Most seniors have two basic problems when it comes to buying life insurance: the cost of the premiums and the sometimes onerous task of getting accepted.
Age and health are the two major drivers of life insurance policy costs, and not coincidentally, they are the primary standards by which life insurance underwriters determine who will be approved for coverage.
Regardless of whether you’ve put off buying life insurance until now or your current policy is expiring and you need new coverage, it’s still possible to get affordable life insurance, whether you’re 55 or 75.
1. Whole life insurance may be the better option
Term life insurance is an insurance policy that is active for only a certain period of time, usually between 10 and 30 years. It only pays if you die within the term of the policy and has no cash value. Term life insurance is much cheaper than similar whole life insurance and it’s easy to see why – it’s much more likely that you’ll outlive the term of the policy, allowing the insurance company to pocket all of the premiums you’ve paid during the policy term.
On the other hand, whole life insurance is an insurance policy that lasts for your entire lifetime. It accrues cash value and this cash value may be borrowed against or withdrawn upon during your life. Of course, any funds withdrawn from the cash value of your policy that aren’t paid back will reduce the total amount of the benefit your beneficiaries will receive upon your death.
Because it is cheaper, most people would benefit more from the cost savings of a term life insurance policy over a whole life policy. However, for seniors, the whole life option may be more attractive, and in the case of some, it may be the only option. As long as you continue to pay your insurance bill your policy will remain in effect and provided that you selected a fixed premium, the costs of the policy will not go up regardless of your age or health.
2. Carefully examine your insurance needs
Life insurance is meant to cover the needs of your family if you should die prematurely. For most seniors, the kids have long since left the nest and have completed their education. Since you don’t need to worry about supporting them, your policy requirements probably aren’t as high as they were when you were younger. Perhaps all you really need is a small policy that is mostly there to cover the costs of your funeral and any lingering debts. Smaller policies have less expensive premiums: for instance, there is a $5,000 policy that costs only about $20 a month.
3. Guaranteed issuance and simplified issuance policies
If you’re over the age of 60 or your health is questionable, guaranteed issuance and simplified issuance life insurance policies begin to make more sense, My Cheap Life Insurance reports.
Guaranteed issuance policies require no medical exam and the application includes no medical questions. Simplified issuance also requires no medical exam but will have medical questions and medical records may be required. Guaranteed issuance, the more expensive of the two types, is guaranteed to accept you, as the name implies, regardless of your age of health status.
However, there are still some significant drawbacks to these types of policies of which you should be aware. Both guaranteed and simplified issuance policies are usually limited to $100,000 in coverage. If you need more coverage than this, and as long as you’re relatively healthy, you may still be better off opting for a fully underwritten life insurance policy instead. If your health is questionable you may have to take out more than one policy of this type.
Another significant issue with guaranteed and simplified issuance policies is that both are also likely to contain a “graded death benefit” provision. This provision limits the insurance company’s exposure during the first two to three years of the policy term. What this translates to is that if you die within the first two or three years, your beneficiaries will only receive an amount up to the total premium you have paid during that time, not the full face value of the policy.
4. Last to Die Insurance Coverage
Last to die life insurance policies are more of an estate planning tool than anything else, but they deserve mention here because they are often less expensive for older people than other types of policies. A last to die policy allows you to leave behind tax free money for your children or whomever you name as your beneficiaries. The premiums are cheaper because of the fact that the benefits will not have to be paid out until farther off into the future than other life insurance policies.
5. Guaranteed Life benefits coverage
If you’re healthy, VT.edu states that a guaranteed life policy may make the most sense for you. You can be assured that your beneficiaries will receive the entire face value of the policy if you die at any time after you sign the papers. There are no deferred or graded benefits. Guaranteed life policies are usually issued for terms of up to 30 years, after which the coverage must be renewed. The application process does include medical questions and you may have to undergo a medical exam.
Life insurance can be the buffer between those you leave behind and the high financial costs of losing a loved one. It can pay off your debts and provide for the costs of your funeral. It can assure that your family receives some money from your estate without having to pay taxes. Even if you’re an older person, and even if your health is not good, there are still life insurance options available for you.
Article courtesy of the 65-year old writer Thomas Madison.