New Advice When Considering Life Insurance Choices

term life insurance

In a distressed economy, it’s common for workers to delay retirement, such as when investments they planned to use for living expenses don’t perform as well as expected. This changing landscape means that the life insurance choices many made in their earlier years may no longer fit their needs.

A recent survey from the NORC Center for Public Affairs Research shows that before the recession, the average planned retirement age was 57, but has since increased to age 62.

Aging Workforce Faces Expiring Term Life Insurance Policies

The findings mean that those who purchased term life insurance in their 30s, expecting it to cover them until retirement, may be unable to afford life insurance at the same policy limits once it expires.

Term life insurance policies offer terms of up to 30 years. If the policy expires, however, a worker must either go without life insurance or face hefty premiums because of advanced age. For those who did not expect to be working into their 60s or 70s, the best solution may be to choose a smaller death benefit that makes life insurance more affordable.

Life Insurance Considerations for Workers in their 30s

Those now in their 30s should reconsider the general advice of buy term life insurance, which is much cheaper than permanent insurance (e.g. whole life insurance, universal life insurance or variable life insurance), and invest the savings. When the economy was stronger, this strategy was sensible, allowing a worker to carry life insurance until retirement age of about 60 when it was no longer needed.

As the likelihood of continuing to work over the age of 70 increases, permanent insurance options begin to look more attractive than term life insurance. Although more expensive, workers can rely on a premium payment that will not change or expire. This allows for the security of carrying full life insurance policy limits needed until policyholders decide to retire.

For those who must delay retirement, permanent life insurance could end up being more affordable than a new term life insurance policy as this new practice becomes a more common occurrence.