FINDING AFFORDABLE SENIOR LIFE INSURANCE
Financial peace of mind during our senior years is the objective for most people as they plan for the future. Indeed, we would all prefer to live comfortably and afford the lifestyle we want when we retire. Yes, we want to ensure our well-being and happiness continues into our later years of life. However, if we haven’t thought and made arrangements for the financial well-being of those we leave behind, we certainly need to give it some more serious thought in our senior years. Will there be enough for a surviving spouse or dependent? Will there be enough to cover funeral expenses and any outstanding debt? Life insurance is a financial product that is designed to ease those very concerns. Of course, there are myriad life insurance products available all with various options and corresponding values and premiums. The good news for the budget-conscious senior that needs to buy life insurance, is that there are affordable choices.
In this article, we’ll talk about the most affordable types of life insurance available for seniors and things to consider when selecting a policy that’s right for you. Some policies require senior citizens to undergo a medical exam while you may even find a good life insurance company that doesn’t. Read on to find out more.
What Do You Need Life Insurance For?
In order to navigate the multiple options available for life insurance, the best place to start is confirming what your main concerns or objectives are when purchasing life insurance.
The most common reasons for life insurance include covering the costs of:
Pension maximization for a surviving spouse
Donation to charity
Decide which are most important (must have coverage) and rank them in order of importance to you. This will help determine how much coverage you need and will affect the premium you will pay.
Life Insurance for Your Budget
What will the Life Insurance policy cost you? Your budget is a constraint and guide when selecting the right product. Remember: even if you do get approved for a life insurance policy with lots of coverage value it’s not a good purchase if it’s beyond your means. If you can’t afford the premiums at some point, then your policy will lapse and you’ll be left with no coverage and any money you actually paid into the plan will be lost.
You need to also look at something called the premium to benefit ratio. What amount of money will you pay monthly versus the payout amount upon death? Here is where you will compare various insurance plans and see which gives you the most for your dollar in the long run.
Best Types of Insurance for Seniors
If you know what you need life insurance coverage for and how much you can spend, the next step is to pick a type of senior life insurance to suit you. There are many kinds of life insurance but there are certain types that are better suited to seniors.
This type of insurance gives the best coverage at the cheapest price. This is especially so if you are in good shape—it tends to be less expensive the healthier you are overall. As the name implies it covers you for a ‘term’ of specific years (normally 10–30 years in 5-year increments) as well as the premiums being the same on a yearly basis. As a senior, you can be limited in the number of years in your term plan. Many companies only offer 20-year plans up to age 60–65. A senior in their seventies may only be able to purchase 10-year plans. After that shorter-term plans will be needed to extend coverage (1–5 years) which means most likely more expensive premiums with each new policy.
Because it’s not a long-term solution, it’s not always the best way to go. However, if you need some coverage for a short-term financial situation it may be the way to go. Some examples where a term policy might make sense include the following:
✓ Mortgage Debt: To pay out a remaining mortgage (if you still have one) should something happen to you. For example, if you have another 10 years left on your mortgage you could get a 10-year term insurance policy to cover that outstanding amount.
✓ Income Protection: If you’re not yet retired you may want to protect those last income-generating years. A term policy payout should you die before you retire would give an extra financial support to your surviving spouse or dependents.
✓ Medical Debt: For some seniors with health problems, medical bills can become large amounts of debt. Again, a term insurance policy can cover the medical debt you may leave behind so your family isn’t stuck with the bill.
Permanent Life Insurance
The following are permanent life insurance contracts that have longevity in terms of you having coverage as long as you pay your premiums.
✓ Guaranteed Universal Life
✓ Survivorship Life
✓ Guaranteed Acceptance Life
Guaranteed Universal Life Insurance
Guaranteed universal life insurance (GUL) as the name suggests, provides some guarantees. These guarantees benefit seniors as we’ll explain.
✓ The premiums for GUL will stay the same during your policy which means the amount you pay is set and you won’t have any increases to upset your budget.
