Buying life insurance may be a good decision at any age but as you get older, it will be more difficult and more expensive to get the coverage you need. If you want to ensure that any expenses associated with your death can be paid without burdening your family, then you may need some help finding life insurance you can afford.
At Addition Financial, we always want our valued members to be aware of their options at every stage of life. With that in mind, here is what you need to know to find affordable life insurance plans as a senior citizen.
What Factors Affect Life Insurance Rates for Seniors?
The factors that determine life insurance availability and rates for seniors are the same ones that affect any life insurance policy. That said, some of these factors are likely to have a more significant effect on life insurance for seniors because they have fewer years left to live than someone who buys life insurance at a young age.
The primary factors that determine life insurance premiums include the following:
- Your age
- Your gender
- Your height and weight
- Your medical history
- Your family history
- Smoking & tobacco use
- Lifestyle
- Occupation and hobbies
Age is one of the biggest factors for obvious reasons. If you buy a whole life insurance policy when you’re 30, the probability is high that you will pay premiums for many years before you die. Buying the same policy at 65 means that you’ll pay less in premiums before you die, leaving the insurance company with less money.
Every factor listed above will be used by a life insurance underwriter to predict your life expectancy and calculate your premium. Someone who’s at a healthy weight with a healthy lifestyle won’t pay as much as an overweight person who smokes and drinks heavily.
What Types of Life Insurance Are Available for Seniors?
There are multiple types of life insurance available for seniors. Some may be more accessible for seniors in their 60s and 70s, but it’s possible to buy a life insurance policy (with some limitations) even if you’re in your 80s.
Term Life Insurance
Term life insurance is life insurance that is in effect for a specified term, usually 10 to 30 years. If your term expires before you die, you won’t receive the death benefit. There are some companies that allow policyholders to choose a premium return option that will refund some of the premiums they have paid at the end of the term.
In most cases, qualifying for term life insurance is more involved – and potentially, more difficult – than qualifying for whole life. You can expect to be required to get a medical exam. If you have a serious medical condition, you may not be able to get coverage.
Whole Life Insurance
Whole life insurance is also known as a type of permanent life insurance because it has no expiration date. It will cover you and pay a death benefit whenever you die provided that you pay your premiums each month.
Unlike term life insurance, whole life insurance offers a guaranteed payout when you die. Part of the premiums you pay will be placed in an investment account, so your policy will accrue cash value that you can borrow against if you need money before you die. Another way of looking at whole life is that it acts as a tax-deferred savings account.
Universal Life Insurance
Like whole life insurance, universal life insurance is a form of permanent life insurance. Part of your premiums will go into an investment account and any interest you earn will be added to your death benefit.
The main thing that sets universal life insurance apart from whole life insurance is that with universal coverage, you have the flexibility to increase or decrease your death benefit if your circumstances change. In most cases, you will need a medical exam for an increase in your benefit.
Simplified Issue Life Insurance
Simplified issue life insurance is an option that may be good for people who can’t wait a long time to be approved for life insurance or who don’t want to have a medical examination to qualify. With this type of insurance, you will answer a few basic health questions. Then, the company will use third party sources to gather additional information about you, such as your prescription drug history and driving record.
Because of the low underwriting standards and short waiting time, few insurance companies offer simplified issue life insurance. When they do, the death benefit limits are typically lower than they would be with term, whole or universal life insurance.
What is the Cost of Life Insurance for Seniors?
The cost of life insurance for seniors can vary greatly depending upon the factors we listed above, including your age, gender, medical history and lifestyle. Premiums also depend upon the type of policy you choose.
Term life insurance rates are the least expensive option in most cases. However, it may be difficult to qualify for term life if you have health issues or your life expectancy is not long. These things make term life insurance a good choice for seniors in their 60s in generally good health, but it may not be an option for older seniors.
Whole life insurance is the most expensive option with universal life falling somewhere in the middle. In some cases, premiums for whole life insurance may be up to 10 times more expensive than for term life.
Simplified issue life insurance premiums may be high due to the minimal underwriting process. Insurance carriers who provide simplified issue life insurance are taking a significant risk by offering a policy without a medical exam or detailed medical history. Their risk is reflected in the premium they charge.
Depending on the type of coverage you choose and your health and age, life insurance for seniors may cost anywhere from under $100 per month to $500 or more.
Tips to Find Affordable Life Insurance Plans for Seniors
Understanding your options for life insurance as a senior is an essential first step, but what can you do to find the best life insurance plan at an affordable rate? Here are some tips.
Compare Quotes from Multiple Insurance Companies
Our first piece of advice is something that we recommend for any type of insurance coverage. You should always obtain quotes from at least three insurance companies with comparable coverage options. Comparison will allow you to evaluate your options and choose a policy that provides the life insurance coverage you need at a price you can afford to pay.
Ideally, you should ask for quotes from at identical levels of coverage and policy type, so you can make an apples-to-apples comparison. For example, if you have quotes for a 10-year term life insurance policy with a $100,000 benefit from three carriers, it’s easy to see which life insurance company is the most affordable.
You may want to consider asking for quotes for term life insurance with different term lengths as well as a quote for whole life. That way, you have a wide array of options available to you.
Consider Term Life
As we mentioned previously, term life insurance is the least expensive option and may be ideal if you want coverage that fits within your budget. You can request quotes for different term lengths and at different death benefit levels to evaluate your options.
Keep in mind that you will need to get a medical exam to qualify for term life insurance. For some seniors, it may be easier to qualify for a whole life policy if they have existing health problems.
Buy as Soon as Possible
You already know that your age plays a significant role in determining the cost of life insurance. For that reason, we suggest buying a policy as soon as possible. Waiting until your next birthday could increase your premiums.
For people in their 50s and above, premiums can be high. Waiting until you get older may put the cost of life insurance out of reach – so buy as soon as you can.
Create a Ladder of Term Life Insurance Policies
Since term life insurance policies are much less expensive than whole life, another way to get the coverage you need while keeping your premium affordable is to ladder several term life insurance policies.
For example, you might buy a 10-year policy, a 20-year policy and a 30-year policy. You will pay more in combined premiums than you would with a single policy, but it is also likely to be less than you would pay for whole life insurance.
This strategy is ideal if you want more coverage early on to cover the last few years of your mortgage or if you have children who are still in college. Your coverage will taper as you outlive the shorter terms, but you’ll have the protection you need, when you need it. You’ll also have the option of converting your term life to whole life if you can afford it and want the additional protection.
Buying life insurance as a senior requires a bit more strategy (and a bit more money) than buying a policy when you’re young. However, it’s still possible to find and buy affordable life insurance as a senior. The tips and information we’ve included here will help you find the coverage you need.
Do you need guidance to invest your money for a comfortable retirement? Click here to learn about Addition Financial’s MEMBERS Financial Services program!
Posted on Mar 28, 2022
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