Life Insurance Over 50, the Ultimate Guide
Life insurance is important, even at the age of 50. The problem comes when individuals think that they are not eligible or cannot find a good insurance policy due to their age, which is not the truth.
The thing is, there is always a policy for everyone, you only need ample research to find out what’s out there for you. In fact, you may be surprised to know you are eligible for most of the insurance policies on the market.
Moving forward, you don’t have to struggle to find an insurance company. The following is a guide to help you understand different types of insurance plans available over 50, how they work, and some of the best companies to consider.
Why get coverage after 50
After attaining the age of 50, you may be wondering if it is important for you to get life insurance coverage. This is one of the reasons that most people over the age of 50 struggle with, not knowing if it is beneficial for them to get insured. There are several reasons why you should get a life insurance policy even after hitting 50 years or more.
Below are the top reasons.
The cost of sending off someone after they are dead is quite high today. In fact, on average people spend about $10,000 or even more to organize a proper burial ceremony. This cost is inclusive of transportation, burial plot, funeral service, casket and other expenses incurred. Most people prefer having a life insurance policy in place so as to cater for such expenses and live off the possible financial burden their loved ones would be left with.
Life insurance proceeds can also be used to replace the income you were making while working after you pass away. For instance, lets say you are 55 today making $100,000 a year, and you plan to work for another 10 years before retiring. If you were to pass away tomorrow that’s $1,000,000 of income you were not able to earn. Maybe you don’t need a full $1,000,000 life insurance policy to replace that though. Keep in mind life insurance proceeds are income tax free and the income from your job is taxable. Perhaps you will need though about $750,000 of coverage to make sure your spouse and/or other dependents are taken care of when you pass away.
Leaving a Legacy
If you want to leave a legacy behind after your death, then a life insurance policy can be a great way to do so. You can list your child, grandchild or anyone or perhaps somebody else as your beneficiary to receive benefits from your life insurance policy after you’ve passed away. Also, if you want to make a donation to an organization or give your money for charity, then you can list such organizations as your beneficiaries for your life insurance policy.
For people over 50 with a significant net worth estate taxes can be a huge concern. Some people who inherit money have been forced to sell off certain possessions to pay these taxes. To avoid such setbacks, it is often advisable to have a life insurance policy to have the liquid cash on hand to help pay estate taxes so not to have sell an asset that is liquid such as a piece of property.
Proceeds from your life insurance policy can also be used to keep a business up and running until fully owned by the next successor. This can be something like getting a key person policy or using life insurance as a way to fund a buy sell agreement.
Life insurance can also be used as a method to supplement your savings. Some permanent life insurance policies are designed to build up cash value over time. If the policy is a good one and it is funded properly and designed well it can be a nice additional way to save for the future. The growth on the cash value is tax deferred and you may never have to pay taxes on the growth even when you take money out of the policy. Life insurance uses FIFO accounting meaning first in and first out. So you can withdraw up to what you put in with out paying taxes on it. If you take out the additional money on top of what you put in you can do so by taking a loan from the policy which is not taxable. The key is you need to make sure the policy stays in force for your lifetime otherwise you may have to pay taxes that you weren’t expecting. Make sure you speak to a knowledgeable agent if buying this type type of policy to guide you on this.
Deciding how much insurance you need to buy is crucial. When choosing a life insurance policy, you should have a financial plan in place. This is to ensure that you choose a policy that is going to address all your life insurance needs when you need it. Also, the amount of insurance you buy should be able provide the funds that your spouse and loved ones would need in the event of your death.
The type of insurance coverage you choose is also crucial. This comes down to a combination of what do you need and what can you afford? Term and permanent life insurance are the two basic types of coverage that you can get. Do you just need short term coverage. A 10 year term would probably be sufficient. Are you trying to create a legacy? Then, a guaranteed universal life policy might be a better option. Do you want an insurance policy that accumulates a cash value and savings component over time then a whole life or indexed life product would probably be your best choice.
Types of products you can get
There are different types of insurance products you can get, whether you need a permanent option or a term life coverage. Each option comes with different rates and terms to each policy are different. So, it is important to find out everything a policy entails and make sure to ask your agent to clarify things for you in case you do not understand. With that, the following are types of life insurance products you can get.
GUL is an abbreviation of guaranteed universal life insurance. It is one of the most common types of life insurance policies that offers affordable rates and lifetime coverage for clients. One major advantage of having guaranteed universal life insurance is that it can provide guaranteed life insurance protection for life…no matter how long you live.
