Even though life insurance for seniors cost more than it does for younger people, it’s still a good option as it will help your loved ones avoid a huge financial burden after you pass away. End-of-life expenses may include medical bills, funeral expenses, mortgage payments, credit card debt and any outstanding loans. If you pass away before someone who depends on you for special needs, life insurance for seniors may also help provide for them.
In addition, a survivor may be receiving social security payments, and it may take time before the benefits are amended. Life insurance can help bridge the gap. Since life insurance benefits are received in a generally non-taxable lump sum, the beneficiaries can decide how to use it. Here are the six main types of life insurance policies for seniors. All of the listed policies except the last one requires a thorough review of your medical records and a medical exam.
Term Life Insurance
For seniors who are in good health and just about anyone else, term life insurance may be a good option. It gives the most coverage for the lowest price. Policies range from 10 years to 30 years and are usually in five-year increments. The premiums don’t change throughout the term. For example, if you have a 20-year policy that gives a $50,000 payout when you die, you will pay the same amount for 20 years.
If you die before 20 years, your beneficiaries will get $50,000. When you live longer than 20 years, the policy stops and your beneficiaries get nothing. If you choose your policy carefully, it is a small risk. You can adjust the timing of this policy to coincide with the time your mortgage or other debts are paid. You may also add a rider that allows you to use part of your death benefit for long-term care if needed. The amount will come out of the total benefit.
Term Life Insurance that Is Annually Renewable
The basics are the same as term life insurance, but the premium payments will increase every year. This type of life insurance for seniors may be beneficial if you only need a short-term policy. This is usually called your current risk. With a regular term policy, you pay for current risk, which means you die before your policy expires and your future risk, which means you outlive the term.
Whole Life Insurance
As the name suggests, this type of life insurance will last your whole life. It also guarantees the same premium every year. Along with the death benefit to your beneficiaries, this type of policy accumulates a cash value. You can borrow against this value. If you die before the loan is repaid, it will be paid out of the death benefit.
Whole life insurance may be good for seniors if they want to minimize the estate tax their beneficiaries will have to pay or if they want to give a specific amount to a specific person or charity. This type may be useful if your burial expenses are $25,000 or less. Otherwise, a guaranteed universal police will offer better value. As with term life insurance, you may also add a rider that allows you to use part of your death benefit for long-term care if needed. The amount will come out of the total benefit.
Universal Life Insurance
This type of policy lasts until you die and accumulates a cash value that is connected to investments performance. If the performance goes down you will need to make higher premium payments. This may not be the best life insurance option for seniors because the premiums may be expensive and there are management fees.
Guaranteed Universal Life Insurance
This type of life insurance for seniors has the benefits of term life insurance in that you can choose its length of time. It also has the benefit of whole life insurance in that it can last your whole life. The premiums don’t change, but it does not accumulate a cash value. It may be a good life insurance for seniors if they want to bequeath a legacy, avoid estate tax and pay after-death expenses. This is a good choice for a senior who is not in good health and doesn’t want to leave huge funeral costs for the beneficiary. This may be a good policy if you are still working and have dependents. The premiums may be high for the amount of coverage.
Final Expense Insurance or Burial Insurance
The benefit may be between $5,000 and $25,000. These are relatively small policies and a medical exam may not be necessary. You will need to fill out a health questionnaire.