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 life insurance 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. I must briefly touch on this subject. This is for someone planning for the “what ifs.” It is strictly temporary life insurance…it is terminating 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 explain its purpose.
You see…we hear it pushed on radio commericals and the guru talk shows.
None of whom are life insurance professionals by the way, just financial entertainers.
We hear commericals 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 also many naive insurance agents lacking in depth training with senior life insurance. Today’s seniors may live to age 90 or even more!! Term life insurance expires typically at 75 or 80 if not sooner.
Term life insurance is not the best thing since sliced bread for someone 55-90. Who’s it for then?
Well, maybe a healthy 25 year old starting a family and needing to protect income and/or your home.
Or…
You have debt that will definitely be paid off prior to the policy expiration and do not need life insurance after that point.
These are all good 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. Yes, you have probably gotten the AARP/NYL and Globe Life term life insurance offers. This not real senior life insurance, just market gimmicks. Don’t be fooled. Those term life insurance rates expire every 5 years and renew automatically at a higher, non guaranteed rate. The rates become expensive at age 70 and 75 for women.
With that said, most likely if you are reading this article…you’re probably not a spring chicken any longer.
Young folks needing life insurance are doing preventative planning and by level premium term life insurance… for the “what if’s, not the inevitable of end of life.
As a senior, you know what you are planning for.
I cannot tell you how many angry folks we have talked to who found out the hard way that their term policy expired worthless at 80.
None of us have a crystal ball and we do need dependable coverage in place. This is especially true if we do not have the financial resources laid aside to cover our final expenses. Living behind funeral and burial expenses, outstanding medical bills and/or other debts leaves our family exposed to financial ruin. In 2024, we are now in unprecedented times thanks to crazy high inflation.
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 of life.
To “win the bet” with a term life insurance policy, you have to conveniently pass away before policy expires for the money to be available to your loved ones.
Understand, the insurance company knows they are very likely to win with term insurance. Statistics are on the insurance company’s side.
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 for a senior citizen’s lifetime. These products have been designed for people age 50 and older though .
As long as your premiums are paid, your family or benficiaries have guaranteed, locked in benefits.
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. You should have average health or better for the best outcome. This type of policy is not as forgiving as whole life insurance. Small policy amounts such as $10-$20,000 for burial expenses are not going to be available from any insurance company offering Guaranteed Universal Life insurance.
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 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 a solid option if you need a larger policy. It is not just a “final expense” insurance policy.
We recommended GUL 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 the affordability is the removal of the 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 covered 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 not to 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 per thousand dollars of death benefits. You will pay considerably higher premium per each thousand dollars of coverage.
Now, if you are only looking for a small policy of $50,000 or less, 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 with full, immediate lifetime benefits. These policies are called level benefit whole life insurance coverage.
If you need a policy up to $50,000 for final expenses, this is going to be the most popular and frequently purchased senior life insurance product.
Why?
Remember when I said that smaller policy amounts were available? Some companies will offer amounts as low as $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 + 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 2024, 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.
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. The key word is “acceptance.”
Be mindful here, a guaranteed issue/guaranteed acceptance product is considerably more costly as it is designed to accept applicants regardless of serious health problems.
There are no health questions at all.
Are their downsides to this? Absolutely.
For those seniors who need the guaranteed acceptance coverage due to very poor health, your beneficiary will have a 2 year waiting period for the full policy death benefit. The exception to this 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 a predetermined interest rate factor as the death benefit.
Again, accidental death coverage is paid in full.
Since there are no health questions with Guaranteed Acceptance policies such as the 9.95 plan offered by Colonial Penn, 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 that offers more coverage and value.
If you are looking for some of the carriers that might be a good senior life insurance solution, you might give this a read.
Term Life Insurance For Seniors Over 80
If you’ve reached this point in life, term life insurance is not an option. Why? Insurance companies with rare exception do not offer term life insurance in this age range. You must elect a whole life policy and are more likely to be approved. While I can think of one carrier off the top of my head that may offer term life to someone over 80 if healthy enough, the policy will expire soon their after.
Here is the big problem and why it is the wrong product for seniors planning for the end of life. It will not guarantee lifelong final expense protection and there are no refunds if you outlive it. Don’t make this mistake. None of us know when the sand will run out of our hourglass. If you need life insurance for a senior over 80, select no exam, whole life insurance. Use our instant quote tool on this page if you like to see your options and the pricing. Better yet, give us a call at 269-244-3420. We have other carriers who choose not to publish their rates in a quoting tool. Most seniors over 80 can qualify for the “Excellent” health class as this type of whole life is designed for a senior in less than perfect health.
Conclusion To Our Life Insurance Guide For Seniors
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 marketed by salespeople who don’t understand the needs of seniors and end of life planning because it sounds “cheap.” Rarely do insurance companies end up paying out death claims on term life insurance, because the policy expires prior to death or increases in price to a point where it is dropped by the consumer.
The worst part…
it can cause loved ones to not have the financial protection you set out to have in the first place. Now days that can wipe our loved ones out.
It is very important to have lots of choices. Make sure you are working with an experienced professional like Maple Valley Insurance Group, who regularly works with seniors and their families to get the job done the right way, affordably.
Life insurance for seniors is not complicated once you know the strengths and weaknesses of the policy type from the top life insurance companies.
If you or your parents need life insurance protection, having any amount of life insurance is better than having no life insurance at all. Even if it happens to be term life. Just remember that it IS going to expire.
Kids, your parents must consent to coverage before an application may be made to any insurance company. A company or their agent/broker will need to speak with them and require their signature on the application as well.
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.
While 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, some seniors have different needs with their life insurance.
A clear discussion with a professional to see what you qualify for… 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.
Feel free to comment below.