’s designed to cover end-of-life expenses, such as funeral costs, medical bills and other related expenses. For many, this policy offers peace of mind, knowing that their loved ones won’t be burdened with these financial obligations during an already difficult time.

These policies are generally smaller whole life insurance policies, with death benefits usually ranging from $5,000 to $25,000. One key advantage of final expense insurance is that it often doesn’t require a medical exam or health questions, making it accessible to those who may have health issues that make qualifying for other types of life insurance challenging.

This accessibility can serve as a practical and compassionate choice for those who want to leave their families with the gift of financial security, covering the inevitable costs associated with saying goodbye. It’s a straightforward way to ensure that, no matter what, your final expenses are taken care of, allowing your loved ones to focus on what truly matters during their time of grief.

Life insurance riders for Gen Xers

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. They are typically added to address specific events that you may want coverage for.

There are several kinds of life insurance riders that Gen Xers might want to consider. The ones mentioned here are some of the most commonly available, but your insurer may have additional ones worth considering.

Disability waiver of premium rider

A disability waiver of 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.

Accidental death benefit rider

This rider provides an additional death benefit if you die as a result of an accident. It’s a way to enhance your policy’s coverage, offering extra financial protection for your family in the event of an unexpected tragedy.

Return of premium rider

With a return of premium rider, if you outlive your term life insurance policy, the premiums you’ve paid are returned to you. This rider is particularly appealing for those who want the security of knowing they won’t lose the money paid into a term policy if they outlive the coverage period.

Child rider

A child rider allows you to add life insurance coverage for your children under your existing policy. This can be a cost-effective way to ensure that, in the unfortunate event of a child’s death, funeral expenses and other related costs are covered.

Why Gen Xers may not need life insurance

Life insurance can be a valuable financial tool for many, but it’s not always necessary for everyone. Depending on your life stage and financial situation, you might find that you no longer need, or never needed, a life insurance policy. Here are some scenarios where Gen Xers might consider forgoing life insurance:

• Single with little debt and no dependents: If you’re single, without children and don’t have significant debts that would become someone else’s responsibility, life insurance might not be essential. The primary purpose of life insurance is to provide for those who depend on you financially. Without dependents or substantial financial obligations, investing in life insurance may not be the best use of your resources. Instead, focusing on building your savings or retirement funds could be a more practical approach.
• Financially independent with grown children: For those who have already achieved financial independence, the need for life insurance may diminish. If your children are grown and self-sufficient, your mortgage is paid off and you and your spouse have strong retirement portfolios, life insurance might no longer be necessary. In this scenario, your spouse would likely be able to maintain their lifestyle without needing an insurance payout, reducing the need for continued coverage.
• Existing life insurance coverage reaching the end of its term: If you have a term life insurance policy that is nearing its expiration, it’s a good time to reassess whether you still need coverage. If your financial responsibilities have decreased — such as your children becoming independent or your debts being paid off — you may find that renewing your policy or purchasing additional coverage is unnecessary. Once the financial gaps that life insurance was designed to cover have closed, maintaining a policy could be an extra expense you no longer need.
• A solid financial foundation and peace of mind: If you’ve built a strong financial foundation — complete with savings, investments and a well-rounded retirement plan — you might find that life insurance is no longer a critical part of your financial strategy. Regularly reassessing your finances ensures that you’re only paying for coverage that truly benefits you and your loved ones. If your current assets can comfortably cover any potential needs, life insurance might be something you can confidently let go of.

Life insurance is designed to provide financial security, but it’s important to evaluate whether it’s necessary for your situation. For some Gen Xers, the combination of financial independence, grown children and a solid retirement plan might mean that life insurance is no longer a priority. By carefully considering your current and future needs, you can better make an informed decision about whether life insurance still fits into your financial picture.

Frequently asked questions