Once your kids are grown, out of the house, and financially independent, you might look at your life insurance policy and think, "Do I still need this?" or "Do I need to cover them?" While it's true that your primary income-replacement needs might be lower, the financial risks associated with your adult children and vice versa don't disappear.
The simple answer is that you may need to keep covering them, and they may need to cover you. It all depends on who is financially dependent on whom, and what debts you share. Getting your head around life insurance cover for adult children is a smart, proactive financial move.
If your adult children are no longer dependents, why should you maintain a policy? It usually comes down to three common financial realities:
One of the biggest reasons to keep your policy is liability. If you've helped your adult child get established in life, you likely have co-signed a mortgage, a private student loan, or a car loan.
No matter their age, dealing with final expenses, funeral costs, medical bills, estate taxes, falls to the beneficiaries.
If you have grandchildren you help support financially, or an adult child with special needs who relies on your financial care, your life insurance is more critical than ever. It's the only guaranteed way to ensure that support continues after you're gone.
This is a less common question, but it has a very practical answer. Life insurance cover for adult children can make sense in specific circumstances, but you must have their consent and an "insurable interest" (meaning their death would cause you financial hardship).
Yes, but you absolutely must have their written consent. Additionally, you must prove "insurable interest," meaning you would suffer a financial loss upon their death (e.g., if you are a co-signer on a major debt).
No. In most cases, the death benefit paid to a beneficiary from a life insurance policy is tax-free at the federal level. This makes it an efficient tool for transferring wealth.
It depends on the goal. To simply cover final expenses or an outstanding debt, a Term Life policy may be the most cost-effective solution. If the goal is to secure permanent low-cost coverage, they can take over later or to use the cash value for future financial needs (like a house down payment), then a Whole Life or other permanent policy may be better.
Yes, contact Majdas Touch Insurance today for expert advice on any potential coverage gaps based on the season, and find the right solutions for your unique needs. We're here to help you understand all your insurance needs, from your pets to your financial future with life insurance policies.
We're here to make securing your insurance straightforward.
You might find this video helpful for exploring life insurance options for adult children: Can I own Life Insurance on my adult children? | QUESTION OF THE WEEK.
