Life Insurance for Seniors - 4 Ways to Lower Your Premium

Lenny Robbins
Jul 12, 2012 12:46:00 AM

We are all getting older.  There’s no stopping the aging process, at least there’s no way to stop getting older that any of us would like!  And of course senior life insurance cost more than when you were younger.  So, we present 4 solutions to lower the cost of your premium that you may not have thought of before.

#1- Save Your Age

Most insurance companies use “age nearest“ to determine how old you are considered when applying for life insurance.  So if you will be sixty on January 1, 2013, the insurance company will consider your age to be sixty on July 1, 2012, a full 6 months before your actual birthday.  
  • seniors-4-ways-to-lower-life-insurance-premium-2018You have the option to backdate your policy up to 6 months.  The thing to remember is that you have to pay the premium from the policy date.
  • Assume you are male and have just been approved for a $ 250,000 policy for 15 years at a preferred rating.  The premium at age sixty is about $103 per month.  But if you backdate the policy to June 30th, one day before your half birthday, you are considered fifty nine and the premium will be about $ 93 per month.  This is a savings of $10 per month.  
  • In this example you would pay between 3 weeks up to 1 additional month of premium to put your policy in force.  At $10 per month times 15 year, minus the 1 one premium, you would save about $1700 over the life of the policy.  If you had to backdate this policy 3 months of premium to get the lower premium it would save you about $ 1500 over the life of the premium.

If you can do it, check with your agent to see the numbers and decide if it makes sense for you.

#2- How You Pay Makes a Difference

Life insurance for seniors can be paid by several different modes.  You can pay annually, semi-annually, quarterly and monthly.  If you have a term policy the mode you choose will determine the actual cost.  On a permanent policy there isn’t any difference.

  • If you pay annually, the premium is the least.  In our prior example where we saved age, the cost would be $1060 per year.
  • Semi-annually payment will be next in line.  2 payments of $541 will cost a total of $1082.  This is an increase in premium of $ 22 per year.  The total over 15 years is $ 330.  That’s not too bad.
  • Quarterly payments will be $ 276 with an annual cost of $ 1104.  The annual difference is $ 44 per year.  The additional cost is $ 660 over the 15 year life of the policy. 
  • Monthly payments that are automatically deducted from your checking account are $ 93 per month, with an annual cost of $ 1116.  Over 15 years you would pay an additional $ 840 per year.
  • Only a few companies will bill you and allow you to mail in monthly payments.  It’s no surprise that this mode is the most costly.  
  • There are some companies that do not like the quarterly mode and you will find that this is the highest cost for them.

This example is based on a $250,000 face amount for 15 years.  The more insurance and the longer the term, the greater the savings would be.  Overall you can save some money on the premium if you can pay more in advance.

#3- Table Shaving Programs

Life insurance for seniors can have a big savings with a table shaving program. Only a few companies have this program and it is on permanent insurance only.  Here’s how it works:

  • Your case goes through underwriting normally. 
  • Available ratings go from best downward are preferred best, preferred, standard plus (only some companies), standard and then table ratings (1-8 or A-H).
  • One company has a program where if you qualify for a rating of Table 1, 2, or 3, you will be given a standard rating.  This cuts the price down substantially (25% and up).

There are a few companies with table shaving programs, each having its own qualifications.  Consult your independent life insurance agent to see if you can benefit from this opportunity.

#4- Better Rating for 1 Controlled Medical Issue

One of our carriers has a program where if you have one medical issue (and only certain ones qualify) and it is well controlled, they will not penalize your rating.  So if you would qualify for preferred in every other way, you get preferred with this carrier.  This is a unique program.

  • For example, we recently had a client with medical issues that we expected to get a standard rating at best with all companies. 
  • He applied to this company and received a standard plus rating. 
  • This difference of one rating class saved him over $ 100 per month on a 20 year term.  Doing the math, this will save him $24,000 over the life of this policy.

Having access to this program, if you qualify, can save you a great deal of money over the lifetime of your policy. 

The Bottom Line

Although life insurance for seniors is usually more costly than for middle age people, here are 4 strategies that can help lower your cost.  If you can take advantage of one of these solutions to lower your premium it can save you significant amounts over the life of your policy.  Remember to consult with an independent life insurance agent with experience in the senior market.

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