What You Need To Know Before Buying Senior Life Insurance Plans

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The older we get, the more we become concerned with how we might provide for our loved ones in the event of our passing. As we near and pass the age of retirement—roughly considered to be the mark where we pass into senior-citizen status—this eventuality becomes more and more pressing and inevitable. Between medical bills, funeral costs, outstanding debts, and all the other expenses that accompany this event, life insurance is often presented as an effective means of securing funding when it is most needed. But is it really?

Term Life Insurance

Also called pure life insurance, term life policies provide a payout, called a death benefit, to beneficiaries in the event of the policyholder’s demise. However, these policies are established only for a certain length of time—hence the name “term”—usually 10, 20 or 30 years. If the policyholder survives the term, then there is no payout; the money have spent in premiums has bought you peace of mind for the term, but provides no other benefits. Term life insurance may be a good deal for younger or middle-aged people who are the breadwinners of their families: working, raising children, paying off mortgages, and meeting other financial obligations. In addition to compensating for end-of-life costs, the death benefit received from term life insurance can also replace the deceased’s income, helping their surviving loved ones meet expenses and maintain their current standard of living.

Whole Life Insurance

On the flip side of term life policies, whole life insurance (as you may have guessed from the name) covers the policyholder not for a certain period but for the entirety of his or her life. The premiums for whole life insurance are typically fixed, but anyone who is advanced in age or has pre-existing medical conditions (or both) should expect to pay much higher premiums. As a result, these policies are most effective for people who buy them at a younger age. Seniors shopping for whole life insurance policies should expect to see higher premiums based on their age and any medical conditions that they may be experiencing—if they can find a vendor willing to sell them a whole life policy at all.

Guaranteed Acceptance Life Insurance

Some seniors are in need of life insurance but are consistently denied term or whole life policies due to pre-existing medical conditions that make them unacceptable risks for issuing companies. These people have the option of acquiring guaranteed acceptance life insurance policies, which—as the name suggests—are available to anyone, regardless of age or the condition of their health. These guaranteed medical policies will probably ask a few questions about the applicant’s health, but they do not require a medical examination to qualify. As a result, the policy will go into effect much more quickly that term or whole life policies, which require an examination by a health professional and a subsequent evaluation of those results by an actuary. However, because the insurance company will probably be taking on considerably more risk in a guaranteed acceptance policy, the premiums will be higher and the death benefits will be lower. Additionally, the policy will probably offer graded benefits. This means that if the policyholder dies within a certain period of time after the policy is issued (say, two years), the full death benefit will not be paid out; instead, beneficiaries will receive only the premiums paid along with some interest accrued.

Policies for Seniors

Life insurance is all about mitigating risk, both for the consumer and for the insurance company that issues the policy. Insurance companies aren’t altruistic; they’re in business to make a profit. They are more inclined to issue policies that they probably won’t need to pay out, because the policyholder is young, in good health and likely to remain so for a long time to come. For whole life, younger people pay lower premiums, but they will (most likely) be paying those premiums for many, many years. Younger people will also pay less for term life insurance, since they are more likely to survive the life of the policy. Senior citizens are high-risk investments; the older a person is, the closer they are to the end of their life. An older person should expect to pay more for a whole life policy, proportionate to their age and health. For a term policy, the older you are, the more that term will cost you in premiums. Companies are less likely to offer term policies to people who are more likely to die within the space defined by the term. When they are offered, the policies are much more expensive. Generally, the terms offered are carefully calculated to end—or become cost-prohibitive—just before the policyholder is expected to die. Unlike whole life policies, term policies are also subject to premium increases at certain key birthdays. This makes term policies increasingly expensive over time, to the point that they may become prohibitive to people living on fixed incomes. The policyholder may be forced to cancel their term insurance, leaving them out all the money they’ve paid in premiums with nothing to show for it. So, is life insurance a raw deal for seniors? It can be, but it isn’t necessarily. Some people can certainly benefit from life insurance policies, but others will not. If you’re a senior citizen interested in life insurance, it pays to shop around and weigh options; the value of a policy is, ultimately, based entirely on your individual situation.