Life insurance for seniors: 4 smart ways to help your family

Does life insurance for seniors make sense?

Getting the right plan in place can make a big difference when you die.

In this article, you’ll learn about:

• 5 reasons life insurance for seniors makes sense
• Why working with a life insurance agent matters
• The one type of policy every senior should consider
• 3 types of life insurance policies for older adults
• 4 smart ways life insurance for seniors can help your family

Getting older: 5 reasons to consider life insurance for seniors

You might think life insurance for seniors isn’t necessary when you get older.

1. People are living longer

The current average life expectancy in the United States is 73.2 years for men and 79.1 years for women.² Dial back the clock to 1950, and the average life expectancy for adults was 68 years old.³

Living longer puts a greater strain on financial resources such as:

• Social Security income
• Medicare benefits
• Pension funds
• Retirement savings

Do you have enough money to retire?

According to the National Institute on Retirement Security, the ideal retirement plan includes income from: Social Security, a pension, and investments.⁴

However, for an estimated 40% of older adults, Social Security is their only source of income.⁴

And that’s a problem.

Wondering if you have enough money for retirement to take care of your needs?

In addition to Social Security, a pension plan, and investments, life insurance for seniors is one more way to meet your financial needs as you get older, and there are a variety of options such as:

• Borrow cash-value. Policies that accumulate cash value can be borrowed against to satisfy current expenses. The funds are taken as a loan and can be used toward any financial obligation. These loans generally have a low interest rate and do not require a credit check. Money borrowed from a cash benefit is also tax exempt.
• Earn dividends. Some life insurance policies also earn dividends. The dividend amount will vary based on the amount paid into the policy, and may be subject to taxes. This money can accumulate interest with the insurance company or be paid as a check to the policy holder. Dividend amounts can increase over time, which can result in higher payouts. These payouts can be used to satisfy living expenses or to offset the cost of premiums.

2. Medical debt

It’s no secret that healthcare is expensive. Even with health insurance, the cost of co-pays, premiums, prescription drugs, surgeries, and out-of-network services can add up.

• An estimated 66.5% of people who file for bankruptcy in the U.S. cite illness and medical debt as the contributing factor.⁵
• Levels of medical debt. About 6% of adults (14 million) in the U.S. owe more than $1,000 in medical debt. About 1% of adults (3 million) owe more than $10,000 in medical debt.⁶

A buffer to reduce the impact of medical debt

A life insurance policy for seniors can help provide some insulation against medical debt.

• Accelerated benefits. Some permanent life insurance policies feature accelerated benefits for terminal illness.
• Access to funds. Some of these plans allow access of up to 90% of the face value through living benefits. These benefits are a portion of the death benefit that can be used prior to the passing of the policy holder.
• Lump sums & installments. Monies can be taken as a lump sum or as installments and spent on medical bills or other debts. Accessing living benefits may reduce the value of policy’s overall death benefit.

3. Raising a second family

You may believe that life insurance for seniors is not as necessary as it is for younger couples with dependent-age children at home. However, more and more seniors are parenting one or more of their grandchildren.

According to U.S. Census data:⁷

• 1 million grandparents are living with their grandchildren under 18.
• About 2.3 million grandparents are the legal guardians for their grandchildren.
• Half of all grandparents legally responsible for grandchildren are over age 60.

For many seniors, raising another family wasn’t part of their retirement plan. If you’re raising grandchildren, you’ll need financial resources for:

• Healthcare costs
• Food
• Housing
• Transportation
• Clothing
• Extra-curricular activities
• Higher education
• And more

Here’s another way to look at the cost of raising grandchildren:

• It costs an estimated $16,007 to $17,141 per year to raise a child.⁸
• Raising a child from birth to age 18 could cost $298,000 or more.

Life insurance for seniors can give you some options, like:

• Accessing funds from accelerated benefits, borrowing from the cash-value of certain types of plans or receiving dividends.
• Providing a guaranteed benefit to take care of a grandchild when you die

4. Mortgage debt

Pay off your house by the time you retire. While that was a common practice at one point, mortgage debt among older adults is rising:⁹

Ages 65-79

• About 41% of adults in this age group still have a mortgage
• Average mortgage debt for this age group is $110,000.

Ages 80+

• An estimated 31% of adults in this age group still have a mortgage.
• Average mortgage debt in this age group is $79,000.

A growing number of older adults have mortgage debt for a variety of reasons, such as:

• Using equity to pay off other debt
• Paying for college
• Caring for grandchildren or adult children

What’s your plan to pay your mortgage if your medical expenses increase dramatically, you experience a major life event, or you die?

It’s a practical question to ask in your senior years. And while there’s more than one way to answer, life insurance for seniors is certainly one way to help protect the equity in your home, your finances, and your family.