Coverage for guaranteed universal life insurance may vary from 90 to 110 or 121 years. If you are above 50 years of age and need an insurance policy that will cover you for the rest of your life, then consider obtaining a guaranteed universal life insurance policy.
You will pay lower premiums when compared to whole life insurance which is also meant for lifetime coverage. The reason being is that whole life insurance also provides cash value component to it. A guaranteed universal life policy will have either no cash value or very little cash value in it.
With a guarantee universal life policy (GUL) the rates you pay and your coverage will not change, that is why it is referred to as ‘guaranteed’. Market changes, health, and age will not affect your premium payments and coverage.
Guaranteed universal life insurance can be used for different applications. Some of the most common uses include payment of your final expenses which are usually burial and funeral expenses, providing a legacy for kids or grand kids, and having liquid cash available for beneficiaries to pay for any taxes that may be due when inheriting money.
Application for GUL
When applying for guaranteed universal life insurance, it is advisable to work with a reliable insurance agent. A good independent life insurance agent can help you find the best GUL for you that will meet your needs. Keep in mind, every insurance company will look at your application differently based on your health, lifestyle habits and your age.
After comparing the available options, you choose the one that best suits you and then begin the application process.
Final expense is a type of insurance that is is typically purchased to provide the funds needed to pay for funeral and burial expenses after they die. In addition, final expense is often used to cover other expenses like medical bills, housing costs, legal fees, as well as other pending bills at the time of your death.
Having a final expense insurance policy does not mean that the policy is linked to a prearranged funeral contract. If one is in place it is usually separate from the insurance policy.
Final expense is whole life insurance. It will stay in force no matter how long you live if keep paying the premium of course. The face amounts that you can purchase or death benefit amounts range from$1, 000 to $50,000.
Final expense insurance can either be simplified issue or guaranteed issue. If you can qualify for it simplified issue is the one you want. They will ask you health questions and they will run your prescription drug check, but if you are approved you are fully covered from the very first day of coverage.
Guaranteed issue does not ask you any health questions. Anybody can be approved for final expense life insurance if you are between the ages of 50-85. The downside is that you are not fully covered for the first 2 years if you were to pass away. For instance with one company if you pass away within 2 years the premiums would be refunded plus 10% interest. Not a bad deal really. However, to receive the full death benefit the policy needs to be in force for two years before it will pay out. The only exception is that they will pay the full death benefit if you were to die in an accident within the first two years.
A simplified issue policy is a type of insurance coverage for people who want to avoid the long underwriting process of taking a medical exam to get approval. Simplified issue policies are among the easiest types of insurance coverages to apply for, although you may need to answer a few medical questions. It is easier to apply for such an issue but it isn’t always guaranteed that you get approved.
The following are some of the best reasons to lock in a simplified issue life insurance policy;
- If you want coverage within days as compared to other policies which take a period of about 3 to 8 weeks to get approved. A simplified issue is your best bet at getting coverage within the shortest time possible.
- If you need to get collateral for a loan and don’t have the time to wait for a month or more to get approved, you can also lock in a simplified issue policy.
- A simplified issue policy is also a great option if you have a court order that requires you to get a life insurance policy.
- If you are a senior and haven’t had a physical for a while, a simplified issue may be a great option. Because if a physical exam was to bring some health issues into light then you would be forced to pay very high premiums.
- Finally, you can lock in a simplified issue if you want a life insurance policy to help you cover your final expenses.
A few more points on simplified issue life insurance policies…
Different insurers offer different coverage limitations based on your age. One company will offer up to $750,000 up to age 55, and $500,000 up to age 65. Another will offer up to $150,000 up to age 75. And there are many companies that will offer between $25,000 and $40,000 of coverage up to age 85. If you need more coverage than what an insurance company allows you could just get two policies. Perhaps you need $1,000,000 of coverage. Maybe you get $500,000 with one company and $500,000 with another.
The underwriting processes for insurance policies that require you to do a medical exam can be stressful for some people. Also, for some it is simply the hassle in making time to complete the exam. With a simplified issue, you are only required to complete an application and answer the health questions. Often times you can be approved in 1 to 3 days.
When compared to other life insurance policies that require you to do a medical exam the simplified issue policies are priced higher. Sometimes though they aren’t priced that much higher. Make sure your agent gives you your options for both.
In a way, simplified issue policies give you a sense of privacy. Since there is no need for a medical exam, you don’t have to worry about a health technician coming to your office or home.
