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It's possible for seniors to get life insurance; in fact, there are a range of policies available for those ages 60 and older. Before you buy, it's important to think about how your loved ones will use the money when it's paid out so you can determine how much coverage you really need. That way, you can avoid being over-insured and paying too much in premiums.
Life insurance can be useful as a senior if it helps your loved ones cover burial costs or pay off taxes or outstanding debts in your name. You have the choice of term or permanent life insurance. Term life insurance—which covers you for a fixed period of time, rather than for the rest of your life—is often more cost-effective.
Here are your options, and some tips on how to shop for life insurance as a senior.
Types of Life Insurance for Seniors
Much about life insurance is the same for seniors as it is for younger consumers. Your eligibility and premium cost will be based on your age, habits, health and risk factors. The more coverage you want, the more you'll pay. You have the option to choose from traditional life insurance policy types, like term and permanent life, and from other types that are unique to older adults.
These are your options:
- Term life insurance: This type of policy offers coverage for a specified term, such as 10 or 20 years, and will only pay out a benefit if you die during that time. If you want to renew the policy, you'll likely pay more since you'll be older. Term life coverage is typically less expensive than a permanent life insurance policy.
- Permanent life insurance: Unlike term life, permanent life lasts for the remainder of your lifespan, not a particular time frame, and also accumulates a cash value in addition to the death benefit. There are a few types of permanent life insurance, including whole life and universal life. It can be expensive, though, and may be difficult to justify if you're already on a budget as a retiree.
- Simplified issue life insurance: This can come in either term or permanent varieties, and what makes it unique—and potentially appealing to seniors and those with health concerns—is that no medical exam is required to gain eligibility. You will have to answer some questions about your health history, though. While the approval process is usually faster than a policy that involves a full underwriting process, it's more expensive for a smaller amount of coverage. The maximum benefit is often between $25,000 and $300,000.
- Guaranteed issue life insurance: An even pricier no-exam option is guaranteed issue life insurance, which some insurers offer to consumers ages 50 to 80. You cannot be denied coverage. But, in exchange, there's a two- to three-year waiting period during which your beneficiaries will receive a death benefit equal only to the premiums you have paid, plus interest, if you die. The maximum benefit is $25,000, though not all insurers will offer this amount.
- Final expense insurance: You may see simplified issue or guaranteed issue policies marketed as "final expense insurance," "burial insurance" or "funeral insurance." In practice, these options are merely life insurance products with small death benefits geared toward seniors who have health concerns and limited insurance needs. Double-check the terms to understand whether a final expense insurance policy you're considering is a term life or whole life product, the size of the coverage amount and whether there's a waiting period before your beneficiaries can receive a full payout.
How Much Does Life Insurance Cost?
Life insurance costs rise as you age. On average, a 10-year, $125,000 term life policy for a typical, nonsmoking female costs $68.75 per month at age 50 versus $222.50 per month at age 65, according to Aflac, an insurance company. But opting for a policy doesn't have to be prohibitively expensive as a senior—especially if you choose one closely matched to your needs.
That's because life insurance coverage amounts don't need to be as high for seniors who are no longer financially supporting children or a spouse, and who might have paid off their mortgage. When deciding on a coverage amount, consider:
- How will your loved ones pay for a funeral or burial?
- Will you have any outstanding bills or debts to your name that your beneficiaries will need to pay off?
- Will any taxes, such as estate taxes, come due that you would like to cover the cost of?
- How will your spouse pay for expenses in your absence?
You may decide that a comparatively smaller death benefit is all you need. Additionally, consider your health and whether you are likely to get a policy after a full underwriting process, or whether a simplified or guaranteed issue policy is best for you. But know that going that route means a potentially tighter monthly budget due to the higher premium costs.
Why Seniors Might Opt for a Life Insurance Policy
While not all seniors may need life insurance, there are some circumstances when it could be helpful:
- If you're retiring and no longer have access to a group life insurance policy through work (but check whether it's possible to transfer your insurance to an individual policy).
- You'd like to cover your own funeral and end-of-life expenses, but there are no other assets in your name that your beneficiaries can draw from.
- You have family members who financially depend on you.
- You have significant debts or taxes that your survivors will need to pay off.
- You can afford to add a life insurance premium payment to your current budget.
Additionally, life insurance could be a good option if you're also interested in long-term care insurance, which helps cover care in assisted living facilities, at home, in hospice and in rehabilitation centers. You can get hybrid long-term care and life insurance or life insurance with a long-term care insurance rider, which is an optional benefit allowing you to use the death benefit for long-term care.
Where to Go for Life Insurance as a Senior
To buy life insurance as a senior, you can contact an insurance company or an agent or broker, who sells insurance for various companies simultaneously. Compare multiple quotes for similar policies so you're sure to get the lowest price and best terms available.
If you find that premiums are too high or your health prevents you from getting a traditional life insurance policy, there are other ways to cover final expenses. For example, other parts of your estate plan could take the place of a life insurance policy, such as excess savings or retirement funds. You may also decide to set money aside in a savings account just for funeral costs or other expenses, and share your wishes with your loved ones.