- Life insurance for seniors differs based on their age and financial situation.
- For seniors over 60, the type of insurance depends on factors such as mortgage status and the need to support a surviving spouse.
- Seniors over 70 and 80 primarily focus on covering funeral expenses.
- Preneed Funeral insurance allows you to customize your funeral service and cover costs using a prepaid plan.
- Final Expense insurance helps alleviate the burden on your family by covering funeral costs and other expenses.
- Final expense insurance has two types: Simplified Issue and Guaranteed Issue, depending on health conditions.
- It is important to re-evaluate life insurance needs as you age to avoid burdening loved ones with significant expenses.
Life insurance needs for seniors vary not only from those in young adulthood but also change within different stages of senior years.
As you age, your financial situation undergoes changes, such as downsizing your home after your children leave or freeing up more disposable income once you pay off their tuition bills. However, an aspect you may have overlooked is how your life insurance needs transform with aging. Different types of life insurance are suitable for different points in life, and being aware of this can assist you and your family in making better preparedness decisions.
Life Insurance Options for Young Adults: Term Life and Whole Life Insurance Explained
According to Kim Porter, also known as the Medicare Chick and an agent at Lehigh Partners Senior Benefits, as a young adult beginning a family, you'll usually consider selecting either Term Life or Whole Life insurance coverage. She proceeds to explain each option in detail.
Term Life Insurance
"Term Life insurance is akin to renting", Porter notes, "as it lasts for a specific time. Though if you outlive the term agreement, you forfeit all benefits and cash value. Nevertheless, premiums are less expensive for a more substantial death benefit. She cites an example where a healthy 37-year-old individual could pay $37/month for a $750,000 death benefit under Term Life insurance. By comparison, the same individual would pay $225/month for a $225,000 benefit under a Whole Life policy".
Whole Life Insurance
In contrast, Whole Life insurance covers the policy and death benefits as long as you continue paying premiums or for your entire life. Comparatively, premiums are higher than those for Term Life insurance. However, Whole Life insurance offers a cash value, and you don't have to pass away to access your money. Nonetheless, you can borrow against your balance, but to receive full death benefits, the loan must be fully repaid. Porter describes it as a "forced savings plan" in some way.
Choosing the Right Life Insurance for Seniors
When it comes to selecting life insurance in your senior years, there are various factors to consider. For instance, if you no longer have debts or dependents, you may opt for a plan that specifically caters to your needs.
Life Insurance for Seniors Over 60
The type of life insurance recommended for individuals over 60 will depend on their current financial situation. If you have a mortgage that will be paid off within 10 years, Kim Porter suggests getting a 10-year Term policy. Additionally, if both spouses are alive, a Whole Life insurance policy with a death benefit can be crucial to support the surviving spouse. Conversely, if you have a significant amount of debt and don't already have Whole Life insurance, Term Life insurance is likely the most suitable option at this stage of life.
Life Insurance for Seniors Over 70 and 80
At this stage, the focus primarily shifts towards covering funeral expenses. According to Porter, funeral costs can range between $15,000 and $30,000. If you wish to alleviate this financial burden and ease the strain on your loved ones, there are two options to explore.
Preneed Funeral Insurance
Preneed insurance involves establishing a funeral service agreement with a funeral home. You have the opportunity to customize the elements of your funeral service, including the casket, flowers, and family transportation. The funeral home calculates the total cost, which forms the basis of your Preneed insurance plan. You can choose to pay the amount in a lump sum or through monthly premiums, and upon your death, the funds are utilized to cover the funeral expenses.
Final Expense Insurance
While Final Expense insurance doesn't eliminate the responsibility of funeral planning, it can alleviate the burden on your family by covering funeral costs and other expenses. The funds provided by the insurance can be used to pay unpaid bills, medical expenses, and even college tuition for children or grandchildren. This type of insurance comes in two forms: Simplified Issue and Guaranteed Issue. Simplified Issue requires answering a few health questions during the underwriting process, while Guaranteed Issue guarantees approval without an underwriting process. The death benefits for Guaranteed Issue policies typically have a modified benefit. Choosing between the two depends on your health condition. If you have no major health concerns, a Simplified Issue plan may suffice. However, for individuals with chronic or serious health conditions, a Guaranteed Issue plan might be more suitable. To find the best final expense insurance plan for your needs, consult with an insurance agent or certified financial planner.
The Importance of Adjusting Senior Life Insurance Coverage
Though discussing final wishes and funeral benefits may be challenging, it is vital to re-evaluate your life insurance needs as you age. As Porter emphasizes, our needs evolve over time, and just as we took care of our loved ones throughout our lives, it's important not to burden them with significant expenses when we pass away.