Guaranteed issue life insurance, as the name suggests is a form of life insurance with no medical exam. This means that the approval process takes a shorter period of time than other types of insurance policies with an underwriting process.
A guaranteed issue life insurance is also pricier compared to other forms of insurance and you should only consider it if you have had difficulty getting approved with other life insurance policies available. It should be your last resort and should not be considered as a first option before trying out other policies.
Since there is no underwriting process, the process can be done online. Guaranteed issue life insurance involves very little paperwork and you will only be required to prove your identity and age to get approved for the policy.
Is Guaranteed Issue Life Insurance Right for You?
While guaranteed issue life insurance is easy to get approved, it does not mean that it is the right option for everyone. However, it is a great option for people that cannot be approved for any other coverage due to health problems and their age.
Some people with specific health conditions are only qualified for guaranteed issue life insurance. For example cancer patients among others.
So, before obtaining your insurance policy make sure to do your research to ensure that it is the only available option for you. If so, compare policies and choose the most affordable one.
Reasons for Buying a Guaranteed Issue Life Insurance Policy
A guaranteed issue life insurance policy can be used in many ways after the insured has passed away.
For instance, death benefits can be used to cover funeral expenses. When someone dies, social security only pays about $255 which wouldn’t cover a quarter of the average amount used for burial and funerals.
Also, the policy proceeds can also be used for payment of debts that may be left unpaid in the event of the death of the insured. These debts may consume your personal assets so it is important to have life insurance coverage to take care of them.
Life insurance policy proceeds are also usually used to cover final expenses for the spouse of the deceased. If you have a partner who is dependent on your money, you may want the remaining proceeds of your insurance policy to be paid out to them.
Pros of Guaranteed Issue Life Insurance
- Guaranteed issue life insurance policy can help to pay your final expenses which include unpaid debts from creditors, household expenses, funeral expenses, medical bills and any other expenses that may be left pending at the time of death. This helps to lift the financial burden that the spouse may be left with.
- Another benefit of having a guaranteed issue life insurance is that there is no medical exam needed. As a result, approval is faster and the process is not as stressful as with other forms of insurance policies.
- Lastly, guaranteed issue life insurance policy payout benefits for accidents.
Cons of Guaranteed Issue Life Insurance
- Generally, guaranteed issue life insurance policies usually have low coverage amount because the carriers of the policy have to mitigate risks. Since the policies are no exam, then they attract different people with serious health issues and other risks.
- The restriction period set by most insurance companies, which normally ranges from 2 to 3 years is a great limitation to most people. This means that if the insured dies within the restriction period, the insurer will not pay out the death benefit.
As the name suggests, whole life insurance is a type of insurance meant to last your entire lifetime. It is the most expensive type of life insurance because it not only provides a death benefit, but also a savings component. You can accumulate cash value over time in these policies assuming you continue to pay the required premium.
How it Works
A whole life insurance policy entails the savings component and the death benefit. The savings component is the amount of money that you can withdraw from your policy and benefit from while alive. The death benefit is what is paid to your beneficiary(s) is when you die.
The cash value is accumulated on a tax-deferred basis and can be withdrawn for any purpose like paying a mortgage or purchasing a new car. Also, there are ways you can access the money in your policy beyond the cost basis (premiums paid) through the form of a loan. This is a loan that you don’t ever have to pay back. When you pass away the death benefit will be reduced accordingly to account for the loan balance.
Some of the most basic and important things to look for when choosing a whole life insurance policy include…
The History of its Dividend
You will want to choose a company that has been around for a long time and has a long history of paying its dividend. If the policy has consistently paid a good dividend over time that is a sign of a strong company and a good whole life policy.
Customer reputation is key. If customers have only bad things to say about an insurer, then it’s probably best to avoid that company. If an insurer is not treating its current customers well, then that will probably not be any different for you. In addition to assessing what your insurer is bringing to the table, look for a company with good customer reviews and you will not regret your decision.
A good insurance company should be in a position to pay out claims while equally helping their clients to build wealth. When looking for a whole life insurance company, you want to make sure that it is financially stable enough to pay out all your death benefit to your beneficiary.
Type of Company
When it comes to life insurance, there are two types of companies involved. First, there are mutual insurance companies which are owned by the policyholders. On the other hand, there are public insurance companies that are traded in the stock exchange. These companies are owned by the shareholders.
