Having a good quality life insurance policy in place can be an essential component for many people’s overall financial plans. That is because the money can be used to payoff debt, pay for ongoing living expenses, and/or the payoff of the insured’s funeral and other related final expenses.
When purchasing life insurance, many people believe that it is only those who are young – and who have dependents who rely on income from the insured – who should own life insurance coverage. That, however, is not necessarily the case.
Why Elderly People Should Consider Life Insurance
There are many reasons why someone who is elderly should have life insurance protection – even if he or she does not have someone in their life who is depending on their income or another type of financial support.
For example, for those who are seniors, just some of the reasons to have life insurance in place include the following:
One of the biggest reasons why someone who is elderly needs life insurance coverage is for the payment of funeral and other related final expenses.
A funeral can cost between $7,000 and $10,000. This is especially the case when factoring in the cost of a person’s memorial service, as well as a burial plot and headstone, flowers, transportation, and the printing of his or her funeral notices.
Seniors today may also have a large amount of debt that needs to be paid off at the time of their passing. For instance, unlike in the past when many who were over age 65 had their home mortgage paid off and no other large debt obligations, today – due in part to the fact that people are living much longer – it is not uncommon for someone who is a senior to still have a large amount of mortgage debt, car loan(s), and / or credit card debt.
Rather than having these debts fall to the shoulders of loved ones, the money that is received from a life insurance policy can help to pay them off.
Those who are elderly may also need to have life insurance coverage to ensure that a spouse or partner will be able to continue paying their living expenses. For instance, in many cases, pension income and other retirement income sources will cease when an individual passes away. So, if there is someone else who also depends upon this income for paying their living expenses, they will need a way to replace it – otherwise, they may face drastic financial hardship. The proceeds from life insurance can provide a way to replace the income that is needed.
Life insurance proceeds can also be used as an inheritance. In many ways, life insurance can create an “instant estate” for a policyholder. The proceeds from a life insurance policy can essentially be used to “equal out” the inheritance for all of the policyholder’s heirs.
Many people who are elderly, may also have a favorite charity. While you may give to this organization during your lifetime, by making the entity a beneficiary of your life insurance policy, the amount can be many times more – and it can also be received by the charity tax-free. Therefore, 100 percent of the proceeds can be used by the organization.
In some cases, an individual’s estate may face excessive taxation upon his or her death. Often, in this type of situation, assets from the estate must be sold to raise the cash that is needed for the tax debt. However, by instead allocating a life insurance policy to pay this liability, the remainder of a person’s estate will go to its rightful heirs, as versus to Uncle Sam.
What Type of Life Insurance is Available for Seniors?
There are several different options when it comes to purchasing life insurance for seniors. With a term life insurance policy, coverage is purchased for a set period – or term – such as for ten years, fifteen years, twenty years, and in some cases, for thirty years. For this reason, term life insurance is considered to be a good option for “temporary” life insurance needs, such as the payoff of a home mortgage balance or for ensuring that a child or grandchild’s future college education will be paid for – even if the insured is not there.
This type of life insurance policy offers pure death benefit protection only. Because of this, term life insurance can often be less costly regarding premium cost than a comparable permanent life insurance policy.
The proceeds of term life insurance are received by the policy’s beneficiary free of income taxation. Therefore, the entire amount of the death benefit that is received can be used for whatever the beneficiary sees fit.
Permanent life insurance offers both a death benefit and a cash value component. As its name suggests, permanent life insurance is meant to be more of permanent coverage, as versus only being in force for a certain number of years.
With a permanent life insurance policy, there is also a cash value build-up within the plan. The funds that are inside of the cash value account are allowed to grow and compound on a tax-deferred basis, meaning that there will be no tax due on the growth of these funds unless or until they are withdrawn by the policyholder.
There are several types of permanent life insurance coverage – the most common of which is whole life for those who are elderly. Often, a “no medical exam” or “guaranteed issue’ policy will be a whole life option. Therefore, once the coverage has been approved and issued, it cannot be canceled by the insurance company – other than for the non-payment of premium.
How Much Will Life Insurance Cost If You Are Elderly?
The premium that is charged for most any life insurance policy will be dependent on several different factors. Mainly, the kind and the size of insurance that is being purchased and how much life insurance is enough. It can also be dependent on the age and the gender of the applicant.
Because a large part of qualifying for life insurance coverage has to do with a person’s anticipated life expectancy, those who are in the older age ranges will usually pay more for their life insurance coverage than someone who is younger.
The cost can also be dependent upon the health condition of the individual when he or she is applying for the policy. In this case, if someone has certain health issues such as diabetes, then they may still be able to qualify for the coverage. However, their premium will be higher than someone who is in good health – with all other factors being equal.
What If You Don’t Qualify for Traditional, Medically Underwritten Life Insurance Coverage?
What if you’ve been declined? There is still the possibility of obtaining life insurance coverage. This can be through either a no exam policy and/or via a guaranteed issue plan.
If a senior applies for a no exam policy, it means that a medical examination will not be necessary as a criterion for qualification. There may, however, still be medical or health-related questions that are asked on the application for coverage.
With a guaranteed issue life insurance policy, not only will there be no medical examination – and therefore, no blood or urine sample needed from the applicant – but the policy will be guaranteed to be approved if the policyholder pays the premium.
Often, the amount of coverage on a no medical exam or a guaranteed plan will be in the lower dollar amount ranges – in many cases, between $5,000 and $50,000. These funds are also often used for funeral and other final expenses.
Because there are not any medical exam results to review by the insurance company’s underwriters with a no medical exam or a guarantee issue policy, this type of coverage can often be approved and issued much more quickly than a medically underwritten plan – in fact, in some instances, these policies can be issued within just a few days, or even on the same day of application.
Because those who apply for no medical exam and guarantee issue coverage are often riskier to the insurance carrier, they are going to cost much more. Also, the face amount of the coverage will often be low.
Also, these types of policies may also stipulate that, if the insured dies within the first two years or so of owning the policy, only a certain percentage of the death benefit will be paid out. (This also helps the life insurance company to reduce the amount of risk it is taking on). If you are interested in high-risk life insurance carriers, we can go over those options with you.
However, even so, these types of life insurance policies can allow for the financial protection that is needed by loved ones and/or other survivors to move forward, without having to endure financial hardship.
Taking Your Next Steps for Life Insurance For Seniors
Buying life insurance isn’t easy. As a senior, you still have a lot of options.
If you need help shopping around or you don’t understand the options, we can assist. We have helped thousands of seniors get plans they can afford without leaving their family at risk.
If you’re wondering what to do next, your first step should be to give us a call or use the quote form. This will give you access to all of the best carriers and plans across the country.