Life insurance for seniors

Life insurance availability of certain plans can be affected by certain factors, including age and pre-existing health conditions. All of these points can impact your choice in selecting a life insurance policy that’s best for seniors.

For most, life insurance helps protect their family from financial burdens such as funeral costs, outstanding debts and more, after their passing. So, while life insurance isn’t required by law, it’s generally recommended. Assessing the financial obligations and goals of everyone involved can help you decide the right path forward.

There are many types of life insurance policies available for seniors looking to provide their families with a sense of financial security after their death. Different types of policies can provide different benefits and payouts, based on how they are structured.

Understanding these options can help you choose the coverage that best fits your age, health, and financial goals. We’ll explore a few of the common options and what they may cover.

Term life insurance

Term life insurance offers coverage for a set period of time. If the insured person passes within the covered period, the death benefit is paid out. A death benefit is a sum of money that is paid out from your insurance policy when the account holder passes away.

With that limitation of time, term life insurance often has lower premiums compared to whole life insurance, making it often a more affordable life insurance option for seniors.

Term life insurance policies are typically recommended for younger, healthier seniors who still have large financial expenses, like a mortgage. They come in varying level terms (period of coverage), according to the Insurance Information Institute (III), such as:

• Yearly/annual renewable term
• 5-year renewable term
• 10-year term
• 15-year term
• 20-year term

Some term life insurance policies are convertible – meaning that the policy owner may be able to change it into a permanent type of life insurance at a certain point without having to go through a new health screening, explains the III.

Whole life insurance

Whole life insurance is intended to be a permanent life insurance policy. As long as it is maintained, it will last until death and there is no requalification process.

With this insurance type, your payment goes to insuring you, the policy fees, and building cash value in your policy with tax-deferred status. These policy types operate as a savings account. Some policies may even pay dividends which can be used to help pay the premium or used by the policy owner.

With this policy type, your premiums, cash value growth, and death benefit are locked in, meaning they will not change.

Whole life insurance can be a great insurance option for seniors. Many whole life insurance plans have higher maximum age restrictions, providing those who are older with coverage options. In addition, the fixed premium can help with financial planning in a fixed-income situation.

But, one thing to consider is that premiums for whole life insurance tend to be higher than for term life insurance, and if a payment is missed, the plan may lapse.

Universal life insurance

Universal life insurance is a more flexible permanent life insurance option. Like with a whole life insurance policy, policies will have a premium, cash value growth, and death benefit. But those values are fixed in a whole life insurance policy, whereas universal life insurance is designed to be more flexible.

With universal life insurance, you can adjust your premium payments, making it often less expensive than whole life insurance if you so choose. But if you choose to make smaller payments, that could impact the growth of your cash value and the amount of the death benefit.

This option can be appealing to people who may not have total certainty that they will be able to pay the premium on a whole life insurance policy or want the flexibility of paying a variable amount.

As you age, your life insurance options typically become more limited and more expensive due to the higher risk, explains Investopedia.

Typically, people in their fifties will have a wide variety of options. For people in later decades of life, these options may be more limited. Above the age of 90, coverage options become extremely hard to find. This is why you should plan ahead as you begin to reach retirement, says CBS.

Here are some considerations to take into account when researching your options for life insurance. In general, it is important to take into account the total financial picture both in the short and long term when choosing the best policy for your situation.

Age and health

Your age and health history play a significant role in acquiring life insurance. Some plans may have limitations related to pre-existing conditions and there may be a maximum age to qualify for coverage – 75 years old for term life insurance and 85 for whole life insurance in many cases, according to Experian.

Coverage needs

People considering life insurance should explore their coverage needs when looking for a policy to ensure that the death benefit will cover what it needs to. This can include funeral costs, outstanding debts, or assisting dependents or other loved ones with living expenses after death.

Premiums and affordability

You should always carefully consider you, and your family’s, financial obligations and potential future expenses to help determine the appropriate coverage amount. For seniors, there may be an increased need for careful planning as income situations can be impacted by retirement and changes in health. Planning ahead can help ensure that premiums can be covered until the policy’s maturity date, also known as the day when the policy ends.

Life insurance offers numerous benefits for seniors, providing financial security and peace of mind. Here are some of the key advantages, according to the III:

Financial safety for loved ones

Life insurance ensures that loved ones are financially protected in the event of the policyholder's death. It can cover funeral costs, outstanding debts, and other expenses, preventing financial hardship on your spouse or other family members.

Coverage for final expenses

Final expense insurance is specifically designed to cover end-of-life costs, such as funeral and burial expenses or state and federal death taxes, according to Investopedia. This type of policy helps relieve the financial burden on family members during a difficult time.

Debt repayment

Life insurance can help pay off any outstanding debts, including mortgages, personal loans, and credit card balances. This prevents these debts from becoming a burden on surviving family members.

Estate planning

Whole and universal life insurance policies can be valuable tools for estate planning. They provide a death benefit that can be used to pay estate taxes, ensuring that the estate can be passed on to heirs with fewer financial complications.

Cash value accumulation

Policies like whole life and universal life insurance accumulate cash value over time. This cash value can be borrowed against or withdrawn, providing a financial resource for emergencies or other needs.

Charitable contributions

Life insurance can be used to leave a legacy by naming a charity as the beneficiary. This allows seniors to support causes they care about even after they are gone.

When you’re researching which life insurance policy is best for seniors, it’s important to gather as much information as you can to ensure you’re getting the most out of a policy. Here are three tips for how you can gather some of that information.

Research insurers

Research life insurance companies closely when looking at policies. Some insurers may specialize in policies for seniors or other types of plans. You can also research customer reviews or get reviews from people you know.

Compare quotes

Always obtain multiple quotes when researching a new insurance policy of any kind. In general, comparing two to three quotes can be helpful in understanding what you should be expecting in costs. When doing a quote comparison, be sure to select all the same options with each policy, so that you can get pricing for comparable coverage.

Understand policy terms and conditions

Review the details of your policy, including any potential exclusions, limitations, or requirements before you commit. It is important to verify that your policy aligns with your needs before committing.