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By Joan Pabón
October 29, 2020
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By the time you reach retirement age, or even if you’re approaching it, you likely have a financial plan in place that may already include life insurance. If, for any reason, you didn’t plan for life insurance or your term life insurance policy has lapsed, your first step should be to assess your needs, starting with the reasons you’re looking for coverage.

Those driving factors, or lack thereof, may determine whether you even need to buy life insurance at your age.

Life insurance works as a financial safety net for those who have dependents and pressing financial obligations. If there is no one who depends on you financially and you’re only looking to cover funeral expenses upon your death, then you may be able to cover those costs with savings or consider a final expense insurance policy, which we will discuss in more detail below.

If, on the other hand, you have grandchildren or adult children with disabilities who depend on you financially, want to leave a donation to your favorite charity, or cover estate taxes for your heirs, then a life insurance policy may be the way to go.

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One thing you need to be aware of is that the types of life insurance available to seniors are the same ones available to everyone else, albeit at a higher price. That’s because the likelihood you’ll die in any given year increases as you get older and insurers will set premiums accordingly. This guide walks you through the different types of life insurance to help you decide which, if any, should be part of your retirement plan.

Life Insurance for Seniors, In Detail

There are two main categories of life insurance policies: term life insurance and permanent life insurance. Each of them has several subcategories with their own particular features.

Term Life Insurance

Term life insurance is a simple product that pays out a specified death benefit to the policy’s beneficiaries if the insured dies within a given timeframe. Common options are 20-year term or 30-year term life insurance. If the insured outlives the term of the policy, the policy will either expire or increase in price, depending on the plan. You can renew some term life policies once they’ve reached their term, but the insurer may adjust your premiums based on your age and health, again depending on the plan.

Term life insurance is known for being the most affordable life insurance option, and it can be a great solution for younger individuals who are in good health and have temporary financial obligations such as a mortgage or private student loan debt. Many families purchase term life insurance as a form of income replacement when they have dependents like young children, and the death benefit is typically intended to cover daily living expenses or debts until the beneficiaries of the policy are able to get back on their feet.

According to the Insurance Information Institute (III), there are three main varieties of term life insurance:

Types of Term Life Insurance

Currently the most popular option. Level term life insurance features both a premium and a death benefit that stay the same over the policy’s term, which can span from 10 to 30 years. This type of policy may cost more.

With this type of policy, the death benefit decreases over time, typically in one-year increments. Premiums remain the same throughout the life of the policy, and so may be lower than for a level-term policy.

The policy coverage can be extended for an additional term or terms without requiring the policyholder to undergo a medical exam to re-qualify. However, the premium is reassessed annually and typically increases as the policyholder ages.

The main drawback of a term life insurance policy is that if you outlive the term, the policy will expire and your beneficiaries won’t receive a death benefit. And, if you opt for a renewable term policy, premiums will likely be lower at the beginning of the policy’s term and increase as you age.

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Permanent Life Insurance

Unlike term life, permanent life insurance does not expire and is meant to pay out a death benefit to the policy’s beneficiaries upon the death of the insured, regardless of age. This type of life insurance also has living benefits in the form of a separate investment component called the “cash value,” from which the policyholder may borrow as long as he or she continues paying the premiums.

Permanent life insurance premiums are much more expensive than those of term life policies, yet this type of plan may better suit people with long-term obligations, those who want to cover estate taxes after their death or want to use life insurance as an investment vehicle. If you’re looking for a whole life policy as an investment, however, it is generally recommended that you exhaust other investment options — such as a 401k, IRA, or Roth IRA — first.

Permanent life options include whole life insurance and several varieties of universal life insurance:

Types of Permanent Life Insurance

Features a fixed death benefit and premiums as well as guaranteed cash value accumulation but is the most expensive life insurance policy available.

Allows you to increase or decrease the death benefit according to your needs, which in turn changes your monthly premiums. Its cash value component accumulates interest based on current market rates. If interest rates go down, cash value accumulation will be low. Another available option is guaranteed universal life, which features low or no cash value accumulation but won’t lapse as long as premiums are paid. Guaranteed universal life features higher premiums than term life but is more affordable than whole life insurance.

The cash value component is tied to the performance of an index, such as S&P 500. Gains and losses may vary depending on the performance of the index, but there is typically a cap on both. These policies are generally considered less risky than standard universal life policies but riskier than variable universal life.

The cash value component is tied to and varies based on the performance of mutual funds, stocks or bonds. Gains and losses will vary depending on the performance of the funds, but there are no caps on gains or losses. That means there is higher risk involved and these accounts need to be actively managed.

Besides the higher premiums, the main drawback of permanent life insurance is that the cash value component is forfeited upon your death, so your beneficiaries will only receive the death benefit amount. You can, however, purchase an add-on or rider that allows your beneficiaries to receive both the death benefit as well as the cash value component.

