Life Insurance for Seniors
As you get older, it's only natural to start thinking about estate planning, end-of-life care, and life insurance. There are many reasons seniors should consider life insurance – it gives them financial protection in case their spouse passes, can help with estate planning, and provides more peace of mind for beneficiaries and dependents.
Keep reading to learn more about types of life insurance plans for seniors, why they are important, and how you can find the right policy.
Why Seniors Should Consider Life Insurance
Seniors should purchase life insurance for many reasons – read about these reasons below:
- Covering Final Expenses: Between funeral costs and medical bills, end-of-life expenses can really add up. The last thing you want is to run out of funds in your retirement accounts. Luckily, many life insurance policies have a cash-value component from which you can borrow – this can help with end-of-life expenses.
- Legacy Planning: Many seniors make it a financial goal to leave money for heirs and relatives, or even leave some of their estate to charitable donations. With a life insurance policy, you know that your relatives or charities of choice will have a sizeable amount of money after you pass away.
- Debt Management: Paying off outstanding debts like mortgages or loans is important. However, when a spouse dies, it can leave the remaining spouse behind on mortgage or loan payments. With a life insurance policy, your spouse can rest easy knowing that they can still pay off remaining debts, even when you're gone.
Types of Life Insurance for Seniors
So, which type of life insurance is best for seniors? The short answer is that it depends on your current financial situation, goals, and future plans. Here are some of the best types of life insurance for people of older age.
Term Life Insurance
If you only need life insurance to cover specific expenses like funeral costs or outstanding debts, a term policy or final expense insurance may be the most affordable option. A term life insurance policy means you'll have coverage for a set time period, or term. Your beneficiary will receive the death benefit if you die during this term.
Term lengths usually range between 10 and 30 years; you'll pay a premium for whichever duration you choose. This is a good option for people who have short-term needs. For example, if you have a mortgage and know your spouse wouldn't be able to pay it off if you passed away, term life can really come in handy.
It's also great if you want your spouse or children to comfortably afford funeral expenses when you pass away. The bottom line is that this coverage is best for short-term needs and lower payments.
Whole Life Insurance
If you're looking for a more permanent solution, whole life insurance is likely the best option. While premiums will be higher, this coverage isn't limited to a specific time period. Instead, you'll be covered your entire life.
The sooner you sign up for whole life insurance, the better. If you are younger, when you obtain a whole life policy, you'll likely get lower rates, saving you money in the long term. Over time, many whole-life policies have a cash value accumulation, growing at a fixed interest rate set by the insurance company each year. You can borrow from this cash value if you need to pay off debts, make a big purchase, or run out of money during retirement.
Whole life insurance is a long-term solution and best for people trying to build wealth or lock in lower rates earlier in life.
Guaranteed Issue Life Insurance
Also known as "no questions life insurance," guaranteed issue life insurance does not require a medical exam, unlike term and whole life options. As you can imagine, this is an excellent option for older people with preexisting conditions – this group of people are often denied coverage or have to pay much higher premiums compared to other groups.
While you'll likely get lower coverage amounts with this option, approval will be much easier. But here's the catch – there's almost always a waiting period. If you pass away during the waiting period, your beneficiaries will not receive the death benefit. Most policies have a waiting period of two or three years.
These policies typically only have a $2,500 to $25,000 coverage range. This isn't ideal, but this coverage can really help with funeral expenses or outstanding debts after you pass away – a huge relief for your beneficiaries.
Final Expense Insurance
Also known as burial insurance, final expense insurance is a form of whole life that only covers the cost of a person's passing. It covers funeral costs, memorial services, cremation, hospice care, legal fees, and even paying off a mortgage loan.
This coverage is very affordable and does not require a medical exam. The best part is that it provides permanent coverage as long as you keep paying your premiums.
Ultimately, the right life insurance plan for seniors will depend on their goals, finances, overall health, and what they really need out of their policy. Be sure to consider your own situation carefully before deciding which one is right for you!
Benefits of Life Insurance for Seniors
There are several benefits of life insurance for seniors – here are some of the most common advantages.
- Financial Security for Loved Ones: Life insurance isn't really about you – it's about your beneficiaries. You don't want your spouse to be left with a large mortgage or your children to be left with costly funeral expenses. With life insurance coverage, you know that your loved ones will be taken care of after you're gone.
- Tax Advantages: Many whole-life policies have tax advantages. For example, this type of policy is a tax-deferred asset with growth throughout your life. The best part? Your loved ones typically don't have to pay taxes on the pay out. It's a win-win.
