Life Insurance for Senior Citizens
It is assumed that only young people with dependents or those with significant assets need to have life insurance. But life insurance for senior citizens is important as well. A senior and his or her beneficiary will benefit from life insurance in several ways. The death benefit provided to the beneficiary can be applied toward final expenses, outstanding credit card debt, property tax or the balance of a mortgage. The death benefit can also be used to fund grandchild’s education or the down payment on a house. For a senior with few liquid assets, life insurance can provide safety and security by not placing financial burdens on surviving family members.
The three best types of life insurance for a senior are: Whole life, guaranteed acceptance and term life insurance.
Whole Life Insurance
Almost all life insurance companies sell permanent whole life policies to seniors that cover both the expenses of a funeral and burial along with providing an investment feature that may counter the effects of inflation. Whole life insurance for seniors is a policy that remains in force for the insured’s whole. Some policies are called “simplified issue” insurance policies. Most applicants will need to answer a few health questions, but this kind of policy does not usually require a medical exam.
The ages of seniors who can apply vary by the state in which he or she lives and the issuer of the policy. But, policies are almost always available for coverage to those between 50 and 95. The death benefit typically ranges between $2,500 and $30,000. With the majority of whole life funeral and burial expense insurance, the premium remains the level and will not increase as long as the policy is in force.
Guaranteed Acceptance Life Insurance
Guaranteed acceptance is a also permanent life insurance. A permanent life policy for a senior citizen cannot be cancelled as long as the premiums are paid according to the terms of the policy. Guaranteed acceptance is the best type of policy for a senior with a history of health problems such as cancer, stroke or diabetes.
Seniors with a history of serious medical situations will usually still qualify for guaranteed acceptance life insurance. However, a reduced death benefit might be paid to the beneficiary or beneficiaries if death occurs during the first two years. Coverage ages will vary among states and policy issuers, but most policies will cover those between the ages of 50 and 90.
Term Life Insurance
Unlike permanent life insurance for seniors, term life is temporary. The length of the term and the amount of the death benefit will also vary by state, but will usually range between five and 30 years and $2,500 to $2,000,000 respectively. The length of term available for a senior depends on his or her age at the time the policy is purchased. The premium will be lower than the premium of a permanent insurance policy for a senior but will be fixed so it will not increase.
Term life insurance for seniors is the least expensive form of insurance. It does not build cash value in an investment account and is considered mature when the term ends or the death benefit is paid. Most policy issuers will try to convert a senior with a term life policy to a permanent life policy. If a senior believes he or she will outlive the term but wishes to remain insured, it might be best to convert the policy, as his or her age at renewal may make another term policy cost prohibitive.
When is Term Life Insurance Best for Senior Citizens?
Most insurance companies will not renew a senior term life insurance policy after he or she reaches the age of 75. A senior interested in a term life policy is normally advised to buy it before age 65. Term life insurance policies are the least complicated type of life insurance.
Term life is best for seniors who neither need nor want an investment component, or for those who do not need tax-deferred growth. While a permanent whole life policy for a senior will provide an investment feature against which he or she can borrow, there are tax consequences. For this reason, a senior should always make sure he or she meets with a reputable insurance agent and tax advisor before purchasing any insurance policy.
When is Permanent Life Insurance Best for Senior Citizens?
Seniors who reach age 75 who do not have the option of purchasing a term life insurance plan can choose a permanent life policy. Permanent life insurance, which is in force for the life of the insured as long as premiums are paid, provides an additional level of financial security as it creates a cash account as well as paying the death benefit the a beneficiary.
Like the death benefit paid on a senior term policy, the death benefit paid on a senior permanent life policy can be used to pay funeral and burial expenses. It can also be used to pay final expenses or any other bills as the beneficiary chooses. Unlike a term policy, however, a permanent plan can provide additional income for a spouse or beneficiary. A permanent senior policy can also be purchased to provide coverage until age 100, depending on the state in which it is issued. And the built up cash value of the policy can be used to provide a lifetime income stream that supplements a pension, IRA distributions and social security benefits.
For seniors who have health issues, a permanent life insurance policy may be easier to qualify for than a senior term policy. From the insurance company’s viewpoint, a term policy represents a higher risk to the company than does a permanent life policy as the insured ages. When a senior purchases a term insurance policy, he or she risks only the monthly premium in order for the beneficiary to receive the death benefit. With a senior permanent life policy, however, he or she assumes an increased portion of the risk with higher premiums.
