Many people incorrectly assume that life insurance is available only to younger adults. While death is a certainty for all, younger people may be statistically less likely to cause a claim on their policy. Nevertheless, some life insurance companies also offer plans for older adults. There may be terms of 10 to 20 years available, even for those in their seventies.1 Here are some things older adults may want to consider before purchasing a life insurance policy.
Term versus Whole: What to Know
Life insurance categories include term life, whole life, and universal life. Whole life policies may also be ‘variable’, that is, they may offer exposure to the performance of financial markets. These policies each provide different benefits.
- Term life insurance remains in effect for a certain period of its term. At the end of that period, the policy expires and has no cash value.
- Whole life insurance and universal life build ‘cash values’ that can be used for tax-free policy loans, or can be used to convert into (for example) variable deferred annuities when lifetime income may become more important than death-benefit replacement income.
- Whole life and universal life also can combine insurance with an investment feature, known as ‘variable’ insurance, allowing the policy potentially to gain more cash value over time.
There is not a one-size-fits-all answer for which type of insurance is better. Term life is usually cheaper than whole life for the same level of death benefits. However, whole life insurance might provide a reliable source of post-retirement income after the policy matures.
A specialty life insurance policy, permanent life insurance, is available only to older adults. These permanent life policies never expire – so long as premiums are faithfully paid when due. Coverage continues for the insured's lifetime so long as the premium payments keep the policy active.
You May Want a Health Exam
Some life insurance policies require the insured to undergo a health examination, including blood tests, before the policy is issued. The healthier the insured happens to be, the more favorable the policy terms – including cost - might be.
If you are generally in good shape, choosing a policy that requires a health exam may allow you to financially benefit from your good health with the possibility of lower insurance premiums.
On the other hand, if you have a few known health issues, you may want to consider a policy that doesn't require a medical exam, even if it is a bit more expensive. Be sure to answer health questions on the application honestly. Some life insurance applications may face denial due to preexisting conditions. Rejection is better than paying premiums for a policy that might not pay the death benefit due to having false answers on the application.
Sooner is Usually Better
Although insurers routinely issue life insurance policies for those aged 60 and older, some policies and providers have an age limit. Since premiums tend to increase as a person gets older, you might save money in the long run by taking out a policy sooner than later, especially if you may want to build cash value in a permanent policy. After reviewing your insurance options, it is worth considering which kind of policy might be most useful to you and your family – and, which level of financial risk you might find comfortable in building ‘variable’ cash value and/or protecting guaranteed cash value.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This material contains only general descriptions and is not a solicitation to sell any insurance product. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.