Life insurance is not just for young people. In fact, as we grow older, we may have more need to protect our family and/or our business with life insurance. While age is definitely a factor in determining the cost of life insurance premiums, it is absolutely possible for life insurance for seniors over 70 to be a good value. As a matter of fact, you can get life insurance up age 90, but it's rather pricey at that point!
Why Seniors Over 70 Still Need Life Insurance
These days many seniors are living longer and often have a healthier lifestyle. Many seniors are still working at 70 and retirement may not be in their near future. Even in retirement many seniors need life insurance. There are so many reasons baby boomers and other seniors may need to purchase new life insurance. Here are some of the more common ones:
- Provide income replacement. Whether from a current job, or a pension, your spouse may need more than his or her own income to live comfortably.
- Provide an income for a special needs child or grandchild. Will your child need care for their lifetime? Can they provide for themselves? Who will take care of your adult child when you are gone?
- Protect a spouse and/or family. Will there be a mortgage or other debts to pay off when you are gone?
- Protect children or grandchildren financially. Is there money for living expenses? What about for school?
- To pay estate taxes. Will your heirs have to sell property to pay the estate taxes?
- For a buy sell agreement for business.
- To make sure there is money to keep a family business running.
- To maximize retirement income.
- Charitable giving.
- To pay for final expenses. Who will pay for your funeral? Do you know that the average funeral in this country is over $7,000?
- And whatever reason you have for getting insurance that we didn't mention.
What is the Best Life Insurance for Baby Boomers and Seniors?
For younger people, term life insurance is often the best option. It's generally the cheapest type of insurance one can buy. It gives you the most "bang for your buck". If you have young children, this may be the right coverage for you. However, insurance for people over 70 is different because at the end of the term policy you may not have any other options or the choices you have may be too expensive. You can purchase term life up to age 80 with a limited number of carriers, but when that policy ends, and you are in your 80's there is even less choice. If you are over 90, there is no choice.
When you are over 70 you will surprisingly find that term life and permanent life coverage are closer in price than you would expect. In fact, sometimes permanent coverage costs less. This is particularly true with table shaving programs. Table shaving means that the life insurance company gives you a better rating than you would normally get based on your health history. They "shave" off 2, or sometimes 3 tables, so that you end up with a better underwriting rating and pay less premium. Table shaving programs are only available on permanent coverage, and not all carriers and policies have this program. The other advantage is that you can purchase a policy in your 70's that will last for the rest of your life and you can set it so that the premium and the face amount remain level. You don't have to worry about changes in health either as once the contract is in force the insurance company can never change your rating.
There are also final expense life insurance policies which are permanent coverage, but much easier to obtain. There is no medical exam. The carrier does not order doctor records. You must be able to answer a number of health and lifestyle questions. Then the carrier will look at your Medical Information Bureau (MIB) record. They will run a prescription database to verify your answers. You usually have to be interviewed (asked the application questions) on a recorded line as well. These policies are approved very quickly. You will have a decision in just a few days. Final expense policies are available from as little as $2,000 up to $40,000 of coverage. Each company asks the questions slightly differently so while you may be declined by one carrier, you may be approved by another. An independent agent is likely to be able to tell you which company will be best for your situation. (If you want more coverage, you have to apply with more than one carrier.)
Which Permanent Policy is Right for Me?
Several things factor into determining which product is right for you. Usually, if you want more than $25,000 of coverage, the least expensive option will be a Guaranteed Premium Universal Life Policy (GPUL). This is a fully underwritten product so you will have a paramedic exam with blood and urine collection. The insurance company will review your doctor's records. The process takes about 4-6 weeks in total. So it takes a while, but is the cheapest. What if you need coverage right away? You may be able to pay for the first month of coverage and have conditional coverage during the underwriting period. There are several requirements for conditional coverage so speak to your agent for advice to see if you qualify.
If you want less than $40,000 (or $25,000 in some states) you are looking at a Final Expense policy. These are whole life policies that have simplified underwriting. There is no exam or medical records. These policies can be placed in force in a few days, sometimes the same day. If you get the best policy option your coverage starts on day one of the policy.