- Flexibility with Cash Value Policies: A policy with a cash value gives you more options and flexibility later in life. Many seniors use their cash value for loans or even as supplemental income during retirement.
- Peace of Mind: Ultimately, a life insurance policy is about peace of mind for your loved ones, knowing that their essential expenses or your death expenses will be fully covered.
Factors to Consider Before Choosing a Policy
Health and Age
Unfortunately, the older you are, the more expensive your insurance policy is likely to be. This means that the sooner you purchase a policy, the better. However, committing to working on your health may be worth it before undergoing a life insurance medical exam. If you can eat right, work out, and prioritize sleep, you may be able to improve your health markers and get a better life insurance rate.
Coverage Needs
Do you only need life insurance for specific expenses? Or do you have broader financial goals? Your answers to these questions will help you determine what type of coverage you really need. For example, someone who wants to make sure their spouse can pay the mortgage after they pass would be happy with term life, while someone who wants a cash value during retirement would consider a whole life policy.
Budget
Your current budget will also help you determine the best life insurance option. After all, the premiums need to fit into your current budget comfortably. This means that if you need a cheaper option, you can consider term life. On the other hand, if you want more coverage, it's worth considering a whole-life policy or a longer-term policy.
Policy Features
Be sure to read the fine print to determine any exclusions within the policy and what the living benefits are. You should also check to see if you can add riders to the policy if you need more flexibility or coverage.
Tips for Finding the Right Policy
When you're shopping for life insurance, the first thing you should do is compare providers. You want a policy with a strong company with a solid financial foundation. You should also read reviews and talk to friends and family about their experience with different insurance providers. The best research you can do is to hear people's firsthand experiences with their insurance companies.
When you've narrowed your search to a few providers, contact an agent to learn more about your policy options. They can answer questions, and you can also check for the level of customer service at that particular company. For example, if it feels impossible to get ahold of someone, that's something to note – you want it to be easy to get in touch with your insurance agent!
Once you've got the policy in hand, read it thoroughly and have your agent decode complex terms so you can avoid surprises. Verify that the policy has all the coverage you need while having a premium you can afford.
When you've chosen a policy and signed it, reviewing it regularly as your circumstances change is important. A good rule of thumb is to check the policy once a year and revise it as needed. For example, maybe you sell your home and move into a larger house. In this situation, you want to make sure your life insurance policy will cover the value of your new home. The key is to be prepared as your circumstances change.
Common Misconceptions About Life Insurance for Seniors
Myth: "Life insurance is too expensive for seniors."
Fact: While premiums for seniors are higher than for younger individuals due to age and health risks, affordable options are still available for older folks. Policies like term life insurance or final expense insurance are specifically designed to meet the needs of seniors at lower costs.
For example, a healthy 65-year-old can secure a $25,000 term policy for as little as $20–$30 per month, depending on the provider and coverage length.
Myth: "Seniors don't qualify for good policies."
Fact: Many insurers now offer policies tailored to seniors, including guaranteed issue life insurance that requires no medical exams. This can give you coverage even if you have a preexisting health condition.
Here's an example – a 70-year-old with diabetes might not qualify for a traditional term policy but could easily obtain a guaranteed issue whole life policy. This can give them full coverage without all the medical hurdles.
Myth: "You don't need life insurance if you have savings."
Fact: Savings might not be enough to cover all expenses or may take years to accumulate even as you age. Life insurance provides immediate financial support, protecting loved ones from dipping into retirement funds or selling assets after you pass away.
For example, a $50,000 whole life insurance policy can cover funeral costs and leave your heirs a bit of an inheritance, while savings may take decades to grow to that amount. Additionally, some policies, like cash value life insurance, can serve as an extra source of liquidity in retirement.
Conclusion
When it comes to financial stability and peace of mind, life insurance is one of the most important decisions seniors can make, even in old age.
Take some time to evaluate your individual life insurance needs, explore cash-value life insurance options, and make the best decision for you and your family. If you need help weighing your options or learning more, contact Think Life today!
Frequently Asked Questions
What is the best life insurance for seniors?
Many insurance agents recommend that seniors get a guaranteed life insurance policy if they don't already have an existing policy in old age. This way, there's no need to undergo a medical exam, making the process much more straightforward.
Should a 70-year-old buy life insurance?
Yes, many people over 70 still need life insurance coverage, especially if they don't have a lot of existing retirement savings.
How much does a $1,000,000 life insurance policy cost per month?
The answer to this question depends on your age and the term length of your policy. A 30-year policy at age 50 costs around $367.58 per month, on average.