No one wants to be a burden to their spouse and children — in life or even in death. This is the main reason why seniors often take a second look at life insurance.
Most seniors already have life insurance of some kind, but the death benefit often is too small to take care of funeral expenses and medical bills. In most states, a life insurance death benefit is exempt from creditors. It is also exempt from inheritance taxes. This makes it an excellent vehicle to transfer wealth to survivors.
Seniors often assume that they will not qualify for life insurance, but many states have laws requiring insurance companies to provide coverage to seniors. Since the senior population is growing fast, many insurance companies have found it profitable to offer life insurance to seniors.
Guaranteed Acceptance Life Insurance.
The best premium rates are offered to seniors who pass a health exam, but many companies offer insurance with no exam required. Typically these policies, known as Guaranteed Acceptance Life Insurance (usually a type of whole life insurance or universal life insurance) will pay a full death benefit in the case of accidental death as soon as the policy goes into effect. However, the policy will pay a limited death benefit if the policyholder dies of natural causes during the first two years of the policy. The insurance companies place these limits on the policies to avoid writing “deathbed” policies. The limited death benefit normally consists of the premiums paid plus interest. Once the two-year waiting period is over, the policy holder is fully insured.
Term Life Insurance for Seniors.
Many seniors, especially those on fixed incomes, do not look at life insurance as an investment opportunity. They are more interested in easing the burden of their death on their survivors. In these cases, term life insurance may be the best option.
Whole Life Insurance for Seniors.
Thanks to improvements in diet and healthcare, seniors are living longer than ever. As a result, there is a risk of outliving your term life insurance policy. Whole life insurance will cover you for your whole life, no matter how long that may be. The premium is fixed for the life of the policy. It cannot go up. The policy will build cash value. You can borrow that money or passed it on tax-free to your heirs. Whole life premiums can be much higher than term life premiums.
If you have accumulated considerable wealth and are not planning to use it for living expenses, you might consider a single-pay insurance policy. This will allow you to “leverage” your money for your heirs. A $100,000 policy paid for with a single premium can double or triple in value overnight, and the death benefit can be structured to be paid tax-free.
As with any insurance, your goals should dictate the kind of insurance you buy. Consult with an insurance professional before deciding which option is right for you.