Life Insurance for Seniors

Millions of Americans depend on life insurance for financial protection, not to mention for many other reasons. But as people get older, insurance coverage may seem out of reach. Many seniors think they don’t have good life insurance options due to age or health.  

Even if you are in your golden years or not quite there, the good news is you do have choices. For example, there are some life insurance policies that may be bought up till age 90. That isn’t the most frequent age to get life insurance for seniors, but it’s helpful to know there are options for just about any life-stage. Some insurance options might also be available for those who may not be in the best health.

Why Do Seniors Get Life Insurance?

There are several reasons seniors seek life insurance. Some want life insurance to help pay for their final medical expenses and burial costs. They seek to protect their grieving families from enduring a financial burden. Others may be business owners who want the life insurance proceeds to ensure their company continues operating smoothly after their passing. 

Life insurance is also valued by seniors who purchase a policy to help their heirs cover estate taxes. And, of course, there is the traditional motivation for obtaining life insurance… to leave a financial legacy for loved ones.

According to LIMRA, more Americans also view life insurance as a good vehicle to supplement retirement income. In 2011, only 38 percent of Americans said their life insurance would supplement their retirement income, compared with 52 percent today.

What are Your Life Insurance Options?

Two forms of insurance available to senior buyers are term life insurance and permanent life insurance.

Term Life Insurance for Seniors

For seniors with short-term needs, term life insurance will likely be a better solution. For people of senior age, the coverage period tends to last up to 20 years. Many term policy options are available, including those for 10-year and 15-year coverage periods.

If you are age 70 or older, you will have an established medical history. You may also have medical conditions, or you may be taking medications for personal health reasons.

While these situations would be considered “high risk” insurance cases, there may be options. Working with an independent financial professional will help you narrow down life contracts that fit your needs and unique circumstances.

Some important things to remember about term life insurance are:

• Term insurance provides a guaranteed death benefit, but no cash value
• Premiums stay level throughout the coverage period
• After the period ends, premiums will go up because your age and other variables used to calculate your premiums have changed
• If you stop paying premiums, the insurance coverage ends

As for health-related and care-related concerns, term life insurance does give some benefits. These include “living benefit riders” for terminal illness or even some long-term care costs. A financial professional can help you identify those contracts if this feature is important to you.

Permanent Life Insurance for Seniors

Seniors can also purchase permanent insurance, including whole life insurance and universal life insurance. Generally speaking, as long as premiums are paid, a permanent policy will give lifelong coverage.

In the short run, term insurance tends to be less expensive than permanent insurance. But as people age, insurance carriers take on more risk with the life policies they provide. If, by chance, you may be looking at term insurance coverage also down the road, bear in mind it could prove costly over the long haul.

Not all permanent insurance comes with a cash value. It’s good to consider guaranteed universal life insurance, or GUL insurance, if you only need coverage for death benefit protection.

This universal life insurance can provide the lifelong protection someone needs, with policy guarantees lasting up to age 90, 95, or even 100. Sometimes it’s at lower cost than other permanent insurance.

Want More Than Lifelong Coverage?

On the other hand, many seniors want more than just long-term protection. The cash value of a permanent policy might figure into tax-advantaged income, high-ticket purchases, or other goals needing liquidity. If that’s the case for you, premiums you pay go towards maintaining lifelong coverage and building up the cash value. Should you stop premium payments and end your policy, you would get the cash surrender value of your policy contract at that point.

Also, it takes time to build the cash value, sometimes as long as 10 years or greater. Be sure to discuss the details behind any cash value growth with a financial professional before committing to any life insurance purchase.

How the Underwriting Process Works

Your age and health are the two main factors that determine the cost of life insurance premiums. As you might guess, the older you are, the more expensive life insurance can be. If you are in good health, you will have more options for coverage than if you have medical conditions.

Term life insurance is generally designed for seniors in good health. Before you can purchase term life, you must meet the insurer’s specific underwriting requirements and standards. The company typically examines a number of risk factors, including:

• Current health, physical condition, and height/weight
• Personal health history
• Hazardous occupation
• Personal habits (tobacco, alcohol or drug use)
• Age
• Factors including military status, driving record, financial status and hazardous hobbies (think skydiving)

When it comes to underwriting guidelines, every insurance company is unique. One might not accept you if you are taking blood pressure and cholesterol medications, even if you have these conditions under control and are otherwise in good health. Another company might classify that person at their best rate.

Medical Exam vs. “No Medical Exam” Policies

It’s possible your carrier will request a complete a paramedical exam that often includes an EKG. And after age 70, many carriers will include a cognitive and physical function test.

The insurance company pays for these in-home exams to measure your current health and determine your longevity. The longer they expect you to live, the lower your premiums.

Maybe you have heard of “no medical exam” coverage and you want to pursue it so you don’t have to ‘fess up to any medical issues.

Even if you are not filling out a medical questionnaire, insurance companies routinely check such sources as your Medical Information Bureau (MIB) report, a pharmacy report and your motor vehicle report. And these “no medical exam” policies will have higher premiums because the insurance carrier is having to account for not having your complete health picture.

If you have serious health issues, a good option may be a “graded life insurance plan.” With this type of policy, full death benefits may not be available for the first two to three years, giving you the potential for coverage, just not in the near term.

Finding the Life Insurance That is Right for You 

In general, it’s a good idea to shop around and understand the variety of options available to you. Working with a knowledgeable financial professional can greatly help you.

If you are ready for personal guidance with your life insurance research, use our “Find a Financial Professional” section  to connect with someone. And call us at 877-476-9723 for a personal referral, if you need one.