At the age of 50 or above, there is a huge dilemma as to whether life insurance is necessary or not. The conversation around age and life insurance has had a majority of people believe that it is not important for elderly people. Besides, most policies are designed to provide an income replacement during working years as well as financially cushioning your loved ones.
It only makes sense not to buy life insurance after 50 considering the chance of not having financial dependants and the fact that you are approaching retirement. As counterintuitive as it is, life insurance is important, even after you turned 50. While you might not have loved ones who rely on your income to survive, there are a handful of other reasons why you might need life insurance.
Let’s dive into whether you need life insurance after 50 or not.
Why Do You Need Life Insurance?
There are different reasons why you might need life insurance regardless of your age. Below is a list of some of the reasons you may need it and at least one of these may be relevant to someone over 50, let’s dive into these first.
Life insurance largely helps with estate planning where proceeds can be used to pay off estate taxes and other related expenses. When you die, the proceeds can be used to pay for these taxes giving your loved one’s peace of mind as they don’t have to worry about losing family property.
Equally, if you want to ensure the continuity of your business, life insurance can be of substantial benefit. The ownership transition can be made smoother as your business partners will have the cash on hand immediately from the life insurance proceeds to easily acquire your business interest from your heirs. If your loved ones don’t intend to continue running the business after your death, it would be easy for the surviving partners to purchase their shares.
Leaving an Inheritance
Life insurance is another way of leaving an inheritance for your loved ones. Perhaps you don’t have assets that you can leave your loved ones but want to make sure your loved ones, perhaps your children or grandchildren, are set financially for a secure future. Once you die, the policy proceeds can be divided amongst them to help with their future.
Protecting Your Loved Ones
Most life insurance policies are designed to provide protection for your family members. If you are the breadwinner for your family, then they would have no means of survival when you die. But with a life insurance plan in place, the proceeds would be used to aid their livelihood. From paying the children’s education costs, supporting your spouse’s lifestyle, and managing the household, there are different ways the proceeds would be used.
Paying Debts and Other Expenses
Debts such as mortgage, car, and credit card loans can leave your loved ones stranded if they have no income of their own. Luckily, proceeds from your life insurance policy can be used to pay off such debts and possibly support your family’s lifestyle for an extended period of time.
When You May Not Need It
While life insurance is important at different stages for an array of needs, sometimes it might be an unnecessary expense. It will vary depending on each individual situation and in most instances it boils down to not having family members who depend on your income. However, there are other few reasons why you might not need life insurance after 50.
There wouldn’t be a need for life insurance if you don’t have any debts to pay off. For instance, if your mortgage is fully paid then you don’t have to worry about your loved ones losing the family home to creditors if they can’t afford it after your death. Having no debts means that your assets will remain under the custody of your loved ones even when you are not there.
Not everyone has dependents who rely on their income to sustain their lifestyles. If you don’t have a family i.e spouse and children who you financially support, then it wouldn’t make sense to buy life insurance. On the other hand, you might have a spouse and children who can comfortably live off themselves without your financial aid. If so, you might also want to skip purchasing a policy.
Perhaps you have significant assets and savings that cover all your liabilities while ensuring your loved ones have a steady income for all their needs. If all your dependents can comfortably maintain their living standards from your current savings/assets even after expenses are paid, you might not need life insurance.
Final expenses are covered
Funeral expenses are quite high nowadays and can leave your loved ones stranded financially if not planned for. But it would be unreasonable to lock in a life insurance policy if your financial plan includes all your final expenses.
Types of Coverage to Get and When
When you discover a need for life insurance, the next step is to determine the best policy for your unique situation. While there are different types of life insurance, not all will be suitable for you. Each is designed differently so it is important to establish the kind of coverage you need and if it is ideal for you. That said, here are different types of coverage you can consider.
Term life insurance is fashioned to provide coverage for a specified period of time. If the covered individual outlives the term of the policy, which is usually between 10-30 years, then the death benefit is not paid out to his/her beneficiaries.
Term life is popular because it has cheaper premiums when compared to other permanent types of insurance. If you buy a level term life policy and happen to outlive it, you can choose to extend the term period, or possibly convert to a whole life policy, or leave it to expire. Another advantage is that term life is more flexible than most life insurance policies.
A good example of when to get term life insurance is if you have an incomplete loan payment. For example, if you have a 15-year-mortgage loan that you have been paying for the past 5 years. You would need a 10-year-term policy that would correspond with the remaining period of time before the loan lapses.