If you’ve borrowed from the policy’s cash value and there is an outstanding balance when you die, that outstanding amount will be deducted from the death benefit. To receive the remaining cash value component yourself, you would have to cancel the permanent life insurance policy, which would leave your heirs without a death benefit.

Another consideration to keep in mind is that the premiums you pay for permanent life insurance go toward funding the death benefit for the first few years the policy is in place. That means no cash value will accumulate during that time, and you can’t draw on the policy’s investment value during that period.

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Other Life Insurance Options for Seniors

There are other insurance products for seniors that may be purchased on their own or in combination with life insurance, depending on your needs and goals.

Final Expense Insurance

Final expense insurance provides a death benefit that can be used for any reason, not just funeral expenses. These policies are essentially whole life insurance, cash value included, but with smaller death benefits — typically from $2,000 to $50,000. Final expense policies are issued for applicants between the ages of 50 and 85 and there are two main options: guaranteed issue and simplified issue.

Guaranteed issue whole life insurance features a guaranteed death benefit (as long as you pay the premiums) and does not require a medical exam or medical questionnaire for approval. For this reason, guaranteed issue policies are an option for those with pre-existing health conditions.

There is typically a waiting period with guaranteed issue life insurance policies. This means that if you die during the waiting period, your beneficiaries won’t receive a death benefit, but they will be refunded the premiums you’ve paid.

Simplified issue life insurance, on the other hand, requires a medical questionnaire but no medical exam. These policies tend to be less expensive (because qualifying for coverage is not guaranteed) and don’t require a waiting period.

Final expense insurance is an option for those who cannot qualify for traditional life insurance coverage because of their health and need only a small death benefit. One thing to keep in mind, however, is that while these policies are more affordable than traditional whole life, you’re still paying a lot more for the coverage amount versus a term life policy.

Long-Term Care Insurance

Long-term care insurance is intended to cover the costs of extended care — such as in-home nursing or hospice care — in the event of a chronic or debilitating illness, disorder, or disability. For this type of insurance to kick in, you must be unable to perform at least three activities of daily living (ADLs), which include eating, dressing, continence, toileting, transferring, and personal hygiene.

Most long-term care insurance policies cover services that health insurance and Medicare do not, such as the costs of a nursing home or assisted living facility. They also work on a reimbursement model, meaning that you must pay for services out of pocket and then apply to get reimbursed.

You may not qualify for long-term care insurance if you have a pre-existing condition, but you can still purchase this type of coverage in your mid-60s. In fact, it’s recommended for people between the ages of 55 and 65. LTC policies are priced based on the selected benefit period, type of policy, and payout options as well as the applicant’s health.

A disadvantage to long-term care insurance is that if you never require long-term care — as applies to about 30% of people — you never benefit from the policy. Increasingly popular are policies that combine long-term care insurance with a death benefit, creating a hybrid life insurance option. While premiums for these policies can be the highest of all types, they may suit those who wish both to protect their loved ones from having to pay for their care late in life and provide a death benefit if that care is never needed.

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The Cost of Life Insurance

In general, the cost of insurance of any type is directly proportional to the risk the insurer is willing to assume by offering you a policy. The principle holds true for life insurance; the higher your risk of dying, the more expensive your premiums.

Many different variables go into calculating your premiums, so it’s hard to offer ballpark figures without knowing the specifics of your situation.

What you pay for your life insurance policy will depend on:

  • The type of life insurance policy you choose
  • The policy amount or value
  • Your age
  • Your gender
  • Your health status and family health history
  • Whether or not you use tobacco
  • Your driving record
  • Your occupation and hobbies

One of the most important of these factors is your age. While there are still life insurance options available to you up to age 85, the older you get the higher the risk you’ll pose to the insurance company and the more expensive your premiums will be. Of course, your age is beyond your control, but there are things you can do to get a lower premium.

Shop Around

Life insurance companies price risk differently based on their particular underwriting guidelines. For this reason, experts recommend you get at least three quotes from different insurance companies before you settle on a life insurance policy.

The best life insurance companies will have strong financial ratings from credit rating agencies like A.M. Best. While a strong financial rating doesn’t necessarily translate into excellent service, it can be a good indicator that the insurer you have chosen to do business with will be around to pay out your beneficiaries’ life insurance claim.

It also pays to know the difference between a captive insurance agent, one who works for a single insurance company, and a life insurance broker who can offer you products from different life insurance companies. Regardless of how you choose to shop around, have your priorities and budget front and center.

Consult a Certified Financial Planner

A certified financial planner (CFP) can help you determine whether or not you need life insurance and which product best aligns with your financial goals. Of course, this service can have high fees and may not be for everyone. But if you have disposable income and are considering a whole life policy, creating a financial plan before you buy can be an especially smart move.