If you only qualify for a graded benefit policy here is how it works. Every company is a little different, but generally you only have accidental death coverage for the first two years. After two years your death is covered for any reason. During those first two years if you die from an illness, your beneficiary will get all of the premiums paid plus interest. Some companies phase in the death benefit...0% year one, 40% year two and 100% year three.
And finally, if you cannot qualify for any of this coverage, you can purchase a Guaranteed Issue policy. There are no requirements for this policy. Everyone can get approved. There is no coverage for the first two years. These policies range from $2,000 up to $25,000 depending on your age.
How Affordable is this Permanent Coverage?
Many baby boomers and seniors who are 70 and older can get affordable permanent life insurance coverage. Of course, your health history impacts the bottom line. How much coverage you want is the other main factor.
If you are in good health, lead an active lifestyle and don't smoke, you have a better chance of getting affordable life insurance. However, don't think you can't get reasonable coverage just because you have some health issues. This is where working with an independent agent makes the process easier. When I have a client with health issues, I discuss it with my (independent) in-house underwriter. He/She helps me understand what the insurance company will look for and which insurance company will be likely to rate the application more favorably. We also discuss how to present your issues to the carrier in the most favorable manner.
Here are some of the factors that the underwriter will take into account when deciding your rating:
- Your build- height and weight. Many carriers have separate build charts for seniors with more lenient weights.
- What medications do you take?
- Diabetes- is it in control? What is your A1c?
- Heart conditions- how are your latest tests?
- What other medical conditions do you have? Are they well controlled?
- Do you follow your doctor's recommendations?
- Do you see a doctor regularly. This is important because if you don't, the insurance company thinks you don't take care of yourself. Annual physicals are a good thing!
- Have you been diagnosed with Alzheimer's Disease or dementia? If so, you can't get any underwritten coverage. The only coverage available to you is Guaranteed Issue Life Insurance. There are no medical requirements but there are some limitations to the coverage. The most coverage available is $10,000 per company. As you may have surmised, this coverage is more expensive than the other kinds because your build and health are not considered. Anyone can qualify to purchase this coverage.
The next decision to make is which policy is going to work best for you? Are you healthy enough to qualify for a fully underwritten policy or would you do better with simplified underwriting? Are you willing to take an exam and have your blood drawn? Some people don't want to go the fully underwritten route...it is just more than they want to do. These policies usually take 4-8 weeks to put in force, while final expense coverage can be in place in less than a week.
Did you know that underwriters follow specific guidelines when rating your application? Every company has them. Agents know some of the guidelines, but certainly not all! If you have high blood pressure for instance, your agent can include that information when giving you a quote, so that it is as accurate as it can be. Only the insurance company can offer you coverage, no agent can do that. Underwriting for permanent coverage is usually a bit more lenient than for term policies.
What makes the most difference in getting affordable insurance is using an independent agent, who can help you find the right company to get the most reasonable pricing possible. You can discuss your needs and your agent will explain your options along with the prices. Your agent will know which company(s) will underwrite your application more favorably and therefore give you the best rating and then the lowest pricing.
If you are a more complex case, that is more medical issues, some agents (like us) have an in house underwriter who can assist your agent in getting you the best available rating. You have to keep in mind that insurance companies look at you differently than your doctor. Your doctor may tell you that you are doing great...but the insurance company will look at longevity statistics for people with your medical issues to help them rate you. They will consider how you are doing along with the statistics when determining your rating.
This is another place where your agent can help. I mentioned that some companies have a table shaving plan. You may qualify for that kind of program, but you have to know which company has it and where to apply. By using an independent life insurance agent you will find much of the angst people may experience when looking for insurance isn't an issue for you. A good agent will answer all of your questions and help you get the right policy for your needs.
The Bottom Line
Just because you are 70 year old, or older, doesn't mean you can't get affordable life insurance. You can! It's is especially important to use the right carrier when you are applying for life insurance as a senior. I strongly recommend you talk with an independent agent who has experience with Baby Boomers and seniors. They can help you decide what type(s) of life insurance you need as well as help you get the best value for your money.