A lot of senior people shy away from life insurance, especially because it is said to be expensive for older people. If you look deeper into the benefits of having a life insurance policy as a senior, you will realize that it is as important as it is for other younger people. In fact, seniors with life insurance are more advantaged than others without, unless, well, you had an alternative retirement plan. That said, below is a breakdown of some of the life insurance products there are for seniors to consider.
Types of Life Insurance for Seniors
Many senior citizens struggle with choosing the right life insurance product. This is made hard because of reasons like age which is a major determinant of the insurance policy one is eligible for. The cost of life insurance will be high if the person is in their older years when compared to a younger person, but that shouldn’t be a reason for failing to opt-in one of the many options available. Different insurance companies offer a myriad of life insurance products for seniors to choose from, and here is a quick rundown of some of these varieties.
Whole Life Insurance
While whole life insurance is not a top choice for many senior citizens, it is still a choice for any elderly persons in need of life insurance. Basically, seniors over 70 will have guaranteed death benefits, a fixed premium, and cash value at their disposal if they choose whole life insurance. Using the cash value, the senior can request for a loan, complete payments for remaining premiums, buy stocks in the stock market, or even increase the death benefits for your life insurance policy. Whole life insurance can further be broken down into the following;
Guaranteed Universal Life Insurance
It is often regarded as GUL and it is an affordable option for senior individuals who want to lock a lifelong life insurance coverage. To apply for GUL you need a medical exam done on you, but on the brighter side, your premium and coverage will not change despite your health and age.
The rates for guaranteed universal life insurance vary from $100,000 to $1million. This type of life insurance policy does not build up cash value and hence remains as an affordable solution for seniors. Also, higher coverages for GUL are a great option for you if you are over 70 years and want your beneficiaries to have a tax-free inheritance.
Simplified Whole Life Insurance
It is also known as simplified issue life insurance and is great for seniors who want to pay off other debts, plus funeral expenses. It is also a cost-effective life insurance policy for individuals who have no health issues.
With simplified whole life insurance, you will be required to fill in an in-depth medical questionnaire for the insurance company to know the kind of risk they will be insuring and so, a medical exam is unnecessary. It is not a guaranteed policy, but you can get as much as $50,000.
If you are a senior individual of 70 years or more then second-to-die insurance would be a great policy for you especially if you have a spouse that needs to be cared for or a real estate that needs to be protected. However, the benefits are not paid directly to your spouse after you die, they are only used to pay for estate taxes and lift off that burden from your surviving partner. The death benefits from this type of insurance are received by your heir(s) after you and your partner are deceased.
The policy is designed to cater for estate taxes and even to pay for other costs linked with estate settlement. Also, second-to-die insurance is an appealing policy for seniors with disabled adult children that rely on their income for survival.
For married couples, getting one policy is more cost-effective than having two separate policies. On the downside, second-to-die insurance cannot be used to pay for funeral and burial expenses like most insurance policies can. On average, a second-to-die death benefit payout would amount to $1million.
Guaranteed Issue Whole Life Insurance
If you are experiencing a few health problems, then a Guaranteed Issue Whole Life Insurance is a great option. While there are high chances for a senior of up to 85 years of age with medical issues to be denied life insurance, this insurance policy is guaranteed to such individuals.
So, any senior persons below 85 years would undoubtedly benefit from the Guaranteed Issue Whole Life Insurance even with a bad medical history or health. What’s more, there are no medical questions asked during the application process and it does not require a medical exam.
Any senior who applies for this kind of insurance policy should expect anything from $5,000 to $25,000. While this may be an expensive option, opting for the minimum required amount can help offset the costs. Additionally, the policy builds cash value which can also help cater for your premiums. Also, guaranteed issue whole life insurance may be the most appealing for you if you need insurance to pay off debts or to cover for your funeral expenses.
Term Life Insurance
Most senior individuals choose term life insurance over whole life insurance because of the senior-specific benefits they offer. The major benefit to having a term life is the death benefits which the insured receives within a covered term.