Universal life insurance offers long term coverage to the insured but it is adjustable, unlike whole life insurance where the premiums and benefits are fixed. The premium you pay can be reduced or increased according to your preference or situation.
With universal life insurance, you can skip payment of the premiums without losing your policy, unlike other policies which may risk losing the policy, as long as you have cash value build-up. The policy offers a lifetime coverage which accumulates a cash value that can then be used if need be.
Your insurer will give you a clear breakdown of your funds, from how much you have in the policy to how the funds are used in the different components of the policy.
How it Works
A universal life insurance policy provides a tax-free death benefit to your loved ones after you are deceased. You may choose to pay your premiums every year or month depending on how much you are able and/or would like to pay at a given time.
With each premium paid, the excess that is not needed to pay for the cost of insurance goes into the cash value. Over time this can accumulate. The policy will pay the internal cost of insurance by taking money from the cash value. As long as there is cash value in the policy the policy will stay in force. Universal life policies give you a lot of flexible in how you fund the policies but you do need to make sure that they are funded properly otherwise the policy will lapse. It’s a good idea to review your policy every year and get an in force illustration every two to three years at the most to make sure your policy is on track.
A universal life policies can be a great policy, but it is not a set it and forget it policy. It must reviewed and you must make sure it’s funded properly.
Universal life insurance comes with a number of advantages as listed below.
With life insurance, the cash value of the policy is tax-deferred. As a result, you will not have to pay taxes every year on the growth of the cash while it is inside of your policy.
Fixed Death Benefit
Another major advantage of a universal life insurance policy is that the death benefit is usually fixed. This will give you peace of mind knowing that the death benefit amount will remain the same and your beneficiaries will receive that amount when you die and as a result, this benefit can be used for a specific purpose.
This is one of the best reasons why most people prefer universal life insurance policies to other options. It gives the insured individual the freedom to adjust premium rates when needed.
Guaranteed Interest Rates
With universal life insurance, every insurer sets a certain minimum amount for interest rates that will be guaranteed. However, there are multiple types of universal life insurance policies, so you want to speak with your agent about your options.
When in your 50’s you are likely going to be faced with several challenges than you would have, had you applied at a younger age. The following is a quick list of some of the challenges faced in such case scenarios.
This is one of the biggest challenges linked to life insurance over 50. The premiums you pay are higher and there is nothing you can do to change that because the rate you have to pay is highly dependent on your age when you apply for coverage. Make sure to work with a good independent agent that can find you best policy for you that will meet your needs at the most affordable price.
Poor Health Which Means Higher Premiums
Poor health is also among some of the biggest challenges of life insurance over 50. Many people are usually faced with poor health/medical conditions. This can limit the amount of coverage you can get and also increases the amount you have to pay for coverage. Your best bet is to work with an agent specialized in high risk.
Companies ideal for seniors
As a senior, it is good to find companies which mostly deal with insuring elderly people. This way, you will be able to easily find a policy that best suits your needs. Read on to see just a few of the best insurance companies for seniors.
Mutual of Omaha
Mutual of Omaha is an insurance company that deals with final expense life insurance. It issues two subcategories of final expense life insurance which includes which includes their level plan and the graded plan. If you are just needing a policy to pay for your final expenses and can qualify for their level plan you can get up to $40,000 of coverage up to age 85. They are a well known company and have a good reputation.
Protective Life Insurance Company
Having operated for over one hundred years, Protective life insurance company offers different options for universal life insurance policies. A huge advantage of getting insured by a Protective life insurance company is that their policies are customizable with relatively fair prices. Also, insurance plans offered by the company usually include both survivorship and individual plans. Protective life insurance company is your best option if you need flexibility and long term coverage.
American National Life Insurance Company
American National offers an affordable entry point for its customers. The guaranteed universal life insurance policies it offers begin from $25,000. It ensures to convey clear information about the types of coverage it offers. This includes information such as the included riders, who are eligible for coverage, and the size of death benefits available.
Banner Life Insurance Company
This is a subsidiary of Legal & General company located in London. They have one of the more competitive term life products in the market place. If you need term life insurance coverage they can be a very good choice for coverage.
Being 50 years or more should not prevent you from taking out an insurance policy. Avoid choosing the first option that presents itself, you may have better options available to you. Different insurance policies may be confusing, so find a good agent to take you through every single step of the process. They are more experienced and will give you the best insurance policies available to you regardless of your health and age.
The good news for you is we specialize in getting coverage for people over 50. Give us a call today and let us do the shopping for you at no extra cost to you.