In this article, I will describe what your life insurance options are as a senior. Whether you need a policy for yourself or a loved one, stick around because this post will help you determine which type of coverage is best for you.
I promise to answer the following questions:
- How do the most common types of insurance policies work?
- Why would you want to buy one policy over another?
- What are the pros and cons of each?
Without further ado, let’s begin!
Term insurance, in short, terminates. It’s a temporary solution, meaning your coverage only lasts for a set period.
For most seniors over 60, a typical plan will last (at most) 30 years, with some policies ending after 15 to 20 years. It’s not uncommon for the length of coverage offered to get shorter as you age. I’ve seen some best term insurance policies as short as ten years.
So, why do people take out term insurance then?
Well, compared to other policies, term insurance provides more coverage for your money. Of course, this doesn’t mean that you should choose term insurance for this reason alone.
Term insurance is the most appropriate option when you have a “temporary problem”. For instance, a mortgage, hefty credit card debt, or another type of loan payment. The risk of these types of problems lasting your entire life is relatively low. Let’s take a look at mortgage payments as an example.
These days, more and more seniors entering retirement have yet to pay off their mortgages. This is where a term insurance policy comes in handy. With term insurance, families can use the payoff to cover the remaining mortgage.
Of course, this coverage is only required if the senior passes away before paying off their mortgage. So, from that perspective, once the mortgage is paid, they no longer need coverage. It’s a temporary financial issue that a term insurance policy can solve.
Whole Life Insurance
Whole life insurance is almost the exact opposite of term insurance. Whole life insurance, unlike temporary term insurance coverage, lasts your entire life.
As long as you keep paying the premium, your whole life insurance plan can NEVER cancel. And when you pass away, the policy will pay the death benefit in full.
Plus, there’s usually a price lock guarantee on premiums for seniors, meaning your monthly payments can NEVER increase. And if you qualify, you may be eligible for first-day full coverage for natural and accidental death.
So, when is whole life insurance a good choice?
You’ve probably guessed that whole life insurance is useful when you or your loved one has a permanent problem – an issue that you can’t avoid.
An obvious example that many Americans face but struggle to think about is kicking the bucket and dying (aka funeral expenses).
Simply put, millions of seniors either in retirement (or close to retirement) do not have enough money to pay off their funeral costs.
Now, this is where a whole life insurance policy comes in handy. Not only can you custom tailor the amount of coverage to match your final expenses, but you also never need to worry about outliving the policy.
The drawback here is that whole life insurance is usually more expensive, especially compared to term insurance. But, on the other hand, your policy can never cancel due to age or health! So there are pros and cons to both.
Just quickly, whole life insurance is also the easiest to qualify for. You don’t have to take an exam, and clients typically receive approval instantaneously. Plus, there are guaranteed acceptance whole life insurance plans that approve seniors even with severe and existing health issues.
Universal Life Insurance
Universal life insurance is a hybrid term-whole life product. Like term life, you can adjust the premiums to suit your budget (just remember your premium rate is NOT always locked in).
But, you can apply for permanent coverage that lasts your whole life. This is your choice, though. You can design the policy to last for a shorter period, say to age 90 if you want to.
Universal life insurance usually offers more coverage per premium dollar than whole life, but less than term life. Plus, more extensive underwriting is required, making it more difficult for seniors with health issues or a history of medical problems.
However, many seniors in good shape purchase universal life for the same reasons as whole life insurance – to pay off final expenses, leave money behind, and so on.
We also see a form of universal life, which I appreciate, called “guaranteed universal life.” As the title suggests, these plans guarantee coverage, AND the premium will NEVER increase, as long as you make the payments on time.
The best policy to choose is the one that suits your goals.
- If you have a temporary problem, then term insurance is a good place to start.
- If your problem is permanent, take a look at either a whole life plan or universal life plan – opt for a whole life plan to cover final expenses.
- If you want to replace lost income, then guaranteed universal life insurance is a good choice.
I hope this article has helped you understand how term, whole, and universal life insurance works for seniors and given you the tools to discover the best policy for you.