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. Picking the right life insurance for seniors is an important decision. We’re going to help you sort it out.
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.
3 Broad Types of Life Insurance to Choose From
There are 3 specific types of life insurance that are available from many different life insurance companies. Two of them I encourage my senior clients to purchase. Some carriers offer some or all of these.
End of life planning needs dictate what to type of life insurance you should purchase. While budget is very important, having the right “type” of life insurance is the key to financial security.
Planning for inevitable versus the “what ifs.”
It is going to be your choice of course.
Term Life Insurance
Ahh, Term Life Insurance. This is for someone planning for the “what ifs.”
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 explain it purpose.
You see…we hear it pushed on 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 many naive insurance agents that focus on the money price rather than focusing on the actual need of their senior customer who may live to age 90 or even more!! Term life insurance expires typically at 75 or 80 if not sooner.
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 and need to protect income and/or your home.
Or…
You have debt that will definitely be paid off prior to the policy expiration. These are all perfect fits because they all have a defined period of time.
For these reasons, I am going to encourage you to eliminate term life insurance from your thoughts if you are planning for the inevitable.
Most likely if you are reading this article…you’re probably not a spring chicken any longer.
Young folks are planning for the “what if’s not the inevitable of passing away. Buying permanent life insurance is usually not required.
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. Especially, if we do not have the financial resources laid aside to cover our final expenses. This leaves our family in financial pickle.
Term life insurance is limited time, pure life insurance protection.
From my perspective, I would be doing you a disservice by not telling you this…in no way should term life insurance be your primary form of life insurance at this point.
To “win the bet” with a term life insurance policy, you have to conveniently pass away before expiration for the money to be available to your loved ones or other beneficiary.
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 temporarily 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 term policy expired at 80.
There are complaints everywhere. New York Life sells a AARP branded term life insurance policy. It is a low tier term policy.
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 for the remainder of your life.
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 (GUL) For Seniors
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 50 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 $50,000 or more, GUL may be an 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.
Why?
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 if you need a policy of at least $50,000 or more. This benefit is a typical minimum in the industry from all the insurance carriers offering it. In the past we have seen $25,000 minimums but at this time, the minimum size has increased.
This is a good recommendation for senior life insurance needs such as estate planning, pension maximization, charitable giving or leaving behind a large legacy for your loved ones.
The key to affordability is the removal of any cash value component that is built into our next recommendation to you.
Whole Life Insurance For Seniors – The Benchmark Policy
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. It has unmatched dependability, ease of application and available in smaller benefit amounts than other types of life insurance.
Many happy whole life insurance owners out there. It is the oldest type of life insurance.
Whole Life insurance is actually quite simple to obtain. Yes, ease of ownership and maximum dependability is attractive to many people.
Here are some key facts about whole life insurance for seniors.
First, it is a permanent, lifelong policy. Hence, the name, 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 and choose to not pay it back.
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 $50,000 or so, it is a very good option.
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. The policy transfers the risk of inevitable burial expenses to the insurance company.
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 ‘living benefit.” This benefit is not found in term or guaranteed universal life insurance and is a key reason for the increase in cost.
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.
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. These policies are called level benefit whole life insurance.
If you need a policy under $50,000 for final expenses, this is going to be the most popular and frequently purchased senior life insurance product you can purchase.
Why?
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 $50,000 + 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.
In 2023, a full funeral can easily run up to $10,000 in Kalamazoo, MI for example. This gets you to the gate of the cemetery which can run another $5,000.
Mind you, $10,000 is pretty common around many places in the country. Simplified issue whole life is easily available up to $50,000.
Guaranteed Acceptance Whole Life Insurance For Seniors
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.
There are no health questions at all.
Are their consequences for this? Absolutely.
For those seniors who need the guaranteed acceptance coverage due to very poor health, you beneficiary will have a 2 year waiting period for the full policy death benefit. The exception would be death due to an accident which is covered immediately at 100%.
No insurance company has less than a 2 year limited period. Some are acutally 3.
The reason…It would be a complete financial loss to the insurance company.
During the “limited” period, if the insured passes away do to a natural cause, the benficiary would receive all your premiums plus an interest rate factor as the death benefit.
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.
It is our recommendation that guaranteed issue life insurance be used if all other life insurance options have been exhausted first. Let’s see if we can’t get you a better, cheaper policy to start with that offers more coverage.
If you are looking for some of the carriers that might be a good senior life insurance solution, you might give this a read.
Conclusion
Whatever you decide, you must understand what it is you are paying for.
If you want permanent protection, forget about term life insurance. It’s oversold by price salespeople who don’t understand the needs of seniors and end of life planning.
The worst part…
it can cause loved ones to not have the financial protection you set out to have in the first place.
It is very important to have lots of choices and an experienced professional who regularly works with elderly people and their families to get the job done the right way, affordably.
Sometimes in complex family situations we will recommend a couple different kinds of life insurance to cover the various goals of the plan.
Life insurance for seniors is 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 estate planning or final expense needs. Whole life insurance is by far the easiest to apply and qualify for and fits the bill for the vast majority of people who call us everyday.
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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