Reassessing Your Life Insurance Options Later in Life
You’ve reached your 50s or 60s, your life insurance term is coming to a close, and you’re left wondering what to do next.
How do you decide on an insurance policy?
While the decision might have been a simple one when you were 30, life happens.
And the older you get, the more drastically your life, and consequently, your life insurance considerations, change.
You’ve probably heard before that you can’t take a one-size-fits-all approach to life insurance policies, and that’s true.
The Smiths down the street might be your age, but that doesn’t mean their life insurance policy is ideal for you.
In choosing a life insurance plan, you have to factor in a number of considerations.
Below are some of your best options for life insurance later in life and reasons why you might consider them.
Term Life Insurance
Tried and true, term life insurance is appealing due to its affordable premiums, low risk, and flexible terms.
While premiums do increase with age and declining health, term life policies still come out as a more affordable option than most permanent plans.
As you choose whether or not to purchase a life insurance policy, you need to weigh a number of factors, first and foremost, your financial needs.
In its 2017 assessment of consumer trends in purchasing life insurance, Statista reported individuals’ main motives for buying their policies.
Here are the top 5.
- Burial and Final Expenses
- Replacing Lost Income
- Leaving an Inheritance
- Paying Off a Mortgage
- Supplementing Income During Retirement
And those are some of the exact issues you need to consider.
If you still have a substantial amount of debt from credit cards, a mortgage, or private student loans, a term policy could be beneficial.
If you’ve yet to reach retirement and your spouse relies on your income, or you want to supplement your income after your retirement, a term policy is a strong option.
It’s helpful to think of a life insurance plan, especially a term one, as a replacement plan.
How much money, essentially, will it take to replace your income if you die in the next 10, 15, 20, or 30 years?
Last, if you want to cushion your children and leave a legacy for your grandkids, a term policy can meet your needs.
Keep in mind, though, that rates do increase with age, and the larger the policy, the more you’ll end up paying.
Health will also pay into your premium rates, with poor medical reports hurting your chances and no exam policies hurting your wallet.
You also need to take a realistic look at your term options.
Are you nearing freedom from debt or just trying to ride out a few years until your retirement kicks in? If so, you might want a 10-year plan.
If, on the other hand, you’re in a heap of debt, still working without an end in sight, and want to guarantee that your loved ones will be taken care of no matter how long you live, you might choose a longer term.
While it all depends on your unique needs, term policies are universally popular for a reason.
Do your research and see what kind of term insurance rates you could get. It might surprise you!
As Statista’s survey suggests, the majority of policyholders are most concerned about leaving their families with funeral experiences.
If you’ve ever been hit with a death in the family and walked through the process of planning a funeral, you know how painful and perhaps shockingly expensive it is.
Many families simply aren’t prepared to pay an amount like $10,000 in the wake of an unexpected passing and have to resort to their retirement, savings, or credit cards.
Here are some key features of a burial plan.
- With burial insurance, you can help cushion the blow of your passing, covering costs like flowers, cremation, burial, and the memorial service.
- Also referred to as final expense coverage, these plans typically max out around $25,000, with some plans ranging even higher.
- While they’re primarily intended to cover funeral costs, excess benefit can be applied to items like unpaid medical bills.
- Burial plans are typically permanent policies, offered through age 80 and lasting up to age 100.
- Unlike other permanent plans such as whole life policies, burial plans are an affordable option with reasonable premiums.
That’s a general overview of how burial insurance works, now let’s consider whether or not you’ll benefit from it.
If you are an older individual with health issues, you might have a hard time getting an affordable term life policy or qualifying for one at all.
Here’s the good news.
With a burial plan, your health condition doesn’t matter, and there usually isn’t a medical exam.
Since the death benefit is considerably lower than those of term or whole life policies, insurers aren’t taking a big enough risk to be concerned with your health.
You might also consider a burial plan if your term life insurance is expiring, you’ve lost your insurance through a job, or you never purchased any to begin with and are looking for an affordable way to protect your family.
Last, you might want to purchase a burial plan if you’re entering retirement in fairly good financial standing but want peace of mind that no matter what happens, your spouse and children won’t have to worry about paying for your funeral.
What if the kids are gone and grown, you’ve paid your way to freedom from debt, and you’re sailing into retirement with some savvy investment returns?
If this characterizes you, foregoing a life insurance purchase might be your best bet.
Remember that analogy earlier, about considering your life insurance as a replacement?
If your savings and returns are a sufficient stand-in for your income, then there’s no need to purchase life insurance.
And if your children have grown into self-sufficient individuals (one can hope), who won’t be encumbered with your debt (because you have little to none), the money you would spend on premiums could probably be put to better use.
Whether you need term insurance, burial insurance, or no insurance at all later in life depends on your unique needs.
Consider your health, age, financial standing, and your loved ones as you pursue the most affordable life insurance option to give you peace of mind.