Life Insurance for Seniors

As you get older, life insurance can start feeling less like a luxury and more of a necessity. If your loved ones depend on you for financial stability, you might even feel like you need to buy a policy ASAP.

But as the need for life insurance grows, policies also get more expensive and harder to qualify for. On top of that, it can be difficult to navigate the various types of life insurance policies for seniors, and the benefits your beneficiaries will gain.

If you’re wondering how much life insurance for senior citizens should cost, which type of policy is best for you and whether you even need life insurance at all, read on.

Is Life Insurance for Seniors Necessary?

Does every senior citizen need life insurance? Not necessarily.

“Seniors might need life insurance if they have dependents, significant debts, or if they’re looking to leave a financial legacy,” says Jeff Rose, CFP and founder of GoodFinancialCents.com. “Those with financial dependents or outstanding obligations typically benefit most from maintaining coverage.”

In other words, these are the main reasons you might want to carry a policy in your senior years:

• Help loved ones maintain quality of life: If a loved one depends on your pension, Social Security or income, your life insurance policy can help them maintain their financial stability after you pass away.
• Cover remaining expenses: A life insurance policy with a death benefit as low as $10,000 can help family members cover some of the expenses involved with your passing, like your funeral and/or remaining medical bills.
• Leave non-taxable inheritance to loved ones: Unlike some other forms of inheritance, beneficiaries receive the death benefit from a life insurance policy, untaxed.

While the majority of U.S. adults depend on the death benefit they’ll get from a life insurance policy, not everyone needs the coverage. Rose says retirees who have plenty of savings and investments to cover their burial expenses probably don’t need to buy life insurance.

Life Insurance Options for Seniors

Understanding insurance can be challenging, especially given how many different types of life insurance policies there are. But it’s important to understand the basic differences between each one so you can choose the right coverage. Here’s an overview:

Term Life Insurance

Term life insurance is typically the most affordable option. These policies, which usually require a medical exam, cover you for a specific term of one year, up to 30 years. If you pass away during that time, your beneficiaries receive a death benefit, which often is $100,000 or more.

Permanent Life Insurance

With permanent life insurance, you’re covered for the duration of your life. Permanent life includes whole life insurance and universal insurance, and gives a guaranteed payout to your beneficiary, usually of $50,000 or more.

But permanent life can be far more expensive than term insurance, and it isn’t the best option for everyone.

“Choosing between term and permanent life insurance really depends on the individual needs and financial goals of the senior,” Rose said. “However, if the need is temporary and budgeting for it is a concern, a term life policy may be more suitable, despite the higher premiums compared to younger ages.”

One perk of permanent life is that these policies build cash value that you can tap into for loans. But borrowing against your policy can also put you at risk of losing the policy and facing tax penalties. Plus, the cash value of the policy is usually surrendered to the insurance company when you pass away.

Like with term policies, you may also need to pass a physical in order to qualify for a permanent life plan.

Simplified Issue

You probably don’t need to pass a physical in order to get simplified issue life insurance, which is a similar policy type to term coverage. But you can still be denied based on the medical information you provide. You may also end up with higher premiums and less coverage for a shorter term than policies that do require a physical.

Guaranteed Issue

Guaranteed issue or guaranteed acceptance life insurance is available regardless of your medical information, but the premiums are higher than term and whole life policies.

You can typically choose a death benefit between $2,000 and $35,000 on a guaranteed issue policy, but there may be a waiting period of 2-3 years before the policy goes into effect, and your beneficiaries will not receive any benefit if you pass during that period.

What To Look For in a Life Insurance Policy as a Senior

Before you choose an insurance policy or a provider, you’ll need to do some research. Rose says that the following two items are crucial, but often overlooked, when choosing life insurance for senior citizens:

• Review provider ratings through agencies like M. Best or Standard & Poor to find a reliable provider with positive customer feedback.
• Conduct a “needs analysis” to determine the appropriate coverage amount. Consider factors like your outstanding debt, future medical expenses and the financial support needed by loved ones.

Life Insurance Riders for Seniors

A life insurance rider is optional coverage you can add to your insurance policy. Some common riders you may consider include:

• Long-term care rider, to help cover the costs of long-term care services.
• Critical illness or terminal illness riders, for access to part of the death benefit if you’re diagnosed with certain illnesses.
• Waiver of premium rider, which can waive premium payments if you become seriously ill or disabled.

Rose says that while a rider can help you tailor a policy to your needs, they are “not universally necessary and often come at an additional cost.”

The Cost of Life Insurance Policies for Seniors

Life insurance premiums vary depending on the policyholder and the specific policy, but life insurance for seniors is much pricier than it is for younger people.

For someone in their 20s, a term life policy may be available for under $15 a month. Prices rise sharply around 50 years old and could reach anywhere from $80 to $250 a month around 70 years old, with the highest rates applying to males and smokers. These are the factors that will impact your premiums:

• Age
• Gender
• Health indicators
• Policy type

Speak With A Credit Counselor

Financial help is available for seniors, whether you need support making insurance decisions or not.

At little or no cost to you, a certified, nonprofit credit counselor can help you calculate how much insurance you can afford, and estimate how much financial support your loved ones need after you pass. Credit counselors also specialize in reviewing budgets, reading credit reports, and they can help you come up with strategies for managing debt, too.