Life Insurance Options for Seniors
Finding the right life insurance can be tricky as you get older, but don’t worry, plenty of worthwhile options exist. Whether you want to handle final expenses or leave a lump sum for your family, there’s a policy that could be right for you.
While prices go up as you age, many insurers are happy to work with older adults, even if your health isn’t perfect. Here’s an overview of what to know when looking into life insurance as a senior.
Before you do anything, figure out if you actually need life insurance. If you’re debt-free and have savings set aside for final costs, coverage might not be necessary.
A life insurance policy might be a good idea if:
- You have debts that others would have to pay after you pass.
- You support a spouse, partner, or other dependents with your income.
- You want to cover your funeral and burial costs.
- You have a high net worth and want to address estate taxes.
- You want to provide an inheritance.
Types of Life Insurance for Seniors
Term Life: The Budget-Friendly Choice
A term life insurance policy can be a good, low-cost option if you’re in good health and okay with a medical exam. Since term life is temporary, it’s best for covering debts like a mortgage, or providing financial support if you were to pass away during the policy term.
You can typically secure a 10- or 20-year term life policy when shopping in your 60s and 70s. However, if you’re over 80, this coverage might not be available.
Whole Life: Coverage for Life
Whole life insurance usually provides lifelong coverage, as long as you pay the premiums. It also builds cash value over time you can withdraw or borrow against. But, it takes a while for that cash value to grow – sometimes a decade or more.
This type of insurance is typically more expensive than term life, particularly if you buy a policy later in life. This is because your life expectancy is shorter as you get older, and health issues can cause premiums to rise.
Guaranteed Issue Life Insurance: No Exam Needed
Sometimes known as senior life insurance or “final expense” insurance, guaranteed issue life insurance has no medical requirements. Insurance companies use medical exams to understand your health and predict life expectancy. Policies with exams are usually cheaper. But, if your health makes it hard to qualify, this type of policy can be a good option.
These policies often have a two-year waiting period before you get the full benefit. During this time, your beneficiaries might not receive the complete death benefit. Instead, the insurer will either return the premiums you paid with interest, or pay out a smaller amount.
Simplified issue life insurance skips the medical exam, but requires a health questionnaire. Coverage tends to be lower, rarely going above $100,000.
Permanent Life Insurance: Other Options
If you’re looking at permanent life insurance, besides whole life there are other types, including:
- Universal life insurance: Offers flexible premiums and death benefits.
- Guaranteed universal life insurance: Has level premiums and death benefits, and lower premiums than whole life. A medical exam might be needed to qualify.
- Variable life insurance: Has a flexible death benefit and lets you choose the investments for your cash value.
- Variable universal life insurance: Comes with adjustable premiums and allows you to choose investments for the cash value portion.
- Survivorship life insurance: Usually covers two spouses and pays out when the second person dies, which is also referred to as second-to-die joint life insurance.
Funeral Insurance
Another option for seniors is funeral insurance, also called pre-need insurance. These plans are usually bought from funeral homes, and the benefit goes directly to the funeral home to cover prearranged services.
Funeral insurance is different from burial insurance, which pays the death benefit to your chosen beneficiaries who can use the money for any purpose.
Cost of Life Insurance for Seniors
Finding cheap life insurance for seniors isn’t always easy; it usually gets more expensive as you age. But affordable options can be found, especially if you’re in good health. Here’s a look at average costs:
Average Monthly Life Insurance Rates for Senior Women
Source: Covr Financial Technologies. Average rates are from three top carriers, for healthy, nonsmoking applicants.
Average Monthly Life Insurance Rates for Senior Men
Source: Covr Financial Technologies. Average rates are from three top carriers, for healthy, nonsmoking applicants.
How to Choose the Right Life Insurance Plan
When deciding what type of life insurance to buy, think about your financial goals and how much money you’ll need. For example, a term life policy could cover mortgage payments or other debts. If you want to cover funeral costs, consider a small whole life policy or burial insurance because the death benefit pays out no matter when you pass away. Or maybe you want to leave a large inheritance with guaranteed universal life insurance.
Before buying a policy:
- Shop Around: Compare monthly premiums and death benefits to make sure you’re getting the right policy for your budget and needs. Be honest about your medical history to get the most accurate quote. Insurance companies have different underwriting standards, so it’s important to know where they stand on various health concerns. If you have heart disease, cancer, stroke, diabetes, or kidney disease, senior premiums might be higher or you might be declined for a traditional policy. In that case, other options like guaranteed issue life insurance could be considered.
- Work with a Professional: Consider using a fee-only life insurance consultant, especially if you plan to purchase life insurance with a cash value. This can help guide you towards a policy suited to your specific situation.
- Read the Fine Print: Pay close attention to details, like causes of death that aren’t covered and what happens if you can’t pay premiums.
Riders
Life insurance riders are extra features you can add to a policy, sometimes for an added cost. Riders vary by company, and including:
- Accelerated Death Benefit Riders: These allow you to access part of your policy’s payout if you’re diagnosed with a terminal illness. Similar riders pay out if you have a critical or chronic illness, or need nursing home or around-the-clock care.
- Long-Term Care Riders: Help cover the costs of in-home care or a nursing home.
- Child Term Riders: Provide a payout for your children if they pass away during the policy period.