While term insurance is a great policy option, there are some downsides to it. For instance, term life insurance does not extend your whole life, it expires as soon as the term is over. And if you outlive your term’s expiration, you receive no benefits despite having paid for premiums.
Also, most insurance companies only allow seniors below 75 or 80 years to apply for term insurance and most coverage options available are limited to $100,000 for individuals 75 years of age.
Guaranteed Level Term Life Insurance
This is the most common term life insurance plan where the premiums and the benefit does not change over the life of the term. With this insurance policy, the average annual increase in rates varies from 8 to 10%.
Return of Premium Term Life Insurance
This is an interesting type of term life insurance policy in that, if you outlive the insurance term, then the premiums you paid are refunded to you. While the refund you get is tax-free, you will incur 30% more than other standard term life insurance policies. An advantage of using the return of premium term life insurance is that you can use the refund to pay off the cost you will incur for your next term.
Annual Renewable Term Life Insurance
If you want an insurance policy with short terms, then the annual renewable term life insurance policy is your best bet. As the name suggests, the policy is renewable every year and coverage is guaranteed renewable for seniors of up to 90 years of age.
However, with this type of policy, the rate of the premium payable is low at the beginning but gradually increases with each renewal every year.
No Medical Exam Term Life Insurance
This type of insurance policy does not require any medical exam, and is best suited for senior individuals with poor health. It is also called the simplified term life insurance where you are required to answer several medical questions and as well, your medical history is checked. With no medical exam required, this insurance policy will cost you 80% more than the guaranteed level term life insurance.
Reasons Some Insurance Products Cost More Than Others
The cost of an insurance product will vary depending on either personal risks or even the length of the term or the size of the benefit. Some of the personal risks include;
Your lifestyle is going to affect your insurance premiums in so many ways. For instance, a mountaineer or a biker would have higher premiums than someone who seldom indulges in such activities. Also, having a criminal record, or your credit and driving history would impose high premiums if they are all unpleasant.
A non-smoker is likely to pay lower premiums than someone who smokes. Also, it would take time, mostly a year or two before your insurer considers you eligible for a non-smoker discount. This period of time assures the insurer that you have completely stopped smoking, so smokers are highly advised to quit if they want to pay lower insurance premiums.
This is the most common reason for high insurance premiums. The older you are, the shorter your chances are for living longer. As a result, some insurance products will be costlier than others, especially if meant for older individuals because of the higher the risk of insuring them.
Some life insurance policies meant to cover seniors with health problems like hypertension, diabetes, and obesity tend to have high premiums. The poorer your health is, the higher the risk of insuring you.
Another reason why you may pay high insurance premiums is because of your occupation. If your occupation is regarded as highly hazardous for example construction work or pilot, then insurance premiums you will pay are going to be high.
The life expectancy for women tends to be higher than that of men. As such men are prone to paying relatively higher insurance premiums than women. At birth, men have a life expectancy for 76.3 while that of women is 81.3. Resultantly, women will be charged lower premiums because a longer life expectancy means that the insurer will collect more money from the insured. This case remains the same even for senior individuals looking to apply for life insurance policies.
In addition to personal risks, the following factors can also affect the cost of the insurance policy;
Length of the Term
The longer the term of the insurance policy is, the more premiums you will pay. If the term of the policy is long, then the chances of paying out within that term are high and also, a longer-term policy equals coverage for higher age brackets.
Size of the Death Benefit
For obvious reasons, the higher the death benefit you are eligible for, the higher the premiums you are going to pay. On the other hand, the rate of increase will decrease as the rates increase.
Choosing the Right Product
As a senior, choosing the right insurance product should not be rocket science. There are a lot of myths revolving around insurance for seniors that make it seem like a hard task. The truth is, it is not. However, before choosing a package make sure to research inside out about the choices you single out to avoid unnecessary headaches. If you can, consult with an expert who will guide you through the whole process and help you make a desirable decision.