The best life insurance policy for you is going to depend on why you are needing the coverage. For seniors over 60 your needs are likely much different than when you were 30. At that time there’s a good chance you may have needed coverage if you had young kids and were raising a family. When you are over 60 chances are you don’t have young kids. Your needs are different.
You might be needing life insurance so that your mortgage could be paid off if you passed away. Or perhaps you need a policy that will replace the income you would have earned if you pass away before your plan to retire. This way your spouse would be assured a financially comfortable retirement. There’s many different reasons why you might need to obtain life insurance. Let’s take a look at the types of life insurance available to seniors over 60. Then we will look at the pros and cons of each. We’ll also look at what is the best life insurance for you to get, and reasons you may want to buy one over the other.
Two Basic Types of Life Insurance
The two basic types of life insurance available to seniors over 60 are term life and permanent life. There are different variations of each. Let’s briefly look at how each type works.
Term life will cover you for a particular period of time. Perhaps 10, 15, or 20 years. During the level term period, the amount you have to pay will stay the same. Example, if you buy a 10 year term policy, the premium will stay the same for the entire 10 years. Also, the shorter the term policy, the less it will cost and vice versa.
Types of permanent life insurance include whole life, indexed life, universal life, and guaranteed universal life. For seniors over 60 a guaranteed universal life (GUL) is usually our recommended choice. A GUL provides low cost life insurance protection that can be designed with a guarantee to stay in force for your lifetime. Specifically, you can buy a policy that will stay in force until you are age 90, 95, 100, 105, 110, or even until you are 120 years old. The longer your policy will stay in force for the more it costs all things being equal.
Whole life and Indexed Life insurance are great policies for the right person in the right situation. However, people over 60 usually are not a good fit. These types of policy are designed to provide a death benefit as well as grow cash value in the policy. For high income earners that are under the age of about 55, and that have discretionary money available these types of policies may be a great fit. If structured and funded properly the cash value in these policies can grow very nicely. Also, there are some nice tax advantages since the growth of the money is tax deferred which means you don’t pay taxes on the growth each year if you don’t take it out. Also, there are ways to take money out of the policy through tax free loans.
With all that said, again these types of policies can be good policies for the right person in the right situation. However, they are usually not an ideal choice for seniors over 60. This is because the internal cost of insurance on these policies is too high. You don’t have enough time to let the cash value grow and so the additional cost for these types of policies is usually not worth it. Instead, if you are over 60 a GUL will oftentimes be the best choice. The death benefit is guaranteed to stay in force as long as you keep paying the premium of course. Although technically it is not term life insurance it does work a lot like term life. This is because the death benefit is guaranteed for a specific time period of time.
What Life Insurance Policy Should Seniors Over 60 Get
Should you buy term or permanent life insurance? The answer depends entirely on why you need the coverage and for how long you truly need it for.
For instance if the need for coverage is 10 years or less don’t buy a policy that will cover you for longer than that. Go ahead and save the money. Let’s say you want your house paid off if you pass away like in the example we mentioned above. If it will be paid off in 10 years or less, then just buy a 10 year policy. Then, when you pay off the mortgage you can cancel the policy if you no longer need the coverage. If you need coverage for a little bit longer then perhaps a 15 or 20 year term would be the right choice.
If you are needing coverage beyond 20 years then this is where buying a GUL will be the best policy for you. The nice thing about a GUL is that you cannot outlive the policy. Since we are all going to pass away one day, the GUL will eventually payout a death benefit to your beneficiaries. With that said, a GUL is going to cost much more than a term life policy for that reason. The insurance company will definitely have to pay out a death benefit at some point. However, if you buy term life and outlive the level term period then the insurance company will not have to pay the death benefit. This is why the term costs quite a bit less.
There are several reasons you may want the lifetime coverage that a GUL can provide. The following is a short list of possible reasons:
- You want to leave a legacy to your kids, grandkids, or a charity
- You are concerned that when you die your spouse will only be able to live on one social security check instead of two
- You’re pension stops when you die, and you want to make sure your spouse has extra money to live on to replace what the pension income provided
- You’re concerned about the rising costs of health care costs, the national debt, and potentially higher taxes and concerned about the impact that could have on your kids so you want to leave something extra behind to help them financially.
- You want a policy that will allow you to take money from the death benefit while you are alive to pay for long term health care costs including various chronic illnesses. (Only available on certain policies)
The key thing to remember here is that neither a term or permanent life insurance policy is better than the other. It’s just a matter of which one meets your needs better.
Exam And No Exam Life Insurance Options
When applying for life insurance an insurance company will review your overall health and lifestyle habits. Based on this, they will decide if they can approve your application, and if so what rate you will qualify for.
All insurance companies will review your application and run a prescription drug check to see what medications you have taken in the last several years. Most companies will also run your motor vehicle report as well. And some companies will require that you do a mini physical which includes an examiner coming to your house and taking a blood draw, collecting a urine sample from you, and asking you some health questions. These same companies will also want to obtain your medical records as well.
The benefit to going with a company that requires an exam to be completed and one that will also get your medical records is that if everything checks out great you could get approved for some rock bottom prices. The downside is you have to take the exam so you have to make the time to do that. Also the process of obtaining your medical records usually takes about 4 to 6 weeks. If you’re patient and don’t mind the exam it might be the best way for you to go.
The other option is to go with a company that does not require an exam, and doesn’t obtain your medical records. The upside is the process is much quicker. Approvals are made in a few days to a week. The downside is that no exam policies cost more. Since the insurance company doesn’t have as much information to analyze they have to hedge their bets so to speak by charging you more.
The other downside is that the amount of coverage you can get past the age of 60 without doing an exam is limited. If you are between 60 and 65 years old you can get up to $750,000 without having to do an exam. If you are between 66 and 80 you can get up to $150,000 without doing the exam.
What Should You Do Next
Hopefully this article gave you a good understanding of what options are available to you. Also, hopefully it was able to help you understand when one type of policy might be a better choice than another.
The next step is to give us a call. Chances are you have questions. If so, we have answers. We work with over 50 top rated life insurance companies. Based upon your unique profile, which includes your specific health history and lifestyle habits, we can determine the best insurance company for you to submit your application to. Know that every insurance company has different underwriting guidelines that they follow. We specialize in helping seniors find the coverage they need at the most affordable price.
So pick up the phone and give us a call. Also, if you like you can run a quote right here.