Senior Life Insurance: How to Navigate the Options If You're Over 50
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Are you concerned about what you will (or won't) be leaving behind for your loved ones when you pass away? As a senior, life insurance may not seem like something you can get at an affordable price. But for many older adults, it is a realistic option that can provide considerable peace of mind. Even a 70-year-old can get life insurance.
Roughly 60 percent of all U.S. residents are covered by life insurance. And although life insurance for seniors tends to be more expensive than what's available for younger people, older adults still represent a significant share of that 60 percent. But getting a life insurance policy isn't necessarily right for everyone. It depends a lot on your particular situation.
That's why it's important to understand your options—keeping in mind that not all life insurance plans are created equal. Besides, you might not even need a life insurance policy. Or the options available to you may not be worth the added expense.
However, if purchasing life insurance does makes sense in your situation, then you'll be able to take some comfort in knowing that the people or organizations you care about will receive the financial help they need when you pass on. But the sooner you buy life insurance, the better. It gets more and more expensive the older you become. And your options for coverage become more limited.
Here are all the major steps you should follow.
This information is not a substitute for personalized, professional advice. Every individual's circumstances are different.
1. Determine Whether You Actually Need Life Insurance
The first thing you should do is honestly assess your goals, responsibilities, and financial situation. Do you already have enough savings or other liquid assets to ensure that your obligations will be met after you die? If so, you may not need life insurance. However, depending on your other motivations, you still might benefit from getting it.
Also, consider your age. Life insurance for seniors over 70 is widely available, but it isn't always worth the higher cost. Plus, according to The World Bank Group, life expectancy in the U.S. is just over 76 years for men and 81 years for women. (In Canada, it's about 80.7 years and 84.4 years, respectively.)
So affordable life insurance for elderly people who are at or above those ages is often unavailable. An 80-year-old can get life insurance through some companies, but the age limit for life insurance is usually 80 or 85. (That is, you can purchase a new policy until you reach that age.) A few companies do offer new, limited-coverage policies for people over 90, but the cost tends to be higher than many seniors can afford.
Some of the most common reasons why seniors buy life insurance include:
2. Name One or More Potential Beneficiaries
Before purchasing any kind of senior life insurance policy, it's essential to think carefully about who will benefit from it. Beneficiaries are the people and/or organizations that you designate to receive the monetary payout after you pass on. You can name more than one beneficiary (as many as you want) and designate the specific amounts that will go to each one.
Any person, trust, or organization can be a beneficiary—even a child under the age of 18. But unless you specify that the money is to be held until the child reaches the age of legal adulthood, any payout intended for that child will likely end up going to his or her legal guardian (who may or may not use the money for the child's benefit).
It's also important to remember that, even after purchasing your policy, you can update the listed beneficiaries at any time. After all, your wishes may change, and if you don't update who's named on the policy, some or all of the payout may not go to those you want to receive it.
So take plenty of time to consider who will truly need or deserve the payout from your life insurance policy. That will help you decide the amount of coverage to buy.
3. Calculate How Much Coverage to Purchase
Also known as the death benefit or face value, the coverage amount of a life insurance policy is the total sum of money the beneficiaries will receive when the policyholder passes away. Advice about how much life insurance coverage to buy varies widely. But many experts recommend using this simple formula in order to calculate it: your financial obligations minus your liquid assets. Here's how that breaks down:
So if your goal is to help your loved ones stay as financially secure as possible, that's the basic formula to follow. For example, if your financial obligations totaled $300,000 and your liquid assets totaled $100,000, the ideal amount of coverage would be $200,000. But it's helpful to use an online life insurance calculator when working everything out for your particular situation.
After determining the ideal amount of coverage to purchase, figure out which financial obligations would cause the largest burdens for your loved ones. That way, if you find that the ideal coverage amount would require having to pay unaffordable premiums, you'll have a starting point for deciding what absolutely must be covered versus what your loved ones might be able to manage when you're gone. (The premium is the amount you pay to an insurance company each month or year for your policy.)
