Term life or pure life insurance is a type of policy that provides coverage for a specific period of time, usually has a term length of 10-30 years. The coverage amount is guaranteed and the premiums are more affordable than most permanent types of life insurance.
It is referred to as ‘pure’ life insurance because it provides a death benefit amount, also known as the face amount, and doesn’t come with a cash component like whole life.
It is flexible and a great choice for anyone looking for temporary protection. If you have temporary financial liabilities and are over 50 years old, term life insurance would be an excellent choice.
When you die, the death benefit amount is paid out to your named beneficiary who is oftentimes a family member, or perhaps not a family member but someone that still depends upon you financially. On the downside, outliving the policy means that your beneficiaries don’t receive anything from the policy. Should this happen, you can apply for new coverage in the future. Of course, all things being equal it will cost more in the future if you were to buy a new policy because you will be older.
Types of Term Life Insurance
As mentioned, term life is known for offering temporary protection – typically for 10 to 30 years at an affordable price. There are different term life insurance plans, all developed to meet different needs. To that end, below are the common types of term life insurance plans that you can consider.
Level Term Plans
This is the most common type of term life insurance plan by far. The amount that would be paid to your beneficiary at the beginning of the level term period is the same all the way through the end of the level term period. If you pass away during this time the death benefit proceeds would be paid out. A major advantage of this type of plan is that the premium amount is predictable since it doesn’t change. You know exactly how much you will have to pay for your policy for the entire level term period.
This makes budgeting easy for you since the premium amount you pay in the beginning is the same one you pay until the end of the policy. Unless you make changes to the policy, the amount will remain the same.
If your health status at 50 is great, then you may want to take advantage of that and pay constant premium rates for a certain coverage amount for up to 30 years, depending on how long you need it.
Increasing Term Insurance
This type of policy is not common at all. The way it works though is instead of a constant death benefit throughout the policy tenure, the death benefit increases over time. This increase is predetermined at the beginning of the policy term, for example, a 5% increase could be agreed upon at specific points of the term. Again, increasing term plans are not very popular at all.
A major advantage of having such a plan is that it would efficiently cover unpredictable increases in your future financial obligations. For that reason, it would be important to consider future goals, your current income, your responsibilities, and most importantly your budget.
Decreasing Term Insurance
Here, the death benefit decreases as you age based on the terms of your policy.
In most cases, this type of plan would be ideal for an individual with a large loan, e.g. if you have a mortgage. If you clear the mortgage, then you might not need the entire amount guaranteed in the beginning as the financial obligation reduces over time.
Return of Premium Term Insurance
This type of plan is available on some level term life insurance policies. It works the same way as a level-term policy. However, what’s different is that at the end of the level term period you would get back all the money that you paid into the policy.
The upside to this is obvious. You get your money back.
The downside is the premiums are quite a bit more. Also, if you do pass away during the term period that extra money is kept by the insurance company.
Convertible Term Plans
When you purchase a convertible term life plan, you would be able to change it into a permanent life insurance policy in the future. Most term policies allow you to do this. This makes it the perfect plan, giving you the flexibility you need if your financial priorities change later.
For instance, if you purchased a 20-year term life policy at 55 years but later find yourself in need of a policy that will last beyond age 75 then you can convert it into a permanent policy. When you convert the policy you do not need to requalify for coverage based upon your health. As long as you are doing the conversion within the conversion time frame guidelines of your policy it’s just of matter of filling out the necessary paperwork and the insurance company will make the change for you.
Different Term Lengths and Which One Is For You
Once you have established the type of term life plan you need, how do you determine the best term length for you? Typically, the term lengths range from 10 and 30 years, and with exceptions could go beyond that. You could also choose an annually renewable term. This simply expires after every year so you will have to renew the policy in the proceeding year.
To choose the best term length, you need to ensure that it is long enough to cover all your financial obligations. Typically, your term length should be based on the reason why you need the policy. Some of the common instances that influence the length of the term include cosigned loans, house purchases, and children, etc.
