If you are near the point of applying for life insurance, you have probably spent a good deal of time thinking and planning on what you want to leave behind for your family to make sure life goes on without you.
In this article, I am going to focus on the two best types of senior life insurance in my opinion, Whole Life and Guaranteed Universal Life Insurance. I’m not going to focus too much on the planning part of the process since a purchase guide is more about selecting and buying the right product for your personal planning needs, right?
The goal of this article is to help you pick the best type or types of life insurance for your personal needs.
With that said, here comes the surprise.
I will be talking about 3 specific types of life insurance that are available from many different life insurance companies. Two of them I really like and do encourage my clients to purchase. Others…I’m not so fond of when it comes senior planning needs.
Senior end of life planning needs dictate what to recommend.
It is going to be your choice of course. So, here we go.
Term Life Insurance
Ahh, Term Life Insurance.
Yes, I know I said I was going to focus on the 2 best types of life insurance for seniors, but term life…it is all the rage these days.
I’ve got to address this life insurance option and put it in its place.
You see…we hear it pushed on the radio commericals and the guru talkshows.
None of whom are life insurance professionals by the way, just financial entertainers.
We hear how “cheap” and affordable it is…
Letters from credit unions and all kinds of insurance companies describing it as a one size fits all life insurance policy.
Sadly, there are even plenty of naive insurance agents that focus on the cost rather than focusing on the actual need of their senior customer who may live to age 90 or even more!!
I’m amazed to be honest!!
No, term life insurance is not the best thing since sliced bread.
Well, maybe if your a healthy 25 and starting a family.
You have debt that will definitely be paid off prior to the policy expiration.
For these reasons, I am going to encourage you to eliminate term life insurance from your thoughts.
You are not planning as a young man and his wife would. The odds are young folks will live multiple decades so a term policy is a good decision for the “what ifs.”
A permanent policy may not be in their needs due to their frame of life.
As a senior, you know what you are planning for.
None of us have a crystal ball, we do need to have dependable coverage in place.
Term life just does not offer that. It expires and gets ridiculously expensive then gets dropped.
Policies are difficult to afford for many people beyond age 80, period. It is further complicated if your health has really deteriorated.
Term life insurance is limited time, pure life insurance protection.
It does not cover anyone beyond age 85.
A lot of these policies automatically expire at age 80!!
Does any of this sound dependable to you?
From my perspective, I would be doing you a disservice by not telling you this…in know way should term life insurance be your primary form of life insurance at this point.
Now, I’m going to get my rant out of the way here.
Yes, it is about a term life insurance product. You may have been pitched or have seen this product before.
Heck AARP is pushing it on their website.
To “win the bet” with a life insurance company and any term life insurance, you have to conveniently pass away before the expiration for the money to be available to your loved ones or other beneficiary.
Those AARP/ New York Life Term polices expire at age 80.
So what happens at age 80, 81, 82 and you depart from the world? Well, your bank account was drained because of the premiums that are high over the time of coverage
Your beneficiary got zero!!
Sure, you do have an option to convert to a whole life insurance policy before it expires, but now you are rated at age 80 and it is very expensive. It would have been much more affordable to have taken out permanent coverage from the beginning.
Life insurance gets more expensive to obtain the older you are.
AARP/New York Life whole life insurance is very, very expensive at that age.
Buying a permanent life insurance policy upfront would be much less expensive and give your loved ones the financial protection they needed giving you the peace of mind that everything will be taken care of.
Simply the premium that never changes.
Understand, the insurance company knows they are very likely to win with term insurance. Statistics are on the insurance company’s side.
That is why they make the bet with those they are insuring.
Now days, seniors frequently outlive the policy. Modern medicine has made a big difference. Where does that leave loved ones?
I cannot tell you how many angry folks we have talked to who found out the hard way that their policy expired at 80.
There are complaints everywhere.
It is not the insurance company so much as the choice of using term life insurance as final expense protection.
You need guaranteed level coverage that will never expire. Coverage that is predictable and will fit into a fixed income.
We need to stack the deck in your favor versus that of the big insurance company.
So where do we go from here?
Guaranteed Universal Life Insurance For Seniors (GUL)
Now we are getting into permanent life insurance products that will perform properly for a senior citizen. These products have been designed for people age 55 and older.
As long as your premiums are paid, your family or benficiaries have guaranteed, locked in benefits.
Premiums never go up and coverage never goes down. No surprises for anyone!!
Guaranteed universal life insurance (GUL) has you covered for as long as you may live. You can obtain coverage till age 121.
It also offers some of the lowest rates per thousand dollars of coverage.
When purchasing coverage in excess of $25,000 or more, GUL is a great answer.
Like term insurance, this policy does not accumulate cash inside of it. While there are company exceptions, cash value is not part of this product as a general rule.
A guaranteed universal life insurance policy for seniors actually keeps premiums low by not offering a cash value accumulation feature. Instead, it puts your premium dollars towards pure death benefit protection so you receive a very affordable product that is a great alternative to term life insurance and can guarantee full coverage until age 121.
Who will outlive that policy?
Guaranteed universal life offers value not often found in other types of life insurance for seniors.
This is an excellent option of seniors life insurance protection if you need a policy of at least $25,000 or more. This benefit is a typical minimum in the industry from all the insurance carriers offering it.
This is my personal favorite product recommendation for senior life insurance needs such as estate planning, charitable giving or leaving behind a large legacy.