✓ Premiums can be set for your remaining lifetime. (up to age 105 and more) This is a benefit because you don’t want to out-live your policy.
✓ A guaranteed death benefit regardless of how long you live and you can select the age of maturity for the policy. For example, GULs to age 90, 95, 100, and 121.
Although there is not always a cash value (or it may be limited) the lower premiums are a fair trade-off, especially for the budget-conscious senior. Keep in mind the longevity of the plan is a plus because buying a new insurance plan at a later age will likely be more expensive. One thing to consider is that your health status during the time of application does affect whether you can be approved for GUL. The sooner you buy an insurance plan and the longer it lasts the better with regards to the cost of premiums and overall a GUL plan will give lifelong coverage at the most affordable rate.
Survivorship Life Insurance
A survivorship life insurance policy (known as Second-to-Die) is one of the most effective products for senior couples. The main advantage is that you have significantly lower premium costs. The way it works is that both individuals are covered under the one permanent insurance plan. The death benefit is paid only upon the death of both insured. This type of policy requires more legal planning and some help from estate planners or financial advisors so keep in mind you’ll need more advice when selecting this type of plan.
Guaranteed Acceptance Life Insurance
This type of permanent life insurance is something for seniors to consider for several specific reasons. The main advantage to seniors is that if you get this type of insurance, you won’t be rejected (a problem if you are advanced in age or your health isn’t the best when applying for life insurance coverage). The other advantage is that you can select lower coverage amounts. If you are only interested in having a small amount of death benefit coverage ($5000, $10,000, $15,000, $20,000, $25,000) this is an option. Keep in mind that many life insurance carriers won’t even underwrite provide coverage for under $25,000.
The downside about this type of coverage is the restriction on death benefit payouts in the first few years of your plan. This is meant to offset the risk to the insurance company for insuring you regardless of your age or health and providing smaller than standard death benefit coverage. What this means is that you have more risk in the first few years by getting less than the full death benefit payout if you should die. Usually, after the 4th year of your plan, you are entitled to the full payout amount. Again, when selecting a death benefit amount it’s important to understand you might get less actual coverage.
Adding Riders to Your Life Insurance
Senior life insurance riders can give some extra benefit to your insurance policy plan. The ones that can be most beneficial to seniors are the following:
The good news for the budget-conscious senior that needs to buy life insurance, is that there are affordable choices.
Accelerated Death Benefit Rider
This feature allows a portion of the death benefit payout of your life insurance policy to be paid out to you before you die. However, you need to have a terminal illness (with 24 months or less to live). Most tend to spend this money on medical bills or other medical treatments that are expensive and otherwise unaffordable. You can choose how to spend it. In most cases, this rider is free of charge and doesn’t add to your premium costs.
Critical Illness Rider
As a senior, a critical illness rider can provide extra security and financial support if you are diagnosed with a critical illness (not necessarily terminal). You get an advance on a portion of your death benefit which can be helpful to offset medical care costs for recovery or treatment. Adding this rider will increase premiums but you can shop around for the best offer.
Long-Term Care Rider
Adding this to your insurance policy gives you access to an agreed amount of the death benefit when you are alive. This can help cover future long-term care should you need it. However, you need to remember that should any lump sum be paid out to you while you are alive, this figure will be deducted from the total, meaning that beneficiaries won’t receive as much. In the case of chronic or critical illness, you can use this rider to provide financial support if you need it.
Shop Around for the Best Price
Once you’ve familiarized yourself with affordable senior life insurance options, the most important and last step is to get some quotes and shop around for the best price and offer. Contacting an independent agent (otherwise known as a broker) is often the best way to go since they can sell products from almost any life insurance company across the country. They will walk you through the options, pricing, and process of applying for a policy. Knowing your main motivations for getting life insurance and your budget will allow you to guide your broker so they can recommend the right senior life insurance products for you to choose from.