Seniors may have a tough time finding the ideal life insurance policy, but worthwhile coverage options do exist — whether you want to cover final expenses or leave a lump sum for your family.
While it’s true that life insurance policies become more costly as you age, many insurers will accommodate older adults, even if you’re not in perfect health. Here’s what you need to know about shopping for life insurance as a senior.
Before you start shopping, check whether you need life insurance. If you’re debt-free and have healthy savings or funds set aside for final expenses, then you might not need coverage after all.
A life insurance policy might make sense if you:
Have outstanding debt that others would have to repay after you die.
Support a spouse, domestic partner, child or other dependents with your income.
Want to cover your own funeral and burial costs.
Have a high net worth and want to cover estate taxes.
Want to provide an inheritance to those you leave behind.
Leave a donation to charity.
Types of life insurance for seniors
Term life: Cheapest option
A term life insurance policy could be a good, low-cost option if you’re in great health for your age and willing to take a medical exam. Because term life is temporary, it’s most suitable for covering debts, such as a mortgage, or providing financial support for a spouse or dependent should you die during the policy term.
If you shop for life insurance in your 60s and 70s, you can typically secure a 10- or 20-year term life policy, but if you’re over 80, you’ll likely have difficulty finding term life coverage.
Whole life: Cash value component
Whole life insurance typically provides lifelong coverage, as long as you pay the premiums. It accumulates cash value over time. You can then withdraw the cash, or take out a loan against the value. However, it can take time for the cash value in life insurance to build — sometimes a decade or more.
This type of life insurance is typically more expensive than term products, especially if you purchase a policy later in life. This is because as you age, your life expectancy is shorter, meaning the insurer might have to pay out the policy sooner. Also, we tend to develop health issues over time, which can cause premiums to rise.
Guaranteed issue life insurance: No medical exam
Sometimes called senior life insurance or “final expense” insurance, guaranteed issue life insurance has no medical requirements for acceptance. Life insurance companies use medical exams to better understand your health and predict life expectancy, so policies that require them tend to be cheaper. However, if your health precludes you from qualifying for coverage, no-medical-exam life insurance such as simplified or guaranteed issue may be a worthwhile option. As life insurance medical exams are typically free, they may be worth it even if you’re not in perfect health.
These policies typically come with a two-year waiting period before full benefits are available, referred to as a graded death benefit or limited benefit period. Unless you die from accidental causes, your beneficiaries may not receive the full amount of death benefits from your policy during this two-year time frame. Instead, the insurer will either reimburse them for the premiums you paid plus interest, or pay out a smaller amount.
Alternatively, simplified issue life insurance skips the medical exam and instead requires you to fill out a health questionnaire. Coverage tends to be low, rarely going above $100,000.
Permanent life insurance: Other options
If you’re in the market for permanent life insurance, there are options beyond whole life insurance. These include:
Universal life insurance, which offers flexible premiums and death benefits.
Guaranteed universal life insurance, a form of universal life insurance with level premiums and death benefits. It has lower premiums than whole life, though the cash value buildup is minimal and you might need to take a medical exam to qualify.
Variable life insurance, which has a flexible death benefit and allows you to choose the investments to direct your cash value into.
Variable universal life insurance, which comes with adjustable premiums and also allows you to choose investments for the cash value portion of your policy.
Survivorship life insurance, which typically insures two spouses and pays out when the second person dies. This type of policy is also known as second-to-die joint life insurance.