The key to affordability here is the removal of the cash value component that is built into our next recommendation to you.
The Benchmark Policy – Whole Life Insurance
Well, this is the golden oldie of the 3 types of life insurance coverage in this buyers guide.
It has it lovers and its haters, believe me.
A guide to life insurance for seniors would simply be incomplete without this product. It has done its job well for many people.
Many happy owners out there on the books with thousands of life insurance companies over the years.
Whole Life insurance is actually quite simple to obtain. Yes, ease of ownership is attractive to many people.
Here is the key facts about whole life insurance for seniors.
First, it is meant to be a permanent lifelong policy. That is why it is called whole life insurance.
You will not outlive the benefits wrapped into it. The premiums are level for life and the benefit amount will never go down unless you take a policy loan.
Whole life insurance has the added benefit of cash accumulation unlike term or guaranteed universal life. However, it comes at a cost.
Whole life insurance is the most expensive of the 3 types of coverage in this article. You will pay considerably higher premium per each thousand dollars of coverage. Now, if you are only looking for a small policy of less than $25,000, it is a good senior choice.
Why is that?
Most often, we find seniors that opt for these policies want an easy to qualify for, permanent policy with no medical exam for burial and final expenses.
Since whole life insurance has a cash accumulating account inside of it, the option to borrow from the cash value in the policy is a featured benefit. This benefit is not found in term or guaranteed universal life insurance and is a key reason for the increase in cost over both.
Many of our senior policy owners chose this type of coverage for burial insurance as it is available in smaller face amounts as low as $2000.
Now, there are two common senior whole life insurance policies sold out there.
Simplified Issue Whole Life Insurance
Most seniors (roughly 90%) qualify for the less expensive, no exam, simplified issue whole life that has full, immediate lifetime benefits.
If you need a policy under $25,000 for final expenses, this is going to be the most popular and frequently purchased senior life insurance product you can purchase.
Remember when I said that smaller policy amounts were available? The example above was $2000. This is why this product tends to hit the home run for burial, funeral or final expense insurance.
Not everyone needs a $25,000 + permanent policy do they?
Finding permanent insurance in smaller amounts keeps the cost down for those who really don’t need a “beefier” policy.
Further, it does not carry the risk of policy expiration like term life insurance. None of us know how long we are going to live. Term policies are never life long policies.
Simplified issue whole life insurance is great for those just looking to make sure loved ones are protected from the costs related to their death.
A full funeral, casket and burial can easily run up to $10,000 in Kalamazoo, MI for example.
Mind you, Kalamazoo happens to be expensive compared to other places around the country, but this policy will get the job done from a couple thousand right on up to $25,000 or more.
We recommend policies $25,000 + as GUL cases to keep the cost down though simplified issue whole life is easily available to $50,000 or more.
Guaranteed Acceptance Whole Life Insurance
Not to be confused with guaranteed universal life insurance (GUL), Guaranteed Acceptance whole life insurance offers level premiums and a lifetime of protection for your family.
Be mindful here, a guaranteed issue/guaranteed acceptance product is considerably more costly as it is designed to accept applicants regardless of health.
For those seniors who need the guaranteed acceptance coverage due to very poor health, you will have at least a 2 year waiting period for the full policy benefit for natural death.
There is no exception to this. It would be a complete financial loss to the insurance company.
During the 2-3 year limited period (depends on the specific insurance company), your premiums plus a interest rate is paid to your beneficiary if natural causes such as heart issues, cancer or other take the life of the insured.
However, accidental death coverage is paid in full upon acceptance.
Since there are no health questions with Guaranteed Acceptance policies such as the Alex Trebek life insurance ad (Colonial Penn) you may have seen on TV, the insurer will nullify their risk by inserting a “waiting or limited benefit” period right in the policy.
You must understand, the easier it is to qualify, the more costly and restrictive the policy typically is.
Guaranteed acceptance life insurance cannot be purchased without a waiting period of 2 years or more regardless of the company.
It is our recommendation that guaranteed issue life insurance only be used if all other life insurance options have been exhausted.
Whatever you decide, you must understand what it is your are paying for.
If you want permanent protection, forget about term life insurance. It is way oversold and can cause loved ones to not have the financial protection you set out to have in the first place.
Sometimes in complex estate plans we will recommend a couple different kinds of life insurance to cover the various goals of the plan.
So yes, in very specific cases, term life insurance will be combined with guaranteed universal life insurance for seniors or even whole life insurance.
You might consider a more specific guide to senior life insurance if you are still on the fence.
Life insurance for seniors is really not complicated once you know the strengths and weaknesses of the policies.
If you or your parents need life insurance protection, having any kind of life insurance is better than having no life insurance at all.
Kids, your parents must consent to coverage before an application may be made to any insurance company.
As you are firming up your purchase decision, be careful about the “catches” built into the different policies.
I have broken it down for you above, but don’t let the detail escape you.
With this all said, please be mindful that there is no substitute for talking with a seasoned life insurance professional who works with seniors regularly.
I would encourage you to consider guaranteed universal life insurance for seniors or “old reliable,” whole life insurance to be at the core of your end of life and/or estate planning.
A clear discussion with a professional… including a needs analysis would be beneficial. Make sure you have somebody that has been at this a long time and is focused on what your best options really are.
Hope this article has you ready to take the next step. We are here if you need us. 269-244-3420.
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