Financial Security in Aging: Life Insurance for Older Adults

Getting affordable and comprehensive life insurance for older adults can be unnecessarily complex and confusing.

Many insurance plans are tailored to young individuals, leaving seniors with limited options and higher premiums.

Luckily, specialized policies designed specifically for older adults offer financial protection and peace of mind.

Suitable insurance later in life is one of the best ways to support your loved ones, as the insurance can cover funeral expenses or provide a financial boost to those left behind. Funeral poverty is a thing and life insurance can be of massive help.

Life insurance policies for senior citizens are quite diverse in duration, coverage, and premiums. There isn’t “one size fits all.”

Our detailed guide explores the basic types of insurance and how to judge which one suits you best.

What Is Life Insurance for Older Adults?

Life insurance for seniors is fairly similar to any life insurance policy. The premiums may be higher and the duration reduced, but such differences are common among insurance companies anyway.

The only real difference is that some insurers insert an end clause in their policies, making them expire when the policyholder reaches a certain age. Upon reaching, say, 95 or 100, the policy would end. Usually, if such a milestone is reached, the policy is paid in full.

Other than that, the potentially higher premiums stem from existing health conditions, which are more common in people above 60 than individuals over 30.

Of course, affordable life insurance for seniors exists because, despite having comparatively fewer options, elders still have plenty of policies to choose from.

The real question is whether life insurance at older age makes sense at all.

Types of Life Insurance for Senior Citizens

Most types of life insurance for the elderly are fairly similar to standard life insurance policies. Some come with lower premiums and demanding underwriting, others cost more but are easier to get, overall.

The insurance specifically designed for end-of-life is called burial or funeral insurance. It is the life insurance for seniors, with no medical exam, but others require little to no medical checks, too.

Let’s examine them in detail

Whole and Universal Life Insurance for People Over 60

Whole life is an insurance that lasts for your entire life, assuming its premiums are paid. Universal life insurance is also a permanent life insurance, but it has a more flexible premium payment schedule.

Pros of Permanent Life Insurance

• Either of these policies comes with a guaranteed payout.
• The payout is a great way to leave an inheritance to the beneficiary.
• Typically, insurance policies don’t go through probate and can have tax benefits, as well.
• Permanent life insurance policies accumulate cash value that can be used for expenses and as a retirement supplement.

Cons of Permanent Life Insurance

• Permanent life insurance costs more than term life. If your income is about to drop significantly post-retirement, the premiums can become a financial burden.
• They require serious paperwork and, usually, medical exams.
• The cash accumulation takes time.

If your post-retirement income remains stable, whole or universal life insurance makes a lot of sense.

Variable life insurance is another way to save money while being insured. This permanent life insurance invests part of the premiums and allows you to save a lump sum of money over a fixed period.

Term Life Insurance for the Elderly

Term life insurance is a policy that has a fixed duration. It costs less than whole or universal life insurance and ranges from 10 to 30 years, even though the latter is available for people around 50 or younger.

It is the best senior insurance for healthy individuals with limited financial means. If you expect your income to drop, term life policies make a lot of sense. 

Pros of Term Life Insurance

• Relatively affordable.
• Good health keeps the premiums low.
• Decent payout despite lower premiums.

Cons of Term Life Insurance

• If its term lapses there is no payout.
• This life insurance has an age limit, as many insurance companies don’t sell it to citizens above a certain age.

If your finances are tied to paying off debt or will dwindle after retirement, term insurance can provide peace of mind without breaking the bank.

Funeral Insurance

Funeral or burial life insurance is a low-cost life insurance for senior citizens that helps with final expenses.

Pros of Funeral Insurance

• Affordable.
• Easy to get.
• Helps pay for the burial.

Cons of Funeral Insurance

• It doesn’t leave money behind for anything but the final expense.

Burial insurance has relatively small coverage but also undemanding premiums. It is a great, low-cost way of preventing funeral poverty and providing enough money for the type of funeral you want.

Simplified Life Insurance for Senior Citizens

Simplified life insurance is another type of permanent life insurance. What separates it from whole or universal policies is the lack of medical examination.

Pros of Funeral Insurance

• No medical exam.
• Quick application process.
• Quick approval.

Cons of Funeral Insurance

• Waiting period of two or three years — Should the policyholder pass away in this initial period, only a percent of the premiums so far paid will go to the beneficiaries.
• Higher premiums.
• Limited coverage.

Compared to other permanent life insurances. simplified life insurance can be obtained almost instantly. And even though the costs are typically higher and the coverage more limited, some shipping around can get you a very decent deal.

It can be the best life insurance for your grandmother, for example, as the lack of an extensive questionnaire makes it со easy to obtain.

Do You Need Life Insurance as an Older Adult

Buying life insurance at any age is an important financial decision, especially as you get closer to retirement.

Retirement usually changes the monthly income and that may impact what you can and should afford. Life insurance retirement planning is based mainly on one variable: whether your post-retirement income decreases or increases significantly.

If your expected post-retirement income drops down, fixed-term or funeral insurance are probably the best choices. These policies are some of the cheapest life insurance for seniors. In case you have plenty of savings to live off, while income is progressively diminishing, foregoing insurance altogether may also make sense.

But if your income is going to remain stable — private business, investment assets, high net worth — whole life or universal life insurance policies would make sense.

The logic behind this division addresses the needs of those left behind. If they don’t rely on your income, its decrease and eventual disappearance won’t affect them much. On the other hand, if you are among the main financial engines of your family, getting permanent life insurance makes much more sense.

Can Life Insurance Be Used for Retirement?

It is possible to use certain life insurance policies as retirement funds, but this is rarely the best strategy. Usually, such types of insurance cost extra. The difference can be invested in assets with higher income potential (and higher risk).

All the same, as long as the policy allows withdrawals, life insurance can be used as a retirement plan or as a supplemental post-retirement income.

Conclusion

You can get life insurance even if you are over 65. And you probably should.

There are so many products, tailored to suit different needs and different health and financial circumstances. Endowment insurance and funeral insurance fit specific financial goals, while term and simplified policies are relatively easy to obtain.

It is hard to pinpoint the single best life insurance for older adults, but it is easy to start evaluating the options and decide what suits you the most.