Many people at 50 years or above still have a few years left for their kids to finish school and live independently. Perhaps a 10-year term would be sufficient in this case.
However, if you still have young children who might need your financial support for the next 20 or more years then a 20-year term life plan might be the plan you need. Or perhaps a 25 or a 30 year plan to make sure you are covered perhaps if you anticipate your kids will still be in college and getting their careers off the ground.
Why You May Need Term Life Over 50
While there are misconceptions around term and life insurance in general, people are slowly recognizing how important it is. The demand for suitable life insurance has increased, and carriers have developed different plans to cater to different individual needs. The needs of each person vary from one to the next. That said though term life is one of the best life insurance options for people in their 50s and beyond.
Below is a short list of reasons why people over 50 might need life insurance.
You might be concerned about the inheritance you will leave your loved ones. You put in the extra work to provide for your family and still want to leave them some money when you pass, but there is a little challenge on how to divide the assets you have accumulated amongst them.
Having a term life insurance plan is a great way to equalize your property amongst your loved ones. For instance, if you have two children, the family home can be allotted to your surviving spouse, then the death benefits from the policy go to the children. Term life is a way of ensuring that everyone in the family receives some type of wealth after you are gone. Remember though, if you think you might outlive the term policy you may want to convert it.
Securing the Future
If you are the breadwinner of your family, then you have a big financial obligation towards your loved ones. This means that when you die, the remaining family members will have a hard time providing for themselves. Term life insurance allows you to plan for the future and protect your loved ones from financial hardships.
Also, if you are a retiree and your family relies on your pension or your Social Security income for survival, then you might want to consider a term life plan which will replace that money when you die.
The proceeds they would receive are paid out in a lump sum and can be used to pay for their daily expenses, debts, your final expenses, etc… Bottom line…this will help to ensure your loved ones can continue to live a comfortable lifestyle even when you are gone.
Grieving is hard enough for anyone who has lost a loved one. That topped up with a huge bill of their final expenses would be a bigger burden for them. Term life insurance can be used to pay for final expenses and reduce the financial responsibilities your loved ones would have to bear after you are dead.
The best part about using term life insurance for final expenses is that the premiums are cheaper and you can choose a coverage amount just enough to cover the cost. As such, you don’t have to incur unnecessary expenses on your life insurance but you still have the death benefit amount needed to pay for everything.
The only caution with using term life insurance to cover final expenses is that you might outlive the coverage. If you do, there would be no coverage in place when you eventually do pass away. Term life is great, but this is a reason to consider a permanent life insurance policy like whole life – or perhaps a combination of the two.
Funeral expenses go up to $10,000 most times, and given other expenses like medical bills, having substantial term life coverage would help clear such bills, reducing the burden for your surviving spouse and children.
Most individuals find themselves seeking loans to purchase assets, finance their education, businesses, and other personal interests. If you have an unpaid loan, having a term life insurance policy in place would help to protect your loved ones if you die before paying it back completely. It gives you the flexibility to choose a term period equivalent to your loan term so that part of the death benefit is used to pay it off if you die before that period lapses.
For instance, if you have a $300,000 mortgage of 15 years, then you could consider a 15-year term life insurance with an equivalent of $300,000 in coverage or slightly above that figure. If you have other financial obligations at the end of that period, you can choose a larger coverage amount that will cover them. Just ensure that the coverage amount is not too low compared to your loan amount.
Term life insurance for individuals over 50 provides different options for you depending on your current financial situation and the needs of your loved ones. And with the right term life insurance plan, you are creating financial security for your loved ones by ensuring that they will comfortably live even after your death. At an older age, you don’t have to try and decipher everything about term life insurance in order to make the right decision, you can always seek help from a seasoned agent who will help you choose the best policy for any individual over 50.
If you’re interested in learning more about your term life insurance options over 50, you can run some life insurance quotes on our site, or you can contact us today and let us do all the shopping, at no extra cost to you.