How to Choose a Life Insurance Policy When You're Over 55

An increased life expectancy has changed the life insurance market over the past few decades. More and more people are enjoying life past the traditional retirement age and therefore, the value of obtaining life insurance for older adults continues to increase. Even if you’re over 55, there are many ways that you can put life insurance to work for you.

Let’s explore when a life insurance policy is a good plan for you, its benefits and how to choose a policy that fits your circumstances.

Choosing a Life Insurance Policy

As an older adult, you may be wondering if you still need life insurance. That’s a fair question and the short answer is that it depends. In certain situations, life insurance coverage may benefit you or your loved ones even if you’ve already retired.

Here are a few circumstances that could shape whether life insurance is beneficial for you:

  • Covering end-of-life expenses

  • Holding significant debts such as a mortgage

  • Leaving behind an endowment or inheritance

  • Offsetting estate taxes

  • Providing for children, grandchildren, or disabled family members

  • Relying on or having dependents who rely on your income

If anything above describes your situation, certain kinds of life insurance coverage may be a good investment for you.

The Benefits of Life Insurance

Beyond covering end-of-life expenses, providing for dependents or leaving behind an inheritance, life insurance coverage can have unexpected benefits for older adults.

Some life insurance policies earn dividends and accumulate interest while other policyholders use life insurance as a financial backup, securing loans to satisfy unforeseen costs like medical debt. A few permanent life insurance policies even allow the terminally ill to use most of the policy’s value through living benefits.

The sheer number of options for life insurance coverage can feel overwhelming. Before shopping, decide what you’d like to use the policy to accomplish. Someone who wants a death benefit to cover funeral expenses will have different priorities than those looking for a smart investment strategy that leaves behind a financial legacy.

Types of Life Insurance Policies

Below are the different types of life insurance with details about what these policies are best suited to provide.

When deciding on a plan or company, compare life insurance policies according to your circumstances and your priorities.

1. Annually renewable term life insurance.

These plans are essentially term life insurance policies with a renewal option, but they have the tradeoff of increasingly higher premiums. You won’t, however, need to requalify each year and the increased premiums will be a previously disclosed, fixed amount. Annual renewal term life insurance is best for those who need short-term coverage to offset income loss.

2. Burial insurance or final expense.

These policies are intended to provide a small amount to cover funeral expenses. Due to limited benefits, burial insurance doesn’t have as many underwriting requirements, so it’s a good choice for those with serious health problems who want to offset the costs they’ll leave behind.

3. Guaranteed universal life insurance.

Guaranteed life insurance is a hybrid of term and whole life insurance, either offering a fixed term or extending until death. The premiums remain consistent throughout the policy term but don’t provide any cash value to leverage. Guaranteed universal life insurance can serve several purposes, including cushioning the expense of estate taxes.

4. Term life insurance.

Term life is the most popular type of coverage and usually the least expensive. This insurance type covers you at a fixed cost for a specific period or term — just like the name says. Term life insurance is best for younger people and healthy older adults.

5. Universal life insurance.

Universal life insurance provides coverage until death, but the cash value ties to how well the policy investments perform. This policy results in higher premiums if your investment strategy falls flat, but it’s a good option if you’re willing to assume some risk for higher rewards.

6. Whole life insurance.

True to its moniker, whole life insurance provides coverage for the entirety of your life with guaranteed premiums. These policies not only have death benefits but also allow policyholders to borrow against any accumulated cash value. Whole life insurance has the disadvantage of higher premiums overall but remains useful for older adults who want a safety net for loved ones.

Ways to Secure a Life Insurance Policy

It’s challenging to provide quotes for life insurance because every company and every policy is different. There are, however, some guidelines to help older adults budget for premiums.

Naturally, the cost of life insurance increases as you age because the risk of death rises, but many companies offer affordable options for people up to 70 years of age. In your 50s, you may pay as little as $500 a year or up to $5,000 depending on the type of insurance and death benefit. After 60 years of age, those premiums can double depending on your health, so try to secure coverage sooner rather than later.

Once you’ve decided which type of life insurance is the best fit for you, it’s time to screen insurance companies. Look for a company that has a solid rating from a third party (like AM Best) with a straightforward application and customizable policy options. It’s also vital to understand the terms of the policy, so review it carefully and consult a professional financial advisor or lawyer as needed.

Most policy applications for older adults have a medical component, which can be as simple as a health questionnaire or as extensive as a full workup from your doctor. Some policies bypass medical exams, but the premiums tend to be higher. Be prepared to undergo a little poking and prodding as a minor inconvenience if you’re relatively healthy. It’ll pay off.

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