Just like other types of insurance, with senior life insurance, premium affordability is partially tied to how much coverage you buy. So if you want to keep your premium as low as possible, it's wise to only cover the most essential financial obligations. After all, life insurance premiums also increase with age because the older you get, the more likely it is that you will die. That's why elderly people can get life insurance up to 80 or 85 (or, less commonly, beyond the age of 90), but they'll have to pay high (often unaffordable) premiums—even for low coverage amounts.
Of course, the reason you want life insurance may have nothing to do with helping loved ones. For example, if your goal is to leave behind a substantial monetary gift for a non-profit organization, you'll likely calculate the coverage amount a little differently. In that case, you may simply decide on an amount based on the affordability of premiums while comparing plans from multiple insurance companies.
According to a report by the American Council of Life Insurers, the average coverage amount of newly purchased life insurance policies in the U.S. is $163,000.
4. Compare the Main Types of Life Insurance
Before shopping around for a policy, it's essential that you understand how each type of life insurance works. That way, you'll stand a much better chance of choosing a plan that actually aligns with your needs, wishes, and overall best interests. Here are the main kinds of life insurance options that you'll encounter as an older adult:
Term life insurance
In general, term plans represent the most affordable life insurance for seniors. That's because the premiums tend to be significantly lower for term insurance than for other types. With a term life policy, you pay for coverage that only stays in effect during a particular window of time (e.g., 10, 20, or 30 years). If you pass away within that period, your beneficiaries receive the coverage amount. If you pass away after that term expires, your beneficiaries don't receive anything.
Some companies offer term life plans for as little as one- to five-year periods, but most people purchase policies that provide coverage for at least a decade or longer. However, when it comes to term life insurance for seniors over 70, policies generally max out at 10-, 15-, or 20-year terms. An 80-year-old may only be able to get coverage for 10 years or less.
So, depending on your health and the length of your term, you may live past the expiration of your policy. Many term life plans provide the option to renew your policy for additional years—as long as you haven't reached a certain age limit by that point. But if you renew, your premium will increase (even if your health hasn't changed).
Many financial experts believe that seniors need term life insurance if they only require temporary coverage up to a certain age. With good financial planning, many seniors can eventually put themselves into a position in which they no longer need life insurance coverage. But if you'll need coverage indefinitely, then term life may not be for you.
Whole life insurance
Also known as permanent life insurance, whole life policies are primarily designed for people who want coverage that never expires. In fact, that's the main difference between whole and term life insurance. With whole life, you don't have to worry about renewing or outliving your policy; it provides lifelong coverage. However, you'll pay a much higher premium for that benefit (typically several times as much as for term life). So whole life isn't nearly as affordable, especially for older adults.
Another big difference between term life and permanent life insurance is that, over time, a permanent policy will accumulate cash value, whereas a term policy will not. Typically, after the first two or three years of paying whole life premiums, a small portion of each payment you make will be set aside.
After enough time has passed, the cash value of your policy (also known as non-forfeiture benefits) may grow to an amount that you can use or borrow against to help pay for things like unexpected medical expenses, emergency repairs, or even your policy's premiums. Also, if you decide to stop paying for your policy, you can still receive the remaining cash value (but your beneficiaries will no longer be covered).
However, if you keep your policy active, whatever cash value you use while still alive will be deducted from the total amount paid to your beneficiaries when you pass away. Also, under most whole life policies, the insurance company retains your accumulated cash value after you pass on, rather than paying it to your beneficiaries—regardless of whether you used any of it while you were alive.
Since the premiums are high and it can take decades to grow significant cash value, a lot of financial professionals don't recommend whole life insurance for seniors who have limited means. But whole life can be useful for wealthy seniors who want to leave sizeable gifts to charities or ensure that their heirs can pay estate taxes when they die—even if that happens past 90 years of age.
Also, keep in mind that some term life policies can be converted into whole life policies—within a specified period of time. But if you convert a term policy to whole life, your premiums will rise substantially.
Four different types of whole life insurance are often available:
Guaranteed universal life insurance (GUL)
This type of insurance is often recommended as a better option than whole life. That's because it can provide a lifelong death benefit without the need to pay such high premiums for it. In fact, the premium amounts tend to fall somewhere between term and whole life premiums—often closer to term. And the premium is usually fixed for the life of the policy. So GUL is usually more affordable than whole life. However, GUL policies do not have a cash-value component.
