Are you a senior looking for life insurance? Should you buy term coverage? Should you buy permanent coverage? If so, which type of permanent coverage? The answer is not as simple as you might think. Term insurance might be a smart purchase, and it might not be! There are some very important factors to consider, including your health, who or what are you trying to protect? And finally, what is your budget? Let's explore term life insurance for seniors!
Term Life Insurance for Seniors
Just to be clear, there are different types of term life insurance. Level term life insurance has a premium and a face amount that do not change for the entire term period. This is usually the type of term insurance that we recommend. After the level term period has expired, the premium will rise considerably and become unaffordable. It's really only intended to last for the level term period.
How long will you need coverage? That's one of the important considereations when deciding if a term policy will meet your goals. Here are the term life policy guidelines if you are in your 60's or older.
- 10 year term- Seniors through age 80 can purchase a 10 year policy. Many carriers offer these policies. If you are a smoker, some carriers limit the purchase age to 70 or 75 years old.
- 15 year term- These are available for seniors through age 75. As with a 10 year policy many carriers offer, and they may limit the purchase age for smokers.
- 20 year term- Only a few insurance carriers offer 20 year policies for seniors through age 70. Most of them limit the purchase through age 65. Smokers again will often see a lower age limit.
- 30 year term- A 30 year term is not available in your 60's.
Applying for Term Life Insurance
Almost all term policies available require full underwriting. This means you will be required to take a paramedical exam. This will include taking your height, weight, blood pressure and pulse. You will give a blood and a urine sample. You will give the examiner a complete medical history.
Most likely expect your doctor records to be ordered. (At this age, insurance companies like to see you having annual checkups and following doctor's advice.) If you have some medical issues, they may order records from multiple doctors. When the underwriter has this information along with your application, exam and lab results, they will decide on your rating.
Ratings for both term and permanent coverage are as follows:
- Preferred best or super preferred- Just as it sounds, this is the best possible rating. The premium will be the lowest of all ratings.
- Preferred- This rating is the second best rating possible. Premiums are higher than for the best class, but still quite reasonable.
- Standard- This is the third best rating for many companies. (Some carriers have a standard plus category that is in between the standard and preferred ratings).
- Table Ratings- Ratings range from A (1) to H (8). These ratings use the standard rate and add a percentage to it. Table A is usually 125% of standard. Table H is usually a decline for term insurance, but not permanent. Obviously the higher the rating, the higher the premium.
Now you understand how term life insurance works. Let's talk about the permanent options next.
Permanent Life Insurance for Seniors
Here are the types of permanent coverage available today.
- Universal Life Insurance- is a permanent policy that is very flexible. It can be structured to last your lifetime with no cash accumulation- essentially acting like a term policy for life. This is usually the least expensive policy for permanent coverage. There are many different kinds of universal life insurance. The simplest and least expensive is usually a guaranteed premium universal life policy. Universal policies are available up to age 90, although you may be limited how the carrier will rate you. (At certain ages the best rating you can get may be preferred or standard. )
- Whole Life Insurance- is a permanent policy that amasses cash value. Although you can borrow from that value, it may affect policy guarantees so you want to be careful about that. These policies are generally more expensive than universal life policies.
- Final Expense Insurance- policies are small whole life policies. They have easier underwriting guidelines than universal or regular whole life policies. There is no medical exam or blood and urine testing required. Many people who cannot qualify for traditional policies can still qualify for this type of policy. Face amounts for final expense coverage start as low as $2,000.
- Guaranteed Issue Insurance- is coverage requiring no medical information. All applications are approved, however, the face amount payout is phased in over two or three years. If you can't get approved for other coverage, this is your only life insurance option.
Now we should consider your needs for insurance.
What are you trying to do?
There are many reasons to purchase senior life insurance in your 60's or later. What your goal is will help determine your first choice of policy. Some examples are:
- Final expense protection- you want a small permanent policy to cover funeral expenses. Permanent coverage is your best choice, so that it will last your lifetime. A whole life final expense policy is most likely your best option. These policies have face amounts from $2,000 up to $40,000. If you want more coverage, you can purchase coverage from multiple companies.
- Protect a spouse- the most comprehensive coverage would be a permanent policy- probably a universal life with no cash accumulation. Although term life will be less expensive, when the term is up, you will be older and the next policy will cost more. Are you better with a permanent policy with a smaller face amount? How old are you? How old is your spouse? Discuss it with your agent and see what makes the most sense. Univeral policies require full underwriting, so the next thing to consider is your health. Can you qualify? And then can it fit your budget? Perhaps a term policy and a small permanent is best for you. Again, your specific situation will determine what's best. Use your agent's experience to help you.
- Protect a special needs child- This is the same as protecting a spouse. You want a policy that will last your lifetime, because you must leave funds for your child. If you can qualify for a universal policy, it is the least expensive option.
- Estate Tax Protection- you would want a permanent policy. No cash accumulation needed. It's particularly helpful to cover inheritance taxes so your heirs don't need to come up with the cash. If you and your spouse are both living, you should consider a survivorship (or second to die) policy. Both spouses are insured, but there is one payout, when the second spouse passes. This leaves the money for the heirs to use for estate taxes, so no property needs to be liquidated.
- Mortgage or debt protection- a term policy might be sufficient. It depends on your exact situation. If you only need enough extra money to cover a mortgage, you could certainly use a term policy for this. A level term policy as discussed earlier will probably be less costly than mortgage insurance. In mortgage policies the premium remains level and the face amount decreases. Why not use a regular term policy where the premium is level, but so is the death benefit. It will leave your beneficiaries with some extra cash, probably for less outlay from you.
- You need coverage for a specific time period- that one's easy- term life is your least expensive option. If you need coverage for 5 years, you may find that a 10 year policy is less expensive. Talk to your agent and find out!
This is where your age, health and finances speak up.
- Age- Premiums are age based. The older you are, the more costly the policy. This is a good reason to check it out and apply soon!
- Health- Your agent will help you determine if you can qualify for a term or universal policy. Incidentally, generally universal underwriting guidelines are a bit more lenient than term policies. Also, certain carriers have programs where they will improve a Table rating (up to Table 3 or 4) back to standard rates for a big saving.
- Finances- You have to be comfortable with your insurance premiums. No one wants to be insurance poor! Talk to your independent life insurance agent. They can help you determine the optimum policy to fit your needs and your budget. Independent life insurance agents help make this process easy as they have access to many insurance companies.
The Bottom Line
Whether you're a senior who needs life insurance for 10 years or for your lifetime it's important for you to fully understand what you are buying. I know you want the best price possible, so talk to your independent life insurance agent. They can help you navigate the sea of choices and help you get the best bang for your buck and the best choice for your needs.