5. Loss of pension

Did you know an estimated 12.2% of all bankruptcy filings are made by adults age 65 and older?¹⁰

Why? There’s a variety of factors at play, including:

• Rising medical expenses
• Lack of retirement savings
• Student loan debt, and…
• Loss of pension plans. Less than 20% of workers retire with an employer-sponsored pension plan.¹⁰

How can life insurance for seniors help you if you don’t have a pension?

• It can give you the ability to borrow from the cash value of a policy when unexpected expenses arise.
• A person who is dependent on his or her spouse’s pension income may suffer a financial loss if that spouse passes away, especially if the pension income is reduced or lost at time of death. Receiving a payout from a life insurance policy can help to supplement or replace this loss.

Why working with a life insurance agent matters

Even though you can shop for life insurance online, evaluate plans, and compare pricing, it’s hard to get customized answers for your situation from just an Internet search.

In a recent survey, researchers found that 75% of adults are reluctant to purchase life insurance for various reasons, such as:¹³

• Misunderstanding about how it works
• Affordability of premiums

But it doesn’t have to be that way.

The needs analysis

If you’re a senior looking for life insurance, a licensed insurance agent can walk you through a needs analysis to identify factors such as:

• Mortgage
• Credit card debt & other debts
• Dependents
• Monthly income
• Investments
• Final expenses
• Future income needed to support household
• And more

A needs analysis is a consultative process that provides information to help your life insurance agent understand your circumstances to recommend the best plans for your situation and your budget.

Final expense insurance: The one type of policy every senior should consider

How much will your funeral, burial or final expenses cost?

If you’re a senior looking for life insurance, that’s an important question to consider. After all, the average life expectancy in the United States is 77.5 years old.¹⁴

• The average cost for a burial funeral in the United States is $7,848?¹¹
• The average cost for cremation: $6,971.

With that in mind, there’s one type of life insurance policy every senior should consider: Final expense insurance.

Also known as burial insurance or funeral insurance, this is a type of life insurance designed to cover the costs associated with your funeral and other end-of-life expenses.

Here’s how it works:

Coverage

• Final expense insurance typically provides coverage in the range of $2,000 to $50,000, although some policies may offer higher coverage amounts.¹⁵
• This money is intended to cover funeral expenses, such as caskets, burial plots, memorial services, and related costs.

Easy qualifications

• Many final expense insurance policies have simplified underwriting processes, making them easier for seniors to qualify for, even if they have health issues.
• Some policies may not require a medical exam, instead relying on health questionnaires or medical history reviews.

Fixed premiums

• The premiums for final expense insurance are usually fixed, meaning they won’t increase over time.
• Seniors can choose a payment plan that fits their budget, whether it’s monthly, quarterly, or annually.

Payouts 

• When the insured person passes away, the designated beneficiary receives the death benefit, which can then be used to cover funeral expenses and other final debts.
• The beneficiary can use the money as needed, providing flexibility during a challenging time.

No restrictions on use

• Unlike some other types of life insurance, final expense insurance typically has no restrictions on how the death benefit can be used.
• The beneficiary can use the money for funeral expenses, outstanding debts, or any other financial needs.

3 types of life insurance for seniors

As a senior, making sure you can pay for your final expenses is a good place to start. But there are other types of life insurance, too

1. Whole life insurance

Whole life insurance pays dividends on how a company is performing. Withdrawing the dividends triggers tax consequences, but you can also roll the dividends into paying the monthly premium.

Other benefits of whole life insurance include:

• Provides death benefit for the policyholder’s lifetime
• Offers great safety and security
• Higher but more stable premiums
• Accumulates cash value

2. Universal life insurance

Universal life insurance is a type of policy that provides a lot of flexibility to design a plan that meets your needs and your budget.

Universal life insurance has a guaranteed cash value, but also grows in value over time based on how the funds are invested.

This type of policy also allows for many different riders to help pay for things like assisted living, long-term care, or private nursing. It’s the most flexible type of life insurance for seniors.

Benefits of universal life insurance:

• Customizable coverage
• Greater flexibility
• Ability to set lower premiums
• Guaranteed cash value
• Can provide death benefit for the policyholder’s lifetime
• Indexed options to grow long-term investment fund
• Some limitations on how much you can contribute
• Possible investment option for those who may not have access to a 401K or employer-sponsored retirement fund

3. Term life insurance

If you’re looking for the most cost-effective or affordable life insurance option, take a closer look at term life insurance. In most cases, it’s the easiest type of life insurance to protect your family and your assets.