Guaranteed-acceptance life insurance
Also known as "guaranteed-issue," "simplified-issue," "guaranteed-approval," "no-exam," or simply "guaranteed" life insurance, this type of policy can provide coverage to any senior who falls within a particular age range—usually between 50 or 55 and 80. After age 80, many plans of this type expire—unless they are permanent policies. But guaranteed life insurance is worth it for seniors who need some coverage, can afford the premiums, and don't qualify for any other type of policy due to health and/or lifestyle issues.
That's because, unlike other types of life insurance, guaranteed life insurance for seniors doesn't involve any medical underwriting. You don't have to fill out a long health questionnaire, undergo a medical exam, or give an insurance company access to your medical records. You simply choose a coverage amount you can afford and apply for the policy. Unless you don't meet the age requirements, you generally can't be turned down.
Plus, with many policies, the premium is fixed or "level" for the life of the policy. And if you pay your premiums on time, your policy cannot be canceled (unless you reach the age when it expires). However, some policies are designed so that your premium increases every five or 10 years.
Keep in mind that the maximum coverage amount is usually only $25,000 to $50,000. And there is often a two-year waiting period after the policyholder's death before beneficiaries receive the full amount owed to them. (Until those two years have passed, they may only get an amount equal to the total premiums that have been paid.)
Final expense insurance
Also known as burial insurance, this type of plan is designed for people who simply want to help their loved ones pay for the cost of funeral or memorial services when they're gone, which may include cremation and/or burial in a cemetery. The difference between burial insurance and life insurance of most other varieties is that you often don't need to undergo a medical exam. However, you may need to provide a little more health-related information than you would for a guaranteed-acceptance plan.
Many final expense policies provide permanent coverage. But the maximum death benefit tends to be relatively low—in many cases, $40,000 or less. Still, that's generally high enough to allow you to choose a coverage amount that will pay for the kind of services you want. After all, according to CreditDonkey, the median cost of a funeral that involves a viewing and burial is $8,755 (with a vault for your casket) or $7,360 (without a vault). Or if you want a funeral with cremation, the average cost is about $1,100 lower than one with burial.
Of course, there are additional costs to consider. For example, CreditDonkey says that burial plots cost between $1,000 and $4,000, on average. And simple headstones tend to cost between $1,000 and $2,000, although elaborate ones can be priced as high as $10,000. Also, your loved ones may need to pay extra for things like burial clothing, a casket or urn, an obituary, flowers, and food service.
5. Choose the Best Type for You
Many financial professionals would say that, in general, term life is better for seniors than whole life insurance. That's largely because whole life comes with much higher premiums, and the cash-value component often doesn't benefit people who purchase the insurance when they're older. In fact, whole life insurance is a bad investment because the cost is high, but the returns are frequently low. As a savings vehicle for older people, whole life is expensive and inefficient. As an investment strategy, it generally isn't too effective.
That's why a lot of older people choose term life, which tends to be the cheapest life insurance for seniors. Rather than putting whatever extra money they have toward whole life premiums, they put it into more affordable and effective savings and investment strategies.
That said, whole life does makes sense in certain situations. For example, some wealthy seniors (who are on the younger side) choose whole life plans in order to ensure that they'll be covered for the rest of their lives, regardless of how old they get or how much their health deteriorates. They also choose whole life in order to protect their heirs from the burden of high estate taxes and/or to ensure that they'll leave behind substantial gifts to their favorite non-profit organizations.
What if you aren't wealthy but still want lifelong coverage? Guaranteed universal life (GUL) is often the best life insurance for seniors in that situation. It's a little more expensive than term life, but you can get a policy that's similar to a whole life plan, minus the cash value. Or if you're only concerned about covering a small or moderate amount in final expenses, it's worth looking into burial insurance.
Here are some other factors you should consider when exploring various senior life insurance plans:
It's possible to find life insurance for seniors over 80, but it tends to be expensive for the relatively small amount of coverage you can purchase. The reality is that you have fewer options the older you get, and those options become less affordable over time. The sooner you purchase coverage, the better.
If you buy a plan with fixed premiums, your monthly payment will be based on your current age and health, and it will stay the same over the term of the policy. But if you wait too long to buy a policy, you'll pay more in premiums. And you may not be able to get a plan with the amount of coverage or length of term you want.
