Life insurance consumer tips: Returning to the empty nest

By Steven Kobrin

Steven H. Kobrin, LUTCF


The "empty nest" is as ancient as Adam and Eve.
    "Therefore shall a man leave his father and his mother, and shall cleave unto his wife, and they shall be one flesh"
    — Genesis 2:24
Sometimes, however, an adult child finds it necessary to return home for financial assistance.

While your parents worry about you and feel a natural urge to continue providing for you, their generosity can place them at risk for a lost retirement. That is clearly not what you want for your parents. Life insurance can help you protect your parents, even as they continue protecting you.

You are not alone. First of all, you're not alone if you've returned home for financial assistance. In the current economic climate, many adult children are returning to the nest, for a number of reasons. For example — and this won't come as a shock — many young adults are chronically unemployed or underemployed.

Just to keep their doors open, many businesses are reducing payroll burdens. "Right sizing" is the new euphemism. Meanwhile, colleges continue to churn out new graduates, flooding the job market. Experienced professionals arguably have it the worst, as they are squeezed in the middle. Even when a job opportunity emerges, they must settle for much less compensation because they're competing with all those newly minted graduates for whom an entry-level salary would be just fine.

Finding themselves with a lot of free time on their hands, some adult children are going back to school and pursuing additional educational degrees, in the hope of becoming more qualified for employment when the economy eventually turns around. A degree program can take several years.

Others decide to take advantage of the business opportunities that exist even in a bad economy. These enterprising young people are using their time and talents to become self-employed. But startups typically take several years before turning a profit.

If any of these scenarios sound familiar to you, then you might want to think about how your own financial needs mesh with those of your parents.

Are the parents all right?

You probably have serious credit card debt, which you began accumulating before even leaving college. Perhaps you financed your education by taking on private debt. Maybe you also financed a car and other necessities. You made financial decisions that ultimately impact other people in ways you did not realize.

While federal student loans are discharged in the event of the student's death, private student loans are not. The repayment of your private debt would fall to the cosigner. Your parents may be on the hook for your other private debts, as well.

What would it mean to your parents if the repayment of your debts became their responsibility? Would they need to liquidate their retirement savings? Would they need to take out a second or third mortgage on their home? Would they need to work overtime or take an additional job? And how would this extra stress impact their marriage? Tough questions, indeed.

Protecting your parents
Until this point in time, you might not have thought much about your own demise. But helping to protect your family from real-world financial consequences is part and parcel of your maturation process.

In the case of your private debts, for example, you can take out life insurance on your own life, making your creditors (or your parents) the beneficiaries. In this way, you can financially protect your parents.

As a relatively young adult, you most likely will find life insurance to be inexpensive and easy to purchase. Moreover, a life insurance policy can form the foundation of your own financial portfolio for a long time to come.

Some guidelines
Here are some guidelines to follow if you are planning to purchase life insurance to protect your parents from your private debt burden.
    1. Shop around. Every carrier specializes in different sorts of risk factors, such as medical conditions, family history, hazardous hobbies and lifestyle. Find the most competitive carrier for your particular circumstances.

    2. Get prequalified. Make sure you confirm your eligibility before formally applying for the coverage. You should know the company, the product and the price — all beforehand. This protects against the risk of a declination or rating.

    3. Think about the longterm. Now, you may need life insurance just to protect your parents from the burden of your student loans, your credit card debt and your car loan. Later, you may need to protect your spouse and your own children, and you may take out a mortgage or a business loan, for which the bank will require default protection. Consider your future goals.