• Low cost
• Ability to choose the length of the policy term (up to 30 years)
• Medical exam not required for simplified issue plans
• Age is the most common factor that determines term-life insurance premiums.
• Sometimes there’s a waiting period for term-life insurance based on certain health conditions

Life insurance for seniors: 4 smart ways to help your family

Wondering how life insurance for seniors can help you and your family?

What’s your goal? Who and what do you want to protect? Your family, your assets, your finances? For most people, life insurance covers all of these.

Here are for smart ways life insurance for seniors can make a difference:

1. Cover burial expense

Did you know the average cost for a burial funeral in the United States is $7,848?¹¹ The average cost for cremation: $6,971.

There’s other costs to consider, too, like:

• Burial plot
• Urn
• Casket
• Funeral home fees
• Cremation vault storage
• Embalming
• Hearse rental
• Removal or transfer of remains

Got enough money saved to cover funeral, burial or cremation expenses when you die?

A life insurance policy or final expense policy can help cover the cost of laying someone to rest.

Depending on the policy, funds from a life insurance policy may also be used to cover expenses like:

• Unresolved debt
• Outstanding medical bills
• Fees associated with settling an estate

2. Protecting a spouse/child

Probably the single biggest motivator behind purchasing life insurance for seniors is the desire to protect a:

• Spouse
• Disabled child
• Grandchild, or…
• Other loved one

When a person passes, they could leave behind unresolved debt in the form of a:

• Mortgage
• Car
• Outstanding loan

If you have someone who depends on you financially, such as a spouse or disabled child, they may struggle to maintain an adequate lifestyle without your contribution.

Life insurance for seniors can:

• Provide a death benefit for survivors
• Help dependents better manage their finances
• Provide additional money for someone who might need care, like a dependent child
• Help settle your debts

Your beneficiaries can typically receive a life insurance benefit in one of two ways as a:

1. Lump sum or one-time payout.
2. Distribution. Distributions keep an even supply of money coming in to satisfy monthly living expenses.

3. Leave a legacy

The motivation for purchasing life insurance for seniors includes having extra savings or ensuring that a guaranteed benefit is left behind for loved ones.

But other reasons include creating a means to make a financial gift.

• Many seniors use a life insurance policy to make a donation to a favorite cause by naming a charity as the beneficiary.
• Often, a death benefit can be left to an organization of your choosing in complete privacy.
• Some seniors will also use a life insurance policy as a way of leaving money to a grandchild. This can be used to help fund a college education or business venture.

4. Assist with estate taxes

Some seniors with large estates that include things like big homes or expensive cars may consider a life insurance policy as a means of transferring their wealth.

Think about it like this:

• The higher your net worth, the higher your tax liability becomes.

Seniors with a good life insurance policy can leave the next generation money without worrying about the inheritance tax.

Often, whole or universal life insurance coverage works.

• Why? Though permanent insurance policies allow for the accumulation of cash, the death benefit can be used to cover taxes.

When is life insurance for seniors not a good choice?

While most life insurance policies for seniors are offered up to age 80, there may be a point when making a purchase is not possible or does not make financial sense.

Life insurance premiums are often based on factors such as:

• Age
• Health of the person applying

If your age is advanced, or a health condition causes high premiums, it may not make sense to make the purchase, because:

• The cost could be prohibitive to the financial goal you are trying to achieve.
• These same factors may prevent you from qualifying for the policy.

If you’re in this situation, how can you help your loved ones when you die?

• The answer may be to look at another option like final expense insurance…
• Or some other guaranteed issue option where age and health are less of a factor.

The waiting period…

Finally, if you do qualify for life insurance despite a health condition, your full death benefit may not be available for the first two years of the policy.

• If you think you have a life-threatening condition that may result in premature death, consider whether or not you will survive long enough for your loved one to receive the full benefit.

Life insurance for seniors: Exam required?

Many life insurance policies require some level of medical underwriting.

This means you could be required to:

• See a doctor (fully underwritten), or…
• Answer a health questionnaire (simplified issue) that an agent can help you to submit.

If you are looking to avoid a medical exam, look for policies that are simplified issue.

• There are certain types of term and permanent life insurance policies that do not require a full medical examination.

How much does life insurance for seniors cost?

The cost of life insurance for seniors is determined by variables like:¹²

• Type of policy
• Benefit amount
• Ability to build cash value

Additional factors that can further alter the cost of premiums include:

• Age
• Health
• Family health history
• Tobacco use
• Driving record
• Occupation/lifestyle

Looking for life insurance for seniors?

Life insurance can give you and your loved ones financial assistance to cover funeral expenses, pay off debt, and protect your assets when you die, but there are many variables to consider.

Want a little help? We can help you compare plans and find life insurance policy options for you. Give us a call at (800) 827-9990 to speak with a licensed life insurance agent or find an agent in your local area.