Most people get life insurance in their 20s and 30s when they’re launching their careers and starting families. So, seniors may think that their opportunity to purchase life insurance has passed them by.
But the reality is that they have options. Not all seniors need life insurance, so consider some of the variables listed next to help you decide if you need insurance. Then, read on to find out what life insurance options for seniors, make the most sense and whether there are alternatives to life insurance.
Do seniors need life insurance?
Middle-aged and young adults almost universally need life insurance. Of course, there are exceptions, but the vast majority of them should have life insurance to protect their dependents and avoid forcing their next of kin to assume their debts.
Seniors aren’t generally in the same position as younger adults, though.
Do you have dependents?
If you had children later in life, perhaps you still have one or two children that depend on your financial support. Maybe you’re raising your grandchildren. Or maybe you’re caring for an adult child disabled from a birth injury or another cause.
Perhaps your spouse depends on your income. You’ll have to consider their financial situation if something happens to you in any of these situations.
Sometimes, the solution is a life insurance policy. It’s not always the answer, as you’ll see when we’ll look at alternatives below, but it’s a viable option.
Do you have debt?
Someone will be responsible for your debts if you die, so if you have more debt than assets, you could be leaving your family in a bad financial position.
If you have both dependents and debt, you’ll need to consider both. But you’ll have to weigh liability with your assets if you only have debts to think about.
Do you have assets?
Even if you have debt and dependents, you may have enough assets to care for them without a life insurance policy. If you determine how much you need to take care of your debt and those depending on you and your assets cover that amount, you probably don’t need a life insurance policy unless you’re looking to leave more behind than what would break even.
What life insurance options are available to senior citizens?
Most seniors have access to the same types of life insurance as younger adults. However, a policy will cost more to purchase than it would have when you were younger. The following is a brief summary of some of the most popular categories of life insurance policies:
- Term life insurance – While a minimal number of providers offer term life insurance with no age limit, most policies have a maximum age of 65 to 75. Once you get into your 50s, though, the premiums can be so high that it’s no longer a viable option.
- Whole life insurance – It’s better to purchase whole life insurance when you’re younger and continue making payments throughout your senior years than buying a new policy in your older years. Still, you can usually buy a policy up until age 85.
- Guaranteed issue life insurance – This coverage is a whole life insurance policy, and it’s especially popular for seniors. These policies don’t require a medical exam, and they are usually just big enough to cover funeral and burial costs.
You will probably be able to find similar sub-categories for seniors as what you could find for younger applicants as well. Remember that the older you are, the higher your premiums will be.
How old is too old to buy life insurance?
No age is too old. You’ll probably be able to find a provider to write you a policy no matter how old you are if you search long enough. But besides those exceptions, most people can purchase a whole life insurance policy until they’re 85 without putting in too much effort.
The more important question to ask is, “At what age does buying life insurance no longer make sense.” You could buy a life insurance policy at 80 years old.
Your premiums could be so high that what you paid in premiums equals the policy benefit within three years. But, then, every month you pay after you break even, you’re essentially throwing money away. You keep paying, though, because you’ll throw the whole policy away if you stop paying your premiums.
Betting on Life Expectancy
To decide when buying life insurance no longer makes sense for your situation, you’ll have to determine how long it will take you to pay as much in premiums as your policy is worth. If you think you won’t live that long, buying the policy might be worth it.
On the other hand, if you think you’ll live longer than that, you might not want to buy life insurance, and instead, allocate what you would have spent on premiums into an investment account.
Buying life insurance is a gamble. The insurance company is betting on you living a long time, and you’re betting on a policy that gives you more than you put in, although most likely you wouldn’t actually say you’re betting on dying.
Are there alternatives to life insurance?
There are several alternatives to life insurance as a senior.
Funeral Home Prepayment
If you’re concerned about your family paying for your funeral expenses, you can prepay a funeral home.
Most funeral homes offer two or three tiers of coverage. The more you pay, the more services they will provide.
Term life insurance is a good fit for most middle-aged and young adults. In fact, it’s essential coverage. But whole life insurance isn’t suitable for everyone.
Investments are often a better financial move, especially for seniors, because of the interest they accrue. Some insurance companies like National Life Group offer both life insurance and investment options like annuities.
Investments are generally a better place to put your money than savings accounts, where they earn very little interest, but a savings account ensures your next of kin has access to the funds needed for end-of-life expenses.
Even with the negligible interest most savings accounts accrue, seniors can often earn a better benefit from them than they would from a life insurance policy.
When is it too late for seniors to buy life insurance? It might not ever be too late, but it stops making financial sense at a certain point. So, weigh your options and choose the one that best provides for those you love.