Life Insurance for Seniors: Considerations and Best Policies

Retirement is upon you. Your monthly budget is changing to a more fixed budget. You have lost your work benefits you once enjoyed at a fraction of the cost it normally would be. You’re a senior and you’re realizing, it is time to get a personal life insurance policy to supplement the protection you will lose once you retire.

There are many reasons why seniors may look at either purchasing a life insurance policy or adding to their existing policy. It is important first to determine the reason why you are purchasing and then find the plan that best matches your goals. Here are some of the many reasons why a senior might purchase a life insurance policy:

  • Final expenses. The most requested reason a senior purchases a life insurance plan is to fund their burial/cremation/final expenses. No one wants to leave behind a financial burden to their family, with no money to bury them. 
  • Inheritance. The second most requested reason that seniors purchase a life insurance plan is to leave behind an inheritance to loved ones. 
  • Liquidity. This can provide liquidity for an estate that has mainly illiquid assets, such as real estate. 
  • Income replacement. Even though most seniors are in retirement when they buy their final, permanent life insurance plan, their spouse may lose retirement income once they pass. This is a great way to ensure income will be replaced for a period of time. 
  • Debts: Vehicles payments and mortgages are common debts that most seniors are concerned with leaving behind to a loved one. 

As I mentioned above, it is imperative that seniors buying life insurance should look for a policy that fits their needs. Your purpose for buying life insurance will guide your decision on the types of life insurance to consider.

If you need life insurance as a senior, here are some considerations. 

Focus on Level Death Benefit Policies

There are a few different types of whole life policies that depict when the full payout of the policy is available to the beneficiaries. A “level” policy pays out immediately upon approval. There are many companies that will approve as soon as the application is submitted digitally, based on a quick one- to two-minute digital prescription check. In order to determine if a company will approve you with a level policy, it is imperative that you are completely honest about all of your medications you have been prescribed, and why, within the past seven years. Each company has differing underwriting standards on what they will or will not allow for a level death benefit. It is the advisor/brokers job to understand the multiple companies that can accomplish your goal and cross match those companies that can approve you at a level benefit, at the best rate. If you’re not approved with a level death benefit, then you will likely get a rated or graded policy. Depending on the company, this will reduce the benefit amount payout to your beneficiaries, if you pass away within the first two- or three-years of the policy. Avoid these rated or graded policies if you can. 

Take Your Time Appropriately, But Don’t take Too long!

Talk to your advisor, tell them everything you want to accomplish and be willing to provide as much information as necessary for your advisor to find the best plans for you. Sometimes even comparing different plans from multiple companies, with the pros and cons for each company and plan. However, once you find a plan that fits, be decisive and move forward. The time for “thinking about” whether or not to get the policy is done. I always tell my clients; a quote is just a number and it doesn’t mean anything until you are approved for the actual policy. Once you are approved the company/insurance carrier sends the policy paperwork in the mail for your review. Take the first 30 days after the policy is approved to consider the policy as a fit for you. 

Ensure Policy Growth is Guaranteed

Most seniors get permanent or whole life insurance. The primary reason is that all whole life policies pay out. Getting a term policy as a senior is not advisable because of the tremendous cost and the risk of outliving the policy. That leaves universal and whole life policies as the clear choice. So, which one should seniors choose? I always recommend going with the guaranteed option, and that’s whole life. Their cash value accumulation has guaranteed rates, regardless of market conditions. Universal policies have variable return rates tied to the market. Your senior ages aren’t the best time to have your cash value stagnate. Go with guaranteed, it’s the far superior option. 

Work with a Professional Advisor

Always work with an advisor/broker when choosing a insurance carrier and policy plan. Their job is to work for you and be unbiased, since they have access to a multitude of companies. They can give you insight on each carrier’s ratings, approval process, policy rider differences, etc. Attempting to do that research on your own will be daunting and exhausting. Let your advisor do the work for you for guidance on the best possible option that suits your needs. 

Do Not Base Your Decision Solely on Price

Cheapest is not always the best. When selecting a policy it should be the last factor you consider when choosing a policy. Your decision making process should look something like this:

  • What do you want to accomplish with the insurance; i.e. your WHY
  • Determine the companies that have policies that accomplish your goals.
  • Out of those further drill down to the companies can approve you with the medications/conditions you have. 
  • Out of the companies that can approve you, weed out any that are not A rated or higher.
  • Now look at each policy for the companies remaining. How fast do they approve? Will they require a paramedic exam? What benefit riders come with the policy? What is the cash value guaranteed growth rate? Pick out the top two to three policies that you want from there.
  • Now, you can use the price to determine which one you want out of your top two to three.   

If you had used price at the start, you wouldn’t have even determined if the policy was the best possible fit for your needs and goals. Besides, each state regulates the pricing of life insurance policies by type and benefit, in order to prevent price gouging. Each of the policies will be within a similar price range, sometimes even negligible. 

If you would like to look at some of the top rated companies and get a final expense quote, click here to see what yo would be looking at in terms of coverage.