Whole life insurance does not expire, it provides coverage until you die. The premiums and death benefit amount remain constant over the life of the policy. Also, unlike traditional life insurance policy, whole life includes an additional component known as cash value. Part of the premium payments are used to build the cash value tax-deferred, and this amount can be used to borrow by taking a loan against the policy.
Since it also includes a cash value component, it is more expensive when compared to term life insurance which only offers a death benefit amount. Usually, whole life is a good option if you have substantial wealth that you need to protect. If you have different assets that might accumulate significant taxes, having a whole life insurance policy might help to ensure that the taxes are fully paid off when you die.
To that end, it might not make sense to take out a whole life insurance policy if you don’t have a massive amount of assets and corresponding taxes and expenses tied to them, given how expensive it is.
The cost of final expenses can be very discouraging for a surviving spouse or children, being that burial and funeral expenses are incredibly high nowadays. Luckily, final expense insurance is designed to help pay off burial expenses, lessening the financial burden. And the advantage of this type of insurance is that it not only covers the burial expenses, it is also used to pay for other final expenses such as medical bills that might be incurred before you die.
When compared to other life insurance policies, it provides lower coverage since it is meant for end-of-life expenses. This is cost-effective and a great way of protecting your loved ones from monetary responsibilities they might have to take on after you die.
Final expense insurance is practical if your loved ones have a sustainable income and don’t depend on you, there’s no need for income replacement, you are debt-free, and your business can run independently after your death, etc.
No Exam Policy
For most life insurance policies, one is required to undergo an underwriting process that involves a medical examination. Younger individuals below the age of 50, especially those in their 20’s and early 30’s, tend to qualify more easily because of their relatively good health. When you are over 50 years, your health may not be as good as once was, and you may have the possibility of having old-age-related illnesses which affect your life insurance.
There are plenty of no exam options available to those over 50. That said, it might be more difficult to qualify. For example, if you over 50 and haven’t had a routine physical in several years insurance companies may not be willing to approve you without a medical exam and/or an opportunity to review your medical records. On the other hand, if you are 30 years old and haven’t seen the doctor in several years an insurance company may not be concerned at all.
If you are in relatively good health you likely would qualify for a no exam policy. This can be great because you don’t have to do deal with the inconvenience of making time for an examiner to come out and see to do the exam. Even if you aren’t in the best of health there may be no exam options available to you. However, the coverage amounts may be limited.
Either way it’s worth evaluating whether a no medical exam option is right for you.
Things to Consider When Buying Life Insurance After 50
Life insurance is different for everyone, a 20-year-old individual without a family might not need the kind and amount of life insurance that a 55-year-old with a family might need. This makes it a sensitive matter and gives rise to different factors that you should consider before buying a policy as below.
Affordability of The Policy
Before buying your life insurance, you need to consider how affordable it is going to be. This does not only apply currently but also later in life, e.g. when you retire. If you are still working at the time of the purchase, your income might be steady and you might be able to afford specific policies.
However, you want to ensure that the premiums will be affordable to you even later when you don’t have a consistent flow of income or if you happen to lose your job or change jobs. In some cases, you might find it more affordable to pay a lump sum every year rather than monthly rates.
With most policies, there are additional charges for paying monthly installments when compared to making annual payments, so this is something you could confirm before you start the payments.
The beneficiary you name in your policy will receive the policy’s death benefit proceeds. Oftentimes, a family member such as a sibling, child, spouse, or close relative is put as the beneficiary. You will want to name anyone you trust and want the death benefit to be paid to.
Why and How Much Life Insurance You Need
Another important factor to consider when buying life insurance is why you need it and how much coverage you will require. For instance, you might have a spouse who relies on your income but no kids. Calculate how much your spouse requires to survive then buy a policy with coverage large enough to cover their needs.
On the other hand, you might have a mortgage loan that is not fully paid as well as a partner and children who depend on your income. This would increase the amount of coverage you buy when compared to the first instance. That is why it is important to establish the need for a life insurance policy and how much will be enough based on that need.
Compare Different Policies
Different carriers have varying life insurance products. In order to find the best policy for you, it is advisable to compare the different options available to you. This would help to find better rates for the coverage you need and even different riders for the policy if you need or want to add any.
Compare the types of insurance, whether term life, whole life, or guaranteed issue, etc to determine which one is the best option for your specific requirements.
At Over50lifeinsure.com, we’re experts at all things life insurance over 50 years of age. We do all the shopping for you, to help you find the best rate, at no extra cost to you. Contact us today to learn more about the options you have, and whether or not you have a need for the coverage.