There is no inappropriate age for taking out a life insurance policy. The earlier you get coverage, the better, but that does not mean that you shouldn’t consider getting life insurance at 70 years of age. There could be a number of reasons why you will need to buy life insurance at that age. Life insurance might get more complicated with age and it might be more challenging to buy at an older age, but you would better off with than without it for a lot of reasons. Usually, health reasons are the major challenge when looking to find a life insurance policy for individuals over the age of 70 years.
However, it is a good way to leave an inheritance for your loved ones or even pay for your funeral expenses. The premiums might be a little higher than those for younger individuals, but the benefits outweigh the cost. The good thing is, while you might be limited to the types of term policies you might qualify for, you will still have different whole life options to choose from. To that end, here are various categories of life insurance policies.
Types of Life Insurance Policies to Consider
There are life insurance policies designed to provide coverage for you until you die. These are often referred to as permanent or whole life insurance policies. On the other hand, other policies are meant to provide coverage for a specific period of time. These are known as term life insurance policies.
Before you decide on a permanent policy or a term life policy, you need to understand the different policy options you have as well as ascertain what your current financial situation and future circumstances will be like. That said, below is a further description of the types of life insurance policies to consider at age 70.
Whole life insurance is permanent life insurance since it provides coverage until you die no matter how long you live. So as long as the policy is in force when the policyholder dies, the death benefit will be paid out to the loved ones. Also, the premiums for whole life insurance remain the same for the life of the policy. Some policies are set up to be paid over the course of your lifetime. Others only need to be paid for a shorter period time such as for 10 years. Of course if paying premiums only for 10 years in this example as opposed to spread out over your lifetime the premium for the 10 years will be higher.
Generally, whole life insurance is more complicated than other types of life insurance. Also, most of these policies usually accumulate money within the policy also known as the cash value component. This is part of the reason why whole life insurance premiums are high when compared to other types of policies.
The cash value component can be used to secure a loan against the policy, as long as it does not exceed the amount of the cash value account. Any loan taken out against the cash value account is a lien again the death benefit. If the loan isn’t paid before the owner of the policy dies, the is death benefit that is paid out is reduced.
This is a type of life insurance policy that stays in force for a specified period of time. The common term periods range between 5 years and 30 years, although some insurance companies have added 35-year and 40-year term policies. Two of the companies that have 35 and 40 year term products are AIG and Banner Life.
If the policyholder dies before the policy period lapses, the death benefit is paid to the beneficiary but if he/she outlives the policy, no death benefit is paid out. This leaves you the option to convert the term policy to a permanent policy. This can be done with just some paperwork. No qualification is required. Of course this assumes that you are still within the conversion period of the specific policy. Alternatively, you can look to to increase the length of the term. To do this you would need to apply for a new policy and you’d have to go through underwriting again.
Term life policies are a preference for most individuals since most people are able to get coverage at an affordable rate. Term life insurance is also less complex than whole life. One of the major reasons why a lot of individuals purchase it is for income replacement. So whether it is to pay off a mortgage loan, cover education costs for your children, support your spouse’s lifestyle, or pay off pending debts, term life insurance can be a great fit.
Guaranteed Universal Life(GUL)
While a GUL is a permanent type of life insurance, it is not as costly as whole life. In fact, it is a great alternative for an individual looking for a permanent policy but at affordable rates. For your loved ones to receive the death benefit payout, you will need to ensure that the premiums are paid up-to-date.
Guaranteed Universal life insurance creates a balance between term life and whole life, since it provides cheaper permanent protection but lacks a cash value component. As such, premiums are lower than whole life but higher when compared to term life insurance.
Should your needs change in the future, a guaranteed universal life policy will usually allow you to change the death decrease the death benefit. Also, some of these products have return of premium options that allow you to surrender the policy in exchange for the premiums already paid. However, you might be required to hold the policy for a significant number of years. For example, it might be 15, 20, or 25 years. The requirements will vary depending on the insurer.
Buying a GUL policy at age 70 is fairly common. The reason being is that age 70 a term policy often doesn’t make sense unless the need for coverage is truly temporary. For example, if you really only need coverage for 10 more years because you just want coverage to be there until the mortgage is paid off for instance then a 10 year term policy is a great choice. However, if you need coverage that will last longer than 10 years you don’t want to buy a 10 year policy and then plan to reapply at age 80. Even assuming you are still in good or decent health the cost will be much more at age 80 to buy a new policy then it is to buy a new policy at age 70 – all things being equal.
