If you’re over 60, you might think it will be somewhere between difficult and impossible to get life insurance. But that’s not the case, at least not anymore.
Much of that thinking comes from the fact that barely a generation ago life insurance companies were hesitant to offer coverage to senior citizens.
But as medical technology is improving and people are living longer, life insurance is not only more available, but it’s often less expensive than you might assume.
It’s time to rethink the whole concept of life insurance for seniors.
Life Insurance Companies Attitudes Toward Seniors Is Changing
30 or 40 years ago, life insurance companies were admittedly reluctant to provide coverage for seniors.
A policy written on a 65-year-old may have resulted in a claim being paid just a few years later. Policies in force for just a few years tend to be less profitable, and life insurance companies generally avoided them.
But much has changed in recent decades.
According to the Social Security Administration, a 65-year old man can expect to live to 84.3, while a 65-year old woman will reach 86.7. They also report that about one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.
Since a typical 65-year-old can now easily be expected to live another 20 years, life insurance companies are taking a fresh and often aggressive look at writing policies for this age group.
In some ways, it’s even proven to be a growth market for the industry, since it had been traditionally ignored. Even those who have certain health-related conditions, or have experienced bouts with diseases, are now eligible for coverage that wouldn’t have been available just a few years ago.
If you’re over 60 or 65 and want to get life insurance, it’s time to charge forward. The policies are out there, it’s just a matter of finding the companies that provide them.
That might make it a little bit more difficult than finding life insurance for younger people, but it’s now far from impossible.
Why You May Need Life Insurance As A Senior
While we normally think in terms of life insurance with younger people, especially those with dependent children, there’s a growing list of reasons why seniors also need coverage.
The most obvious is covering final expenses. Even if you have other assets available, you may want to preserve those for your spouse or other heirs. Your spouse, in particular, may be dependent on your income, creating the need to preserve financial assets for that purpose.
Still another expense category to be concerned with are uncovered medical expenses. While most of the public has been focused on rising health insurance premiums, copayments, deductibles, and coinsurance provisions have also increased dramatically in recent years.
Even if you have health insurance, you can incur tens of thousands of dollars in uncovered expenses. This is particularly true of treatments and therapies for extended terminal illness situations.
But another disturbing trend is debt. Seniors are now carrying higher levels of debt than previous generations.
Examples of how debt is now impacting seniors include:
- Credit card debt: According to AARP, Americans over 60 account for 30% of all credit card indebtedness, equal to $260 billion.
- Mortgage debt: The number of people 65 and older carrying mortgage debt has grown drastically in the past 15 years.
- Student loan debt: Some seniors are carrying debt from their children, while others incurred it with late-stage education for themselves.
Life insurance may be a way to pay off any lingering debts you have, so they won’t become obligations of your spouse or your heirs.
Do Seniors Citizens Need Life Insurance If They’re “Self-Insured”?
Many seniors may assume they don’t need life insurance because they have substantial financial assets. The assumption is that a spouse or other heirs will be covered through inheritance alone.
While that’s often true of multi-million dollar estates, it may not apply to more modest ones. Having a life insurance policy in place can protect your financial assets so they can be fully passed on to your designated beneficiaries.
As noted earlier, the insurance can be used to cover final expenses, uncovered medical expenses, and unpaid debts. But there are other situations that may apply to even those with large estates.
The first is estate taxes. Though very few people will be subject to estate taxes at the federal level, due to the exemption of $11.4 million, state taxes may still apply.
Fully 13 states impose taxes on estates worth less than $11.4 million. In most cases, it’s well below that figure. In fact, Massachusetts and Oregon impose estate taxes on estates of just $1 million, while Rhode Island does so at just over $1.5 million.
That’s an estate threshold that takes in millions of Americans, especially when you consider it includes non-financial assets, such as real estate, business interests, and personal possessions.
You should review your financial situation with a financial planner or an estate attorney to determine if estate taxes will apply in your state based on the value of your assets. If so, life insurance is one of the best ways to make a provision to pay those taxes, without disturbing your estate.
Another category of high net worth seniors who may need life insurance are business owners. The transference or dissolution of a business can incur substantial expenses, not anticipated before the fact. A life insurance policy can make a provision for those costs, relieving the financial burden on your family.
Whole Life vs. Term Life Insurance Options
If you decide you need life insurance as the senior, an important consideration will be whole life versus term life.
Whole life has an obvious advantage, since it’s permanent insurance. As long as you make your required premium payments, the coverage can never be canceled. The major disadvantage, however, is that whole life insurance is prohibitively expensive.
This can be even truer as a senior. It’s possible that a whole life policy premium can be 10 times higher than a term life premium.
Still, another factor is the time horizon of the specific financial need. For example, if paying off debt is the primary reason for taking a life insurance policy, a term policy will be a better fit.
If you expect your debts to be paid off completely within 10 years, your life insurance needs can be met with a 10-year term life insurance policy.
When it comes to life insurance coverage, there’s a balancing act between cost and need. While on the one hand you want to make sure you have the necessary amount of coverage, on the other you certainly want to avoid paying for longer than is necessary.
For that reason, it’s even more important for a senior to work with a competent life insurance agent to strike that right balance.
No Medical Exam Life Insurance Options
If you do decide you need more life insurance, and most people certainly do, you’ll need to select the right policy. That’s even more important for a senior than it is for younger consumers.
Age is an obvious factor that will impact the premium of the policy. But an even more important consideration is the condition of your health.
Fortunately, there are specific policies available even if you do have certain health conditions. One important example is no medical exam life insurance. These policies cost more than regular ones, but it’s a way of getting coverage without going through a medical exam.
They’re term policies that can be purchased up to age 80, though usually for a limited death benefit. The policy will typically range between $25,000 and $100,000, and run in terms from 10 years to 30 years.
A no medical exam life insurance policy doesn’t completely take the condition of your health off the table. The insurance company will investigate publicly available health records in making a determination on both your approval and the premium level. But it does offer a way to get life insurance without risking a decline based on the medical exam itself.
Final Expense Life Insurance Options
If you’re unable to obtain life insurance due to the condition of your health, but you still want coverage, you can select a final expense life insurance policy.
This type of policy won’t enable you to get a large death benefit, but it will enable you to provide for final expenses, and even unpaid medical costs and lingering debts.
The policies are relatively small, ranging in size from $5,000 to $50,000. The premiums are high on a per thousand basis, and many of these policies do have a waiting period.
The waiting period will generally be two or three years, but it may not apply if you’re in relatively good health.
This is usually the last consideration if you can’t qualify for other types of coverage. But it can still be an excellent choice if you have serious health conditions.
Why You Should Never “Go It Alone”
As you can see, there certainly is life insurance for seniors available, and more so than ever before. But there can also be complications, particularly if you have significant health conditions, whether acute or falling into a long term care situation.
The first, best option is always to attempt a fully underwritten policy, that will include a medical exam. Those policies will offer the largest death benefit with the most affordable premium.
But if you’re unable to get coverage under that type of policy, you’ll need to look at other options. This is why it’s so important that you don’t try the do-it-yourself approach when applying for life insurance as a senior.
There are many variables involved, and working with the wrong company could result in either an uncomfortably high premium or even a decline.
Considering those facts, it’s always best to work with an independent life insurance agent. An independent agent works with many different insurance companies and knows which companies work best for people with specific health conditions.
That information can be the difference between an affordable life insurance policy and a declined application. We are independent life insurance agents, and we can help you through the process.
Put our experience to work for you – it won’t cost any more than if you made direct application to one or more insurance companies. As an independent insurance agency, we’ll work for you, not the insurance companies.