Also, beyond a certain age, many companies require additional medical tests. So, for example, if you're over 70 or 75, you may need to pass an EKG, a physical function test, and a cognitive exam, in addition to the standard tests of things like your body mass index (BMI), blood, urine, resting heart rate, and blood pressure.
Your health and lifestyle
The healthier you are, the easier it will be to get the kind of policy you want. That's because, in addition to your age, the cost of premiums is based on the medical conditions you have and the risky behaviors you engage in (such as smoking).
So it's less difficult to find cheap life insurance for seniors who are in good health and have never smoked than for older adults with chronic health conditions and/or a history of dangerous or unhealthy habits. In fact, smokers, heavy drinkers, drug abusers, and those suffering from obesity, diabetes, cancer, heart problems, severe hypertension, or other serious medical conditions often don't qualify for insurance policies with affordable premiums.
That's why, if you're in poor health or have a risky lifestyle, the best kind of life insurance might be a guaranteed-acceptance plan. But it's wise not to make assumptions. Every insurance company weighs things differently, using a unique set of standards for their medical-underwriting process. So a health condition that makes you ineligible for a policy with one company may not matter as much to a different company. Always shop around.
The cost of premiums
If you won't be able to consistently afford paying a monthly premium, then there's no point in buying life insurance. Even under a so-called "senior plan," life insurance can be expensive. Many insurers provide a grace period that keeps your policy active when you're late making a payment. But if you let your policy lapse beyond the grace period, you will stop being covered. And if you die after your policy lapses, your beneficiaries probably won't receive anything.
So it's incredibly important to ensure that you'll be able to make on-time premium payments throughout the life of any policy you buy. That means you need to compare the costs of a variety of different plans—from a variety of different companies. In fact, the only way to know for sure what life insurance will cost you is to get quotes from multiple providers based on your unique circumstances.
But to give you a general sense of how age, gender, and policy type affect premiums, imagine that you're a non-smoking senior in good health who wants to purchase $250,000 of coverage.
According to NerdWallet, if you're a woman, the average monthly cost to purchase a 20-year term life policy at age 50 is about $30. At age 60, that cost jumps to about $75. At those same ages, whole life insurance is about $384 and $628 monthly, respectively.
NerdWallet says that if you're a male non-smoker in good health, the average cost to buy a 20-year term life policy at age 50 (for the same amount of coverage) is roughly $39 per month. For a 60-year-old, term life insurance costs about $106 per month. When it comes to whole life insurance, the average monthly cost for a man is about $462 at age 50 and $759 at age 60.
For a 70-year-old man or woman, it would probably cost at least three times the amount for life insurance (compared to rates for a 50-year-old). Plus, keep in mind that not all policies come with fixed premiums. Under some life insurance plans, premiums increase at specified intervals. So the best life insurance for seniors over 70 is generally term life with a fixed premium. However, your circumstances may necessitate different options that tend to cost more, such as guaranteed universal life, burial insurance, or a guaranteed-acceptance plan.
With term life insurance, you may only be able to get a policy that covers you up to the age of 80 or 85. So, for example, if you purchase a policy at age 50, the maximum term will probably be 30 to 35 years. At age 60 or 70, the maximum term will likely be 20 to 25 years or 10 to 15 years, respectively.
However, before purchasing any type of life insurance policy, you should always learn about the policy's exclusions (i.e., the conditions and events that are not covered). For example, most insurance companies exclude death by suicide within the first one or two years of a policy's term. Other common exclusions to look for include death caused by:
- Smoking (if you said you were a non-smoker)
- Drug or alcohol abuse
- Criminal actions
- High-risk activities (such as skydiving)
Before paying money to your beneficiaries after you pass away, your insurance company may conduct a thorough investigation to ensure that your death wasn't caused by any of the exclusions in your policy. If the company finds that it was, your beneficiaries will not receive the payout.
That's why it's crucial that you read and understand the fine print. If you aren't comfortable with a policy's exclusions, shop around for a different policy or ask how much higher your premiums would be if certain exclusions were removed.