According to Malik Lee, CFP and founder of Felton & Peel Wealth Management, the benefit of consulting a certified financial planner before getting life insurance goes back to being a fiduciary. “When you are going to a regular insurance agent, they will offer you options based on a suitability standard or whether or not you can afford the policy. Whereas a certified financial planner, or somebody bound by fiduciary standards, is looking at how the policy fits your goals and plans,” says Lee.

“Think of it as going to a car dealership. If you go to a car dealership and say you have $30,000, they’re gonna try to find you a car for $30,000. Whereas if you went to a car dealership that was a fiduciary, they’d ask you if you have a big family or do a lot of driving, and this can mean the difference between walking away with an eight-cylinder car vs a four-cylinder SUV,” he adds.

Senior Life Insurance FAQs

Do I need life insurance after I retire?

If you have enough in savings to cover funeral and burial expenses and don’t have any dependents, you may not need life insurance at all. Depending on what you want to do with the policy and how much it would cost you to get insured based on your age and health, you may be better off self-insuring or purchasing a different kind of policy than a life-insurance one.

When You Need Life Insurance
When You Need it: When You Don’t:
You still have dependents You don’t have dependents
You have outstanding debts, a mortgage, or other temporary financial obligations You don’t have debts or a mortgage
You want to cover funeral expenses You have enough saved up to cover funeral expenses
You want to supplement your spouse’s retirement income You have healthy retirement savings
You want to cover estate taxes for your heirs You have a simple estate situation
You want to leave an inheritance or contribute to a favorite charity Your financial situation is unlikely to change in the near future

Can I buy term life insurance after 60?

In light of the COVID 19 pandemic, some insurers have adopted more stringent underwriting guidelines that don’t favor seniors, people with pre-existing conditions, or those who have recently traveled outside the U.S. But that doesn’t mean there aren’t any options for people over 65.

According to LIMRA’s Insurance Research Director Elaine Tumicki, even a product like term life insurance — which can become more expensive the older you get — is still available to people well into their 70s, albeit for shorter terms.

What can I do if my life insurance policy has lapsed?

If you’re over 60 and your policy has lapsed, Faisa Stafford, president and CEO of nonprofit Life Happens, recommends you talk to your financial advisor before looking for a new policy. It’s likely you don’t need to shop for a new policy or undergo additional underwriting to reinstate your coverage.

“Many insurers have made it even easier to reinstate a lapsed policy, but the sooner you call about your lapsed policy, the better. Covid-19 has had a marked effect on household incomes and finances, and many insurance companies are offering new options to reinstate a policy, defer payments, and even extending grace periods between payments,” says Stafford.

“If you can’t reinstate a lapsed policy, make your next call to your financial advisor. They will help you find a replacement policy as soon as possible and give you options on what type you should go with depending on your needs, age, and health,” she adds.

What type of life insurance policy is best for someone over the age of 60?

The life insurance policy you choose should depend on your goals and financial situation. Ask yourself what you want the policy to accomplish and look for options that can help you meet those goals.

Then, factor in the cost of premiums. A product like whole life insurance may sound like a good investment, but if you cannot comfortably afford high premium payments on a fixed income, you run the risk of letting your coverage lapse.

Another important consideration is whether or not you can get approved for the policy. If you have pre-existing conditions, you may not have a wealth of options to choose from, but may still qualify for a more expensive guaranteed issue or simplified issue policy.

How much coverage should I buy?

According to the Insurance Information Institute, choosing a death benefit is not as simple as going for a policy valued at 10 or 20 times your income, which is an oft-quoted rule of thumb. This simplistic formula often doesn’t account for “hidden income,” services typically carried out by the breadwinner, and inflation. When choosing a death benefit, consider the following:

  • The number of dependents and their age
  • Other sources of income your dependents may have
  • Your gross income
  • Any services you provide for your dependents (accounting, childcare, etc.)
  • Additional benefits you receive, such as company-sponsored health insurance
  • Potential medical bills
  • Outstanding debt
  • Funeral expenses
  • Financial obligations such as a mortgage
  • College expenses for surviving children
  • Inflation

If you have dependents, a life insurance needs calculator could help you determine an average life insurance benefit amount. However, consider running these numbers by a professional who can tell you whether your estimate accurately reflects your needs.

Senior Life Insurance in a Nutshell

Since providing for children until they reach adulthood is often the key factor driving the purchase of life insurance, you may have less reason to acquire it if your kids are now grown. In addition, purchasing a policy later in life means the cost of your life insurance premiums will be higher than for a younger applicant.

That said, insuring your life when you’re older can still make sense, for reasons ranging from sparing loved ones from inheriting your debts to making sure they have an additional measure of financial comfort after you’re gone.

If you’re seriously considering life insurance late in life, be sure to shop around by comparing quotes and making sure you settle for a policy that’s underwritten by a reputable company.

More from Money:

Guide to Term Life Insurance

Guide to Whole Life Insurance

Guide to Universal Life Insurance

Best Life Insurance Companies of 2020