Life Insurance for Seniors
At any age life insurance is an important purchase, and this is no less true for seniors. When thinking about getting life insurance for seniors there are many things to consider, including what type of insurance (term or permanent), what amount of insurance, what company to consider (and why this one vs. another), who can help me through this maze, how do I know I am getting a good value?
Is Term Life Insurance Best for You?
One of the first things you have to decide is if term insurance is right for you or a permanent policy would better fit your needs. This is where you need to think about what you want to accomplish with this insurance coverage. Basically, do you need coverage for a limited time period or would coverage for your lifetime do a better job?
The goals(s) you want to achieve with life coverage will help determine which type of policy is the best choice for you. Here are some goals better met with a term policy:
- You have a loan or debt (or mortgage) you wish to allow your family or business to pay off should you pass away.
- If you can't afford permanent coverage, term coverage is certainly better than no coverage. Also, most term life policies are convertible into permanent policies for a specified period of time. (If you want permanent coverage and can't quite afford it now, you may purchase a term policy with good conversion options and plan to switch when you are ready. Obviously, you would discuss this with your agent so they can explain exactly how conversion works and why you should choose one company vs. another!)
There are different types of term life insurance.
Our usual go to policy is level term life insurance. In level term life insurance for seniors, the death benefit and the premium both remain the same for the entire period of the term policy. After the level term period expires, the premium will increase dramatically, because the insurance carrier is basing their risk on you living during that period of time. It will continue to increase annually. If you still need coverage you would have to apply for a new policy. You would be at least 10 years older and your coverage will be more expensive.
There are some level term policies with chronic care and critical care riders built into the contract. Although they are slightly more expensive than level term policies without the riders, the additional value they provide may make the extra premium well worth it. If you are diagnosed with certain illnesses and meet the criteria care, you can borrow out of the policy to fund your care. (This loan will reduce the face amount payable to your beneficiary. There are fees associated with the loan.) If you don't have long term care coverage, this can help you during a difficult time. This is not a replacement for long term care coverage, but it can be a great benefit to you and your family.
Decreasing term insurance is generally not a great deal, because the premium will remain the same, but the face amount will lower over time. This type of coverage is often referred to as mortgage coverage and is usually more expensive than level term policies.
Renewable term life insurance has a level death benefit however the premium increases annually. This may be the least expensive coverage if you need coverage for a short period of time.
There are return of premium term policies. Just like it sounds, after the level term period you would receive all of you premium payments back. You get the most money returned if you keep the policy to the "end", with some companies offering partial refunds for a number of years prior.
Which policy is right for you? Talk to your life insurance agent for advice on the best way to achieve your goals and get the most value from your life insurance.
Is Permanent Life Insurance Your Best Option?
Here are some goals that are better accomplished with a permanent (or lifetime) policy:
- You want to leave money for your final expenses and any debts.
- You want to protect your spouse who would not be able to live comfortably without your income.
- You have a special needs child or grandchild and you want to leave money for their care.
- You want to leave money to care for a spouse who needs home health care.
- You want to leave money for a family member you help support, who would have financial difficulties without your assistance.
- Your want to use insurance for estate planning.
- You want to protect a business that would fail without you.
- You have some other financial need that will follow you throughout your lifetime.
There are many types of permanent life insurance available. Universal life insurance policies are very flexible and can be structured to meet your needs.
- Guaranteed universal life can be set up with level premiums for life. You can choose to accrue cash value or not. You can pay the policy in full in one payment or over a number of years. These policies offer a level or an increasing death benefit. If you don't choose to accrue cash value and you choose a level death benefit, this will usually be the least expensive type of permanent coverage you can purchase.
- Survivorship universal life insurance insures two people, usually a husband and wife, and pays one death benefit after both are deceased. It is an excellent choice for high-net worth applicants. It can be used to supply cash for the cost of settling your estate (probate or taxes), to pay off business or personal debts, to equalize the estate among your heirs, and more. It is usually less expensive than two separate policies. An uninsurable applicant may be able to coverage through a survivorship policy.
- Indexed universal life insurance credits your interest based on a percentage change of an index in a given year. Typical index crediting methods have an upside cap and a downside floor. The actual percent change on the upside is typically capped at 9-12% with a floor on the downside of typically 0%. These policies offer a level death benefit or an increasing death benefit.
- Variable universal life insurance is a security and must be sold by a registered representative.
- Whole Life Insurance is another type of permanent coverage available. We think whole life insurance is the best option for smaller face amounts of final expense life insurance. If you are looking for a policy in the $2,000 to $40,000 face amount range this type of policy is often a good choice. Final expense policies have simplified underwriting, so there is no medical exam or blood test required. These policies can be in force in a number of days (rather than weeks with a fully underwritten policy).
Whatever type of permanent coverage you decide is right for you, you will need to work with an agent.
How Much Insurance?
How much insurance do you need? We find that many of our clients have some idea of how much coverage they want. Sometimes we work backwards starting with the amount of monthly premium someone wants to spend, and we will tell them how much insurance it is likely to purchase.
We can help you know how much insurance you qualify to buy (there are financial guidelines from each insurance company). We will work with you to find an amount of insurance that you are comfortable with and that makes sense for your situation.
Which Companies are Best for life insurance for Seniors?
How do you know which company to apply with? Well, that's where our expertise comes in. Especially when dealing with senior life insurance there are often many issues to consider. The older we get, the more medical issues there tend to be. Underwriting may be more complex when there are multiple issues and multiple medications. Experience working with seniors and life insurance is very helpful. Here's why:
- We know which carriers look more favorably on certain medical conditions.
- We have in-house independent underwriters to assist us with the more complex cases. Their experience working directly with the carriers and their underwriters puts them in the unique position of knowing the insurance company's preferences best.
- Together we can direct you to the carrier that will look most favorably on your personal situation.
- We work with many different, highly rated companies. This gives you access to a wide range of policies with different underwriting guidelines. Underwriting guidelines differ from company to company, so you may be declined from one carrier, but another may offer coverage at a reasonable premium. One large drawback of a captive agent is that they have only one carrier available for you.
- In certain cases our underwriter can request informal quotes from multiple carriers giving us vital information about where you should consider applying.
- We may have our in-house underwriter assist with your case from the initial quoting to discussing your file with the insurance carrier underwriter. Sometimes that can make the difference in getting your policy to be affordable for you.
The Bottom Line
There are many different options for getting affordable senior life insurance. Using an independent agent is the easiest way to getting a good value on your coverage. Let us do your shopping for you- we know where to look! We will help you through the life insurance maze to find the best policy to meet your life insurance goals.