Most life insurance companies offer the chance to add optional provisions to your policy in order to expand your coverage. Known as riders, these provisions can provide extra peace of mind, but they add to the cost of your premiums. Here are a few examples of riders that seniors sometimes purchase:
Participating vs. non-participating plans
With a participating life insurance policy, your insurer pays you yearly dividends when the amount the company receives in premiums exceeds the amount it pays out in death benefits and other expenses. However, participating policies tend to be more expensive. And most life insurance plans are non-participating, meaning that they don't provide any dividends. Also, participating plans are generally only offered for term life or traditional whole life insurance.
Also known as second-to-die insurance, this type of plan includes two people as joint policyholders. Under a survivorship plan, the death benefit isn't paid out until both people have passed away. Seniors have various reasons for purchasing survivorship policies, but a common one is to help protect their heirs from the financial burden of large estate taxes or the need to liquidate assets when they've passed away.
6. Analyze Options From Multiple Insurance Providers
Remember: Your situation is unique. So you don't want to buy just any insurance policy. Rather, you want to take plenty of time to gather several quotes based on your particular needs.
One of the best ways to do this is to use a licensed life insurance broker (or independent agent) in your area who specializes in finding suitable policies for older adults. (A broker will be able to recommend options from multiple companies, whereas a "captive" or company-employed agent will generally only be able to recommend plans from the company he or she works for.)
You may be able to find a good life insurance broker by asking a "fee-only" financial advisor or accountant you trust for a recommendation. If that professional only gets paid by the hour, then he or she won't try to steer you toward unsuitable insurance agents or products in order to reap high commissions. You can find a fee-only financial planner through the Certified Financial Planner Board of Standards.
You can also approach individual companies on your own to get baseline quotes on the life insurance plans they recommend for you. Just keep in mind that company agents may be more inclined to try upselling you products you don't really need or that may not be appropriate for your circumstances.
Regardless, before purchasing any kind of senior life insurance, company reviews, ratings, complaints, and licensing information should be checked out through organizations such as:
Additionally, it's important to check out the financial strength of all the insurance companies you're considering. After all, a policy is only worth purchasing if the company behind it will be able to pay your beneficiaries after you're gone. And most states place a cap on the amount that is guaranteed to beneficiaries if an insurance provider declares bankruptcy. That's why the most reliable life insurance company will be the one that has the highest credit ratings from Moody's, A.M. Best, and Standard & Poor's. (Note: Each website requires you to sign up for a free account in order to see company ratings.)
After checking out a variety of senior life insurance reviews, ratings, and other information, you'll begin to have a better idea of which options are most worth pursuing. Doing all of that homework can go a long way toward ensuring that you choose a reliable company and a suitable plan you can afford. That said, you still may want to cross-reference the options you've arrived at with lists from a licensed broker and other trustworthy sources.
For example, based on a variety of credible online rankings of the best life insurance companies for seniors, some of the insurers that repeatedly make the cut include:
- American National
- Lincoln Financial
- Mutual of Omaha
- New York Life
- North American Company
- Northwestern Mutual
- State Farm
Of course, just because a company isn't part of a "best of" list doesn't mean it isn't worth approaching. Some seniors are satisfied with the popular and highly marketed plans they've purchased through organizations like AARP or Gerber Life. So it's impossible to say definitively who has the best life insurance policy. But it pays to be cautious.
Depending on your situation, AARP life insurance rates may not be as affordable as what you could get directly through a different insurer. In fact, although AARP life insurance is good in terms of the coverage it provides, it often costs significantly more than the same coverage from other providers.
Whichever company you decide to go with, be completely honest when filling out the health and lifestyle questionnaire. Being untruthful in the hope that you'll secure a lower premium can have severe consequences. For instance, if you pass away and your insurance company discovers in its investigation that you lied on your questionnaire, it can deny payment to your beneficiaries.
For additional guidance on how to choose a good life insurance company and policy, check out the book Questions and Answers on Life Insurance: The Life Insurance Toolbook by Tony Steuer. It's available for Kindle or as an audiobook.
7. Beware of Scams and Misleading Advertising
Following all of the steps above will help prevent you from being scammed. However, it's still essential to keep your guard up. Seniors who have or are looking to purchase life insurance make appealing targets for crooks and con artists. Here are some additional steps to help you avoid becoming a victim of elder fraud:
Keep a skeptical mindset.
