The reasonsare typically pretty clear. You generally purchase a policy to protect your spouse and children in the event that you die and are no longer able to support them financially. But ? After all, your financial responsibilities change as you age.
As a senior, there's a strong chance that your children have grown up and moved out of your house. They likely have their own lives with their own careers and are capable of taking care of themselves financially. So why would you need life insurance?
Believe it or not,in multiple ways — even if they don't depend on you for financial support.
Three reasons seniors need life insurance, according to experts
"Life insurance is an essential financial tool that provides a payout to beneficiaries upon the death of the insured person," says Jordan Mangaliman, CEO of Goldline Financial Services.
Here are three reasons why experts say seniors should purchase life insurance:
For financial protection for your loved ones
"Having life insurance can help protect your spouse," says Krisstin Petersmarck, investment advisor representative at Bridgeriver Advisors. "The death benefit can provide financial security to pay off debts, living expenses and any medical or final expenses" she says.
The truth is that it can take some time for your Social Security and other retirement benefits to transfer to your spouse or other dependents., ensuring your loved ones don't fall on hard times before your retirement benefits transfer to them.
To cover the cost of funeral expenses
"The cost of a funeral and related expenses can be significant," says Mangaliman. "Life insurance can help cover these costs, relieving the financial burden on the family during a difficult time."
The cost of a funeral is an important factor to consider. According to the National Funeral Directors Association, the average funeral in the United States costs $7,848 with a viewing and burial, or $6,971 with cremation. No matter which direction you go, the cost of a funeral is significant and .
If you don't have a life insurance policy, your loved ones may have to cover this cost themselves. Chances are that's the last thing you want them to have to worry about as they grieve your death.
Use life insurance as an estate planning tool
"Life insurance is often used as a tool in estate planning," says Mangaliman. "It can provide liquidity to the estate, ensuring there are funds available to cover estate taxes and other expenses."
In fact, life insurance "is by far and large the most cost-efficient way to pay for estate taxes," he says.
So, what makes life insurance an efficient way to pay estate taxes? There are a couple of factors to note:
- The death benefit is typically tax-free: In general, . As such, your death benefit comes with no federal or state income tax burden — unless your beneficiaries receive your death benefit over time. If that's the case, the interest your death benefit earns after your death is taxable.
- Plan for a specific tax burden: As you go through the estate planning process, you'll form a detailed understanding of what you'll leave behind when you die and the tax burden your estate will face. Life insurance gives you an efficient way to plan for that tax burden. Moreover, you can make monthly contributions over time to make sure that your estate taxes don't burden your beneficiaries.
The bottom line
Life insurance is a valuable financial tool that makes sense even after you're 55 years old. As a senior, a life insurance policy can provide an income for your spouse as they wait for your retirement benefits to transfer; cover the cost of end-of-life, funeral and burial expenses; and pay for estate taxes so your loved ones don't have to sacrifice what you've left behind to cover them.
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