Typical Costs Based on Different Health Rating
Smokers pay more for coverage than non-smokers especially at older ages. For instance 70 year old smoker would pay much more than a 70 year old non smoker. However, the difference in rates at age 30 are nearly as significant. Rates also vary based upon your overall health and lifestyle habits. The better the rate class you are approved for the less you have to pay. Most companies have similar rate classes. This is how it works:
The best risk class is preferred plus where the individual has great health history, any cholesterol blood pressure issues are well under control with medication, no major medical issues, and normal body mass index. With most carriers anyway if you have more than two accidents within the last three years or a suspended driver’s license would prevent you from qualifying for this class.
The second category is the preferred class where individuals are required to have good health. You don’t have to be in perfect health, but certainly above average. You can have some minor medical conditions that can be controlled using medication perhaps.
If you don’t qualify for the above qualifications and have a little more than minor health issues, you are classified under standard plus. For instance, being overweight could place you under this category.
The other common risk class is standard or regular, which is the most common. It is for individuals with average health and probably on multiple medications. Also, a family history of diseases such as cancer or weight and height that don’t meet the required guidelines might also put you in this category.
Below are sample rates for term life insurance policies based on gender.
10-year term policy approximate rates for someone in AVERAGE health:
|70-year-old female non-smoker|
|70-year-old female smoker|
|70-year-old male non-smoker|
|70-year-old male smoker|
How Companies Determine Rates
The rate class you are approved for indicates the mortality risk presumed by the insurance company. Insurance companies use different factors to determine rates for every individual, which means what you pay for a certain amount of coverage might not be the same rate as the next person. That said, here are a few factors companies use to determine life insurance rates.
Age plays a huge role in determining policy rates. A 70-year-old individual would pay higher rates than a 65-year-old individual all things being equal. Simply put, the older you are, the higher the rates of your policy. This is why it is advisable to lock in an insurance policy when you are young.
Younger individuals are healthier and are likely to live longer than older individuals, which is why they pay lower rates for insurance policies.
Next to age, health is a major factor used to determine life insurance rates. If you are in good health, the lower the premiums you are going to pay. On the other hand, if your health is poor then you are considered risky to insure because of the high chances of the insurance paying out, and you will likely pay higher premiums.
In most cases, health is a mandatory factor but you don’t have to take a medical exam before qualifying for a policy. If you want your policy approved without the underwriting process then you can opt for a no-exam policy. These policies allow you to skip the underwriting process, although you will be required to answer health questions before qualifying. On the downside, at age 70 you may not be able to qualify for as much coverage as you want or need. Depending on the amount of coverage you want you may have to do a medical exam.
Family Medical History
Family medical history also impacts the rates set by life insurance companies. Most carriers will ask if your parents and any siblings have had cancer or any cardiovascular issues. They will also want to know at what age they were diagnosed and if they are still living or not. Having said all this about family history most carriers will not factor in your families medical history if you are 70 years old. Most will not consider family history in fact if you are older than 65 and some even at age 60.
The gender of the policy owner is also used to determine the policy rates. Men pay higher premiums when compared to women because they are considered riskier to insure. The fact of the matter is that woman outlive men statistically speaking. Perhaps it’s because of the occupations or hobbies that men partake in. Regardless of the reason why the rates for men are higher than women.
This is one of the main factors that life insurance companies use to decide policy rates. Obviously, you would pay more premiums for a high coverage amount. For instance, don’t expect a $1million dollar policy to cost the same as a $500,000 dollar policy. Regardless of your age, health, or gender, larger coverage amounts will always cost more.
Different types of policies attract different rates since each policy is made differently. For instance, there are medically underwritten policies that have lower premiums if you can qualify for them than no exam policies. This is because once you undergo an underwritten policy to prove that you are healthy, you are seen as less risky to insure. But for no exam policies, many insurance companies automatically assume that your health is average and that you are riskier to insure. As a result the rates are priced accordingly.
Term life is also less costly when compared to whole life because it is temporary and has no cash value component. Since whole life offers both death benefit and cash value and provides lifetime coverage, it costs more. Every policy carries different components which also account for the rates charged for the policy.
On the other hand, guaranteed universal life insurance policies are not as expensive as whole life although they provide lifelong coverage. They are, however, costlier than term life because term only provides temporary coverage.
Before buying any life insurance policy, it is advisable to shop around and compare different premiums and products suitable for you. It allows you to find coverage that best fits your budget and financial goals. Our professionals at over50lifeinsure.com will help you choose the perfect policy while providing you with all the information you need to know about it. Based on your needs, we will help you decide how much coverage you will need and the type of policy you will need.