Life insurance for seniors
Once you retire, the life insurance you had through work typically comes to an end. That is unless you accept to pay the premium, usually at a higher cost than what you were paying through work. Whether you have had life insurance through work or not, there are various options available for seniors in good and bad health.
Term life insurance
High coverage amounts
Term life insurance will offer higher coverage amounts than any other type.
Term life insurance will provide coverage at a lower cost than any other type.
At age 55, you technically become a senior, although you probably don’t quite feel like one yet. But, at this age, and even up to age 65 for some insurance providers, you can still qualify for term life insurance.
Term life insurance can be a great option if you are in average or better health for your age. In some cases, a medical exam isn’t even required, depending on the insurance provider. It’s important to note that you are still medically qualified while a medical exam is not needed. The insurance provider will qualify you based on health and medication records, among others.
Term life insurance qualifies you differently than other options. You could say that term life insurance has higher requirements for you to be eligible than final expense or guaranteed acceptance. But, in return, it offers far higher coverage amounts at a much lower cost.
Is term life insurance a good fit for you?
As previously mentioned, term life insurance is an excellent option for seniors between ages 55 and 65. Additionally, term life insurance makes sense for seniors in average or better health.
Keep in mind, though, that term life insurance only lasts a predefined term. Depending on your age, and the insurance provider, you could get a 10, 20, or even a 30-year policy. Other whole life policies will last the rest of your life.
Final expense insurance is a product that is focused on seniors, so mild health conditions are somewhat expected.
Final expense is very straightforward. The application is simple, and the coverage is reliable.
The most common life insurance type for seniors is a final expense policy, a type of whole life insurance. These policies are also known as burial insurance. The name makes sense, as this type of life insurance is most commonly used to cover burial expenses.
Final expense life insurance is only available to seniors, with rare exceptions. Seniors have a far easier time qualifying for final expense than they would for term life insurance. Common health conditions are somewhat expected, so you don’t have to worry about getting denied if you have high blood pressure or other common health issues.
The different types of final expense
Final expense insurance itself is very straightforward. You can get up to $50,000 in coverage (people usually settle for $10,000 – $20,000), and the policy lasts the rest of your life. That is, as long as you make the payment.
So, where do the different types come into play? They are mainly health dependent. Depending on your health, you would qualify for:
- Level benefit
- Graded benefit
- Modified benefit
- Guaranteed acceptance
Is final expense a good fit for you?
It’s easy to see why final expense insurance is a common choice for seniors. The application is straightforward, and the qualification is lenient towards mild health conditions. Once you’re approved, you can select $1,000 to $50,000 in coverage. Your coverage will remain in place as long as you pay the premium, and you can choose the beneficiary as you wish.
And just because a final expense policy is known as a burial insurance policy, it doesn’t necessarily have to be used for that purpose. You can use it to pay off debt or simply as an inheritance.
Acceptance is guaranteed
Forget about a medical exam, or even a health qualification. You’re approved, guaranteed.
Guaranteed issue life insurance is the most expensive life insurance product on the market.
Guaranteed acceptance, or guaranteed issue, is another common whole life insurance type for seniors. As the name implies, acceptance is guaranteed. In other words, it doesn’t matter what health issues you have. Approval is guaranteed. Most applications only take a few minutes.
But, while guaranteed acceptance is highly convenient, it comes with a few cons. The biggest con is the cost. Guaranteed acceptance is the most expensive life insurance type on the market.
Another con is the graded death benefit period. Most guaranteed issue policies have a graded death benefit period of 2 years. If the insured passes within these two years, the insurance provider will not pay the coverage amount. Instead, they will return any paid premiums, plus a small percentage.
For example, your $10,000 guaranteed issue policy includes a 2-year graded death benefit. You pay $70 a month for this policy. Unfortunately, you pass away 12 months after the policy goes into force. You would have paid $840 in premiums. Now, rather than your beneficiary receiving $10,000 from the insurance provider, they would receive the $840 you paid in premiums, plus 10% interest, for a total of $924 (the interest amount varies based on the insurance provider).
This type of life insurance is commonly advertised on TV. “You can get coverage for just $9.95 a month. Acceptance is guaranteed!” While that’s true, the critical part these commercials leave out is that $9.95 only gets you about $400 in coverage. And let’s face it, $400 in life insurance coverage won’t cover much—the average funeral costs between $6,000 to $9,000, dependent on your state. A cremation will cost between $4,000 and $5,500.
Is Guaranteed issue a good fit for you?
Between the high cost and the 2-year graded death benefit, guaranteed acceptance insurance is a tough sell. This type of insurance is only recommended if the individual has/had severe health conditions and can’t qualify for any other life insurance type.
More coverage, lower cost
If you have health problems, you could likely get more coverage for less compared to guaranteed issue insurance.
Joining a group has fewer qualification steps than applying for individual life insurance.
Lastly, an often-overlooked option is group insurance. In this case, you are part of a group rather than you getting your own individual policy. The group shares a tremendous amount of life insurance, and each group member shares part of the cost.
The benefit of group life insurance is that the qualification is simple and straightforward. You typically are asked just a few simple questions, and if you qualify based on your answers, you can join the group.
Is group insurance a good fit for you?
While owning your policy has its benefits, a group insurance policy can make sense for seniors, especially those in poor health. It’s a beautiful alternative to guaranteed issue insurance.
What is the best life insurance for seniors?
As we described above, there are four options, term, final expense, guaranteed issue, and group insurance. Which option is best for you mainly depends on your health and what you want out of your life insurance policy.
For young, healthy seniors
If you are a young senior and are in good health, we believe term life insurance is a great fit. It will allow more coverage than the other three options at a far lower price. You may even qualify for a no medical exam term policy for ultimate convenience to top it off.
For seniors of any age in average or good health
Final expense insurance may be a great fit. It won’t allow for a tremendous amount of coverage, like term. Instead, you’re most likely limited to $50,000. But, most seniors opt for a $10,000 policy, which will cover burial expenses. The application is very straightforward, and the price and coverage are fixed.
For seniors of any age in poor health
Before you decide to go with guaranteed acceptance insurance, we recommend looking into group insurance first. A group insurance policy will allow you to become part of a group and share the coverage and cost. Most of the time, you’ll be able to get more coverage for less than you would with a guaranteed issue policy. If you are not sure how to even get started with group insurance, give us a call. We’ll be happy to explain your options and what sort of questions you will be asked.