If you’re a senior in need of life insurance, you’re probably wondering whether term life insurance for seniors makes sense.
The general wisdom for younger people is that term life insurance usually provides the necessary coverage for less expense than permanent policies, but does that apply to seniors as well? The answer is “maybe, yes, maybe, no.” Not surprisingly, it ultimately depends on cost.
When Term Is the Best Choice
Whether term life insurance for seniors will be your best buy will depend largely on your exact age and your health. If you qualify for term rates that are lower than for permanent policies, term may be your wisest buy in many cases.
The other important considerations to determine which type of insurance is best for you are your goals. Are you protecting an estate? Or a special needs child? Do you need coverage for the rest of your life? If so, cost aside, term life insurance won't be your best option. However, if you need insurance for a limited time, it may well be the best choice.
When Term Isn’t the Way to Go
But age and health often cause term life insurance for seniors to be more expensive than a permanent policy. Consider that a permanent policy covers you until you die and the insurance company will be paying your beneficiary(s) the face amount of your policy. With term life insurance, however, you don't have a guaranteed payout. If you can get a permanent policy that will be less expensive than a term policy, I can't think of any reason not to get permanent coverage. Can you?
- For example, if you’re in your 50s and older and have some health issues, you may qualify for a "table shaving" program. You can work with an independent life insurance agent to find carriers who offer table-shaving programs that may result in the universal policy being cheaper than a term policy. Here's how it works:
- Whenever someone is rated for insurance, they are graded on the following scale: preferred best, preferred, standard, and table 1 to 8, which the lower number being a higher rating and more expensive premiums. With table shaving programs, if you qualify for a rating of table 1 to table 3, the carrier bumps you up to a standard rating, which can drop the cost of the universal policy below that of term.
- In addition, health underwriting guidelines are usually less stringent for permanent policies, so seniors may not even be able to qualify for a term policy.
The Bottom Line
To compare the benefits and costs of term life insurance for seniors versus permanent policies, consult an independent life insurance agent who has extensive experience helping seniors find the best deals. They will know about any cost-saving opportunities that will help you make the most financially smart selection.
Photo credit: Susan Goulding