Your thirties is seen as the optimal time to get life insurance, yet that doesn’t mean it’s too late for people to get it in their forties. But what should you know about getting a life insurance policy as you approach middle age? Do you get term or permanent coverage, do it for the kids and spouse, or grow your wealth while you’re still alive? So many questions. Fortunately, we’ve got the answers with everything you need to know about life insurance in your 40s.
Does a debt-free life await?
Americans aged between 40 and 55 are the most likely to have debt. Much of the money owed is on a mortgage, but that doesn’t mean you’ll want to leave it to your family to deal with should you pass away. Don’t worry too much, though–a life insurance policy can help reduce your debt if you’re no longer around.
You’re most likely at the stage in your life where debts will remain stable, and your income is secure. That makes it even easier to choose a life insurance policy as your incomings and outgoings should be relatively stable.
Customize the policy around your financial obligations and safeguard your family against debt in the process. Should the worst happen and you pass away, the death benefit left to your spouse will likely be enough to cover any form of long-term debts, allowing the rest of your family to carry on without financial burden.
A safety net for your spouse
If you’ve built a life with your spouse, the last thing you want to do is leave them fending for themselves in the event of your death–even if you’re both the breadwinners of the family. Your unexpected loss could lead to your spouse facing unrealistic financial burdens as they pick up the pieces after you’re gone.
A life insurance policy lets you add an extra layer of security, with factors like mortgages, bills, health costs, and your child’s expenses taken care of. It will help your spouse get on with life–at least from a financial perspective. It will allow them to lead a similar quality of life while ensuring they have enough funds in the process.
This is especially true if your spouse is a stay-at-home parent, as they would be left without any significant income if you passed away. Getting life insurance in your 40s is one way of crafting a sound financial plan should the unexpected happen and you’re no longer around.
It’s all about the children
People in their forties could just as easily have newborns as they do children heading into their first year of college. Regardless of their age, you want to ensure that they are financially protected in all scenarios.
One of the key drivers for getting life insurance in your 40s is likely to be your children. They are your largest responsibility and have the greatest expenses attached to them, be it childcare, school fees, school supplies, groceries, clothes–you name it.
Many parents in their 40s opt for a term life insurance policy, which lasts for a set period of time. This time span usually covers their kid’s most pivotal ages and is when they rely on their parents financially. You can choose the amount of coverage needed based on the ages of your children and have it until they’re no longer financially dependent on you. However, while a term policy might look like the best option on paper, it’s not the only life insurance coverage available.
Life insurance, in life and in death
Most people in their forties get a term policy because they expect their situation to change (retirement in later life; kids become financially independent), but getting coverage for a set period of time is essentially short-term thinking.
With a permanent life insurance policy, you can cover every factor needed–both in life and death. That’s because a permanent policy lets you build wealth while you’re still alive. Wealth building works alongside the death benefit, with both of them growing simultaneously.
So how do you build wealth? A permanent life insurance policy has something called “cash value". The cash-value element will accrue over time (as you pay into the premiums), and you can access it later in life. It can come in handy and pay for the kid’s college, act as a retirement plan, or be used to spend on anything you like.
Even better, you can build your wealth tax-free, something you won’t find with regular investment accounts. It means that, over time, you can choose to invest in a high-interest savings account or public equities, then change your investment options without facing any tax liabilities.
Don’t rely on your group life insurance at work
Of course, you may find yourself in a situation where your current employer already offers a life insurance policy. This is known as group life insurance and typically doesn’t require a medical exam–you start the policy when you begin employment.
On paper, everything looks great. And while group insurance can come in handy, it’s worth getting individual coverages, especially in your 40s. Group policy insurers are chosen by the employer, and you usually have a cap on the amount you’re covered for–it’s unlikely to be enough to take care of your spouse and children.
So, yes, by all means, be happy about your group life insurance policy at work. Just don’t solely rely on it to offer complete financial safety to your loved ones if you pass. It also doesn’t come with a wealth-building tool like permanent life insurance.
In conclusion: Life begins at 40
Even though you can get the best rates in your 20s, it’s not too late to get life insurance in your 40s. Covering yourself at this stage in life still gives you plenty of time to build wealth with a permanent policy while also ensuring that your family is well looked after should the worst happen. They say life begins in your 40s, and for many, so does a life insurance policy.