You know the old saying: If it sounds too good to be true, it probably is.
Life insurance is a money-making enterprise like any other. So it attracts some bad players who try to extract maximum profit from unsuspecting consumers. That's why you should always question the advertising or promotions you see on TV, in print, or online. For example, you may see marketing for what appears at first glance to be a fantastic life insurance plan with amazing rates, only to find out after you've purchased the policy that it will actually become unaffordable or inappropriate for your needs.
So read all of the fine print before signing, purchasing, or agreeing to anything, whether online or in person. And question the motives of any agent, broker, or advisor who tries to convince you to purchase an expensive policy without showing you more affordable alternatives.
Verify the identity and reputation of any potential agent or broker.
Never let yourself feel pressured by someone who's trying to sell you life insurance. Reputable professionals will allow you to take the time you need in order to make a wise decision. But the older you are, the more likely it is that people who claim to be in the life insurance business will try to take advantage of you. That's why, if you're a senior citizen, life insurance salespeople should always be investigated to find out if they are actually licensed, reputable, and who they say they are.
You can validate a person's identity online or over the phone by directly contacting the company that he or she claims to be from. Just make sure you find the contact information of the company yourself; don't rely on any phone numbers, websites, or email addresses given to you by the person you're investigating.
In order to verify the professional license of someone claiming to be an insurance agent, contact the insurance commissioner in your state. And keep in mind that agents who've lost their license in one state often move to a different state and try to conduct business under a new identity.
Also, never respond to unsolicited requests for personal information. Always hang up or delete the email. Then, call the company back—using a verified number from a phone directory or the company's website—and ask whether the request is legitimate and, if so, why they need the information. If their answers seem suspicious or they are pressuring you, hang up.
Learn about power of attorney and avoid giving it to an agent or broker.
Older adults and elderly people with medical or cognitive issues are sometimes preyed upon by supposed professionals who seem, at first, to be kind and extraordinarily helpful. Such seniors may feel vulnerable, overwhelmed, or confused, causing them to jump at the chance for the extra help. Then, they are convinced to sign over power of attorney (POA) to someone they may barely know who promises to ease their burden by handling things on their behalf. But once you've given a person power of attorney, it's easier for them to steal your money or sign you up for expensive life insurance plans, investments, or other financial products that drain your assets.
Get a trusted attorney to look over your policy before signing anything.
Some insurance agents and brokers aren't good about telling you everything that's in a policy. Unless you carefully read all of the fine print, you may miss provisions that aren't necessarily in your best interest. For example, some insurance policies include buried language that gives the company the right to increase rates under certain conditions or to make other changes without letting you know in advance. That's why it's a good idea to enlist another set of eyes to look over a policy, preferably an attorney, notary, or someone else with experience in this area of financial services.
Beware of common phone, mail, and email scams.
Many identity thieves prey on seniors who have life insurance plans. Generally, these crooks are trying to steal personal information in order to gain access to financial assets. In fact, some identity thieves are able to fraudulently name themselves as beneficiaries of life insurance policies without the policyholders ever knowing. So it's important to check in with your insurance provider every so often and look over your current policy, ensuring that everything is still as you intended it to be. Also, watch out for common tricks used by identity thieves, such as official-looking letters or emails, or official-sounding phone calls, in which you're told that:
In addition to those schemes, you should stay mindful of the possibility that you may encounter fake websites. In order to collect personal and financial information from unsuspecting people, some tricksters create life insurance websites that look official but are actually fraudulent. Just remember that legitimate companies will not require you to share any banking or credit card information in order to receive life insurance quotes online.
Ensure that your premiums are actually being received by your insurance company.
Fraudulent insurance salespeople sometimes have the actual paperwork used by insurance companies. So you might sign up for a policy that looks completely official, but your payments may be going to the dishonest agent or broker. So after sending your first payment, call your insurance company directly and make sure you are actually listed as having an active policy and that your premiums are going to the right place.
Senior life insurance plans are more varied—and more widely available—than ever before. But it's essential to do your homework and arrive at a strategy that makes sense for your unique situation. That way, you can enjoy greater peace of mind for all the life yet to come.