When it comes to buying senior life insurance, you have many different options to satisfy your age and your needs. However, it’s not as complex as many people think. The two main types of life insurance are term and whole. Term life lasts for a certain amount of time (the term), expiring at the end of the policy. Whole life, however, is permanent. There are more insurance policies that fall under these two types, each with their own pros and cons.
Term Life Insurance
Term life insurance policies have a fixed expiration date. If you pass away before the term is up, the death benefit — a set amount of money — gets paid to your chosen beneficiary.
Pros: It’s simpler and more affordable (for most folks), which makes it a more popular option.
Cons: The term can last up to 30 years.
Notes: When you pay your premium, you’re paying for the death benefit that will go to your beneficiaries if you pass.
It’s great for: Healthy people in their 20s and 30s.
Whole Life Insurance
Whole life is a kind of permanent life insurance that includes a premium and tax-deferred savings account, called a cash value — which accumulates interest at a predetermined rate.
Pros: Whole life insurance can meet specific needs, such as inheritances or large estates. The policies don’t expire.
Cons: Typically these policies are more costly and complicated, for the same death benefit amount.
Notes: A certain percentage of your monthly premium will go into the cash value, offering a guaranteed rate of return — and grows over time.
There are different types of whole life insurance and there are deviations within each type.
It’s worth it for: People who need the cash value to cover estate plans or endowments.
Simplified Issue Life Insurance
Usually when you apply for life insurance, you undergo a paramedical exam as part of the underwriting process. This exam allows the carrier to determine the risk it will be to insure you and helps them dictate your premium rate.
But, you can omit the medical exam with simplified issue life insurance.
Pros: It’s a “no exam policy.” That’s what makes it “simplified.”
Cons: Often more expensive than term policies. You also still need to complete a health questionnaire about whether you smoke or have been diagnosed with severe illnesses.
It’s good for: Healthier folks who are pressed for time.
Note: Those in poor health may need to take the exam if they have too many problems. They could be denied by the carrier.
Guaranteed Issue Life Insurance
Guaranteed issue takes the idea of simplified issue insurance one step further.
Pros: No health exam. And you don’t have to answer any health questions.
Cons: You’ll pay more for coverage.
It’s appealing for: Older people whose health is declining or may have pre-existing health conditions — which makes it very expensive to get other types of insurance.
Important Notes: The carrier will cover you as long as you pay the premium. They only need your sex, age, and state of residence.
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Final Expense Insurance
This unique type of insurance is available for seniors who don’t want to load their family with funeral expenses.
Pros: It covers any of your final expenses, including a funeral, cremation, or medical costs.
If you’re between the ages of 50 and 85, you’re guaranteed acceptance — no matter your health. There’s also a cash value that may grow over time.
Cons: Higher premiums for a fairly low coverage amount.
Important Note: In most cases, final expense insurance is a simplified issue policy. However, if you don’t pass the health questionnaire, you’ll be put in a guaranteed issue policy.
It’s perfect for: elderly consumers who don’t have other coverage and don’t have enough savings to pay for their funeral.
Other Types of Life Insurance
Universal Life Insurance
Just like a whole life policy, universal life insurance features a cash value. Your premiums go toward both the death benefit and the cash value.
However, you can alter the premium and death benefit amounts — without obtaining a new policy. In other words, you can use the cash value to pay the minimum premium. Having enough money in the cash value means you can skip premium payments altogether and let the earned interest do the job.
Pro: Flexibility. If your financial situation changes, you can change the death benefit amount within your policy.
Con: Making changes can be confusing and complex. It also brings an added cost.
Variable Life Insurance
Variable life is similar to whole life insurance, but the cash value functions in a different way. With variable life insurance, the cash value is comparable to investing. It’s essentially placed in the stock market where it can grow or fall depending on the market.
Pros: The lower fees make it a better investment option than whole life policies. Provides tax-free money to beneficiaries when the policyholder is alive. This money can help cover funeral and end-of-life costs.
Cons: It’s a riskier product that requires effective management. Many people don’t know a lot about the stock market. Plus, there are limitations — you don’t get to pick from the variety of mutual funds available on the open market. Once the policyholder passes away, the insurance carrier retains the money.
Variable Universal Life Insurance
For the most part, this is some aspects of variable and universal life insurance policies blended together.
Pros: It takes the best of the other two policies. You can modify the premium and death benefit amount while you invest the cash value — in the policy’s cash value.
Cons: It’s complicated and comes with risks. The better option is a mutual fund that has the same coverage with lower fees and simpler administration.
Group Life Insurance
In theory, this is not a type of life insurance, but you should know how it differs from privately purchased term life insurance. Some employers provide group life as an employee benefit. It’s usually term life insurance, but it can be whole. While many folks think their employer life insurance is sufficient, it’s not enough — most of the time.
Pros: Employer-provided coverage is an excellent benefit if offered at no extra cost.
Cons: You get relatively low coverage. It may not be enough if you need life insurance to protect your family.
Note: As long as it fits your needs, you can work group life insurance into your private coverage.
Speak with an Independent Insurance Agent
Now that you know the pros and cons, you can better understand your life insurance options. However, you should consult a licensed independent agent to determine the best policy for you. The team at Final Expect Direct is ready to help, so call 1-877-674-0236 or contact us online!