Many seniors these days are retiring with an indeterminate need for life insurance. Maybe they didn’t save enough money, or perhaps the life insurance they had at work vanished after retirement. Regardless, there’s a growing need for life insurance among the elderly.
That’s why in today’s article, I will discuss the most common types of insurance available to seniors and the pros and cons of each.
I promise that after reading this article, you’ll have a far better understanding of the following issues:
- What your options are for life insurance as a senior.
- The pros and cons of each type of life insurance available.
- Which type of insurance suits your requirements.
So, let’s get started!
Life Insurance for Seniors
Unfortunately, more and more people are retiring with less and less money. So many things can happen unexpectedly that can suddenly change a person’s financial situation overnight. One day you’re financially stable; the next, you need life insurance desperately to help your family cover expenses when you pass.
In my experience as an insurance agent, there are three main reasons why seniors sign a life insurance policy. I plan to discuss each of these separately below.
#1 – Final Expenses
“Final expenses” refers to things like burial costs, cremation costs, and any other additional expense associated with dying.
Many seniors retire with a small pension plan with little to no savings. And unfortunately, they don’t have time to save up enough money to cover the cost of a standard funeral, nor do they want to burden their loved ones with this responsibility.
That’s why more and more seniors are looking at life insurance to take care of their final expenses. Generally, these plans range from $5,000 to $15,000 and can be designed to suit the senior’s needs.
#2 – Debt Payoff.
Even after retirement, seniors still have mortgages to pay, plus car loans and other debts to sort out. Luckily life insurance is a great tool that can help cover these debts, so your family members don’t have to.
#3 – Leaving Behind Money
Many seniors decide that they want to make their loved one’s lives a little easier (financially) after they pass away. Maybe, they want to leave money behind to help a grandchild pay for college or buy their first car.
Whatever the reason, life insurance is a great way to do just that.
The Different Types of Life Insurance
When choosing a life insurance plan, you should know that not all plans are the same. In fact, there are three major types of insurance: term life, whole life, and universal life. Let’s start with term life insurance.
Term Life Insurance
Term insurance, in short, terminates. It’s a temporary solution to a potentially permanent problem. But, it’s still the most common life insurance purchased.
This is how it works:
1. The senior pays a fixed amount every month for the entire duration of the policy (term lengths can vary between 10 to 30 years).
2. If the individual dies within that period, the insurer will pay their death benefit to their chosen beneficiary (coverage amounts are typically high – up to $50,000 or more)
Most people buy term insurance as seniors because they want to cover a temporary obligation, such as a mortgage or debt. In most cases, the senior is financially able to pay off these debts with time but requires coverage just in case they pass away beforehand.
Term Insurance – PROS
- You usually get more coverage for your money.
Since term insurance is temporary coverage, it’s highly likely that you’ll outlive your policy. When this happens, companies prefer to extend your coverage instead of offering whole life or universal life coverage (more on that later).
Term Insurance – CONS
- It’s difficult to get senior applicants approved due to health-related issues.
I once did a consulting project with a large term insurance call center that dealt with hundreds of clients weekly.
I found that 70% of the time, individuals over 60 did not receive approval for term life insurance. That’s seven out of 10 people!
If you flip that around, only 30% got approved.
Now, there are probably other factors at work here, but my point still remains– term insurance can be more difficult to qualify for.
Whole Life Insurance
Now, let’s shift gears and talk about how whole life insurance for seniors works.
Whole life insurance is almost the exact opposite of term insurance. Whole life insurance, unlike temporary term insurance coverage, lasts your entire life.
As long as you keep paying the premium, your whole life insurance plan can NEVER cancel. And when you pass away, the policy will pay the death benefit in full.
Whole Life Insurance – PROS
- ● Peace of mind.
- Limited underwriting.
- Easier to qualify for.
For seniors looking to cover final expenses, a whole life plan is a perfect solution. In many cases, you can scale the amount of coverage up or down to an appropriate level that reflects your needs.
Furthermore, whole life insurance uses “simplified issue coverage,” which has limited underwriting and is a lot easier to qualify for (even with significant health issues).
Whole Life Insurance – CONS
- The amount of coverage is low in comparison to term insurance.
Unfortunately, if you’re looking for a large amount of coverage (perhaps in the six-figure range), it makes more sense to apply for term insurance instead.
Universal Life Insurance
Universal life insurance is basically a hybrid term-whole life product. It’s technically a permanent life insurance product intended to last your whole life, depending on how the insurance agent designs it.
A lot of the universal life insurance products we sell to seniors are “guaranteed universal life insurance” plans. Similarly to whole life plans, these plans cannot cancel due to age or health (as long as the client pays on time).
Universal Life Insurance – PROS
- More coverage compared to whole life plans.
- More coverage for your money (compared to other options).
Universal Life Insurance – CONS
- More underwriting compared to whole life insurance.
- More expensive.
Similarly to term insurance, universal life insurance requires more extensive underwriting than a whole life product, meaning seniors will find getting approved difficult. Plus, for larger amounts of coverage, the cost can be quite high.
So, Which One of These Is Going to Be Your Best Bet?
Well, it all depends on your goals. Take a quick look at the following questions.
- Why do you need coverage?
- What do you want to accomplish?
- Is your problem permanent or temporary?
Once you have a solid answer for each of these issues, you’ll be able to understand which policy can meet your requirements and solve your insurance needs.
But don’t worry too much. At the end of the day, some insurance is better than nothing. Even if you don’t qualify for your preferred policy, we can always find an appropriate solution that works as a great backup.
Maybe your family won’t receive the desired amount you were hoping for, but some money is always better than no money. Make the smart choice and find out what plan you could qualify for today.
Thanks for reading!
David Duford owns Buy Life Insurance For Burial, a virtual insurance agency helping seniors source quality final expense life insurance coverage. He is the author of 3 best-selling insurance sales and marketing books, including “The Official Guide To Selling Insurance For New Agents, “The Official Guide To Selling Final Expense Insurance,” and “Interviews With Top Producing Insurance Agents.” David is also a YouTube Influencer in insurance sales with more than 17,000 subscribers and more than 1.7 million total views.