As a Gen Xer myself, who was born in 1977 and two young children, getting life insurance is a must! Generation X is also considered the “sandwich generation” where they must take care of their aging parents and young children. As of 2020, Generation X is also in its peak earning years.
Generation X is the demographic cohort following the baby boomers and preceding the Millennials. Researchers and popular media typically use birth years around 1965 to 1980 to define Generation Xers, although some sources use birth years beginning as early as 1961 and ending somewhere from 1977 to 1984.
In my mind, Generation X is the most self-sufficient, but overlooked generation given so much attention is focused on Millennials. Getting affordable life insurance is possible. But you need to hunt as I did.
Generation X And Life Insurance Needs
Gen Xers are sandwiched right between the 75 million Baby Boomers and the 83 million Millennials. We're the generation who skateboarded, watched MTV, didn't have internet until college, and wanted to be bankers, doctors, lawyers instead of social media influencers.
Gen Xers love The Dave Matthews Band, Pearl Jam, The Beastie Boys, and more. There are roughly 65 million in Generation X, which is roughly 20% of the American population. Given the significant size, it is curious why Gen X seems to largely be ignored or forgotten in the mainstream media.
Generation X also seems to be the last generation who has been able to build great wealth and be able to afford a comfortable middle-class lifestyle. You know, a single family home, a car or two, a couple children, a dog, and enough money saved for retirement and paying for their children's education.
Unfortunately, if families want to live a middle-class lifestyle in a big city like San Francisco, New York, Los Angeles, Boston, or Washington D.C., a family of four will likely need to make around $300,000 a year.
Generation X also went through the global financial crisis in 2008 – 2009 with a reasonable amount of assets. Whereas Millennials have finally experienced a bear market plus a global pandemic in 2020.
In many ways, the 2008 – 2009 GFC feels worse because the system was brought down within by over-leverage and banking failures. To recover from a financial crisis due to bad finances takes years. At last with the coronavirus pandemic, a recovery can be swift because of a self-imposed demand shock.
By 2020, most Gen Xers have recovered and far surpassed their net worth highs of 2007. Many should have life insurance, but some are still lagging in terms of estate planning. Life insurance is definitely a key component of estate planning if you have kids.
According to New York Life’s 2019 Life Insurance Gap Study, the average Gen Xer has a 48 percent coverage shortfall in life insurance. Studies show they need no less than $525,000 in coverage but obtain only $272,000 — if any at all.
Why Life Insurance Is Important For Generation X
The 2020 coronavirus crisis is a sadly GREAT reminder why life insurance is so important for Generation X. Generation X already experienced the dotocom bursting in 2000 and the 2008-2009 housing-driven financial crisis. Now with a virus that could kill, life insurance is a must.
A lot is now at stake for Generation X due to kids, student loan debt, and mortgage debt. I personally refinanced my mortgage to take advantage of all-time low interest rates with Credible. But I still have a $688,000 mortgage that needs paying off. My $1 million policy will cover this liability.
With Generation X in their peak earning years, this also means an untimely death with lots of debt has the most negative impact on a household. Further, about 47 percent of 40- to 50-year-olds are taking care of an elderly parent while simultaneously raising a minor or supporting a perhaps grown child.
Buying life insurance helps alleviate the stress that is felt through the constant grind of working, saving, and investing. When times are more difficult, life insurance provides even more value.
I know that if I am about to die, I will die easier knowing that my $1 million term life insurance policy will pay off all our family's debt.
Best Life Insurance for Generation X
There are two main types of life insurance: term and whole. Let's take a quick look at the two below.
- Term Life Insurance: Think about term life insurance like an apartment rental. When you leave your rental, you're done. You get no equity. Term life covers you for a specific period of time — usually 5, 10, 20, or 30 years. When the term expires, your coverage ends and you’d need to renew your policy at a higher rate, convert your coverage to whole life, or get a new policy. If you outlive your term — and here’s hoping you do — the insurer keeps the money you’d paid in premiums.
- Whole Life/Permanent Life Insurance: Think about a whole life insurance like buying a home with a mortgage. Over time, you build equity, which is equivalent to “cash value” in your life insurance policy. Later in life you could borrow against your policy’s cash value or surrender your policy and claim the money.
- Last Resort Insurance: These are pretty easy life insurance policies that are used to pay for funeral and burial expenses. The average cost of funeral and burial expenses can range between $5,000 – $15,000.
- Employer-Provided Life Insurance: If you work for a decent employer, you should automatically get employer-provided life insurance. You can get more, usually up to 5X your base salary, if you want to pay more. Usually, if an employer does provide life insurance, it will provide 1-2X base salary. As someone who hasn't had an employer since 2012, having a good term life insurance policy is even more valuable.
Life Insurance Laddering To Save
Life insurance laddering is similar to CD or bond laddering. A life insurance ladder is when you buy multiple life insurance policies, all with different end dates. For example, you could buy a 10-year policy, a 20-year policy and a 30-year policy.
To keep things simple let’s say all three policies have $200,000 each in coverage which means you’d start out with $600,000 in coverage.
After the first 10 years, your 10-year policy would expire, lowering your overall coverage amount to $400,000. Then, after 10 more years your 20-year policy would expire, lowering your coverage to $200,000 for the last 10 years.
A life insurance ladder helps because it:
- Helps save you money by locking in lower life insurance premiums. Life insurance usually always costs less if you get life insurance at a younger age because you are healthier and have less of a chance of dying.
- You have the appropriate coverage over time. You won't have kids in school and a mortgage to pay forever. Over time, your debt should go down if you are a responsible Financial Samurai. Your kids will also graduate from high school or college. Despite opening up a 529 plan to pay for tuition expense, oftentimes, you might not have funded enough. Laddering lets your coverage gradually diminish, lowering your premiums along the way, rather than continuing to pay for coverage you don’t need.
Life Insurance For The Sandwich Generation
Hopefully, this article has convinced you about the importance of getting life insurance if you have children, parents to care for, and/or debt. Gen X is the greatest generation today. We also have the most amount of responsibility.
The easiest way to get affordable life insurance is to shop around online. PolicyGenius is the #1 term life insurance marketplace where you can get multiple real quotes, all in one place, in minutes for free. The old way of going to each life insurance carrier and applying is inefficient.
Get life insurance to protect your family and experience more peace of mind during uncertain times!