In this article:
Insurance brokers often recommend purchasing life insurance and locking in a rate when you're young and healthy. But that doesn't mean older adults can't benefit from life insurance. For example, an appropriately valued term life insurance policy could help ensure your loved ones aren't burdened with any debt after you pass.
Thankfully, it's never too late to purchase life insurance. Buying life insurance from certain insurers may be difficult depending on your age and health, but it's not impossible. Here's what you need to know about purchasing life insurance as you age.
Is There an Age Cutoff to Buy Life Insurance?
Many life insurers don't issue term life insurance policies after the would-be policyholder reaches a certain age, with limits ranging from 75 to 90 years of age. If you're 55 or older, you may find it difficult to find term life policies up to 30 years or longer. You may have better luck securing a shorter-term policy for older seniors.
Whole life insurance policies may be easier to obtain than term life insurance, even when you're older. Many life insurance companies sell new policies to applicants up to age 85 or 90.
Your need for life insurance may be less if you don't have any debt or dependents who rely on your income. In that case, a simple final expense policy may suffice to cover funeral or cremation costs. You may qualify for coverage until age 85. Some companies offer final expense insurance over 85 with higher premiums.
Understanding the age limits for these types of life insurance can help you plan your long-term coverage needs. It's also important to understand how these policies differ to help you pinpoint your ideal policy.
- Term life insurance: As its name suggests, term life insurance covers you for a specific period usually ranging from one to 30 years. Your premiums are fixed, so you'll pay the same amount during the term. Policies include a death benefit that pays out to your beneficiaries when you pass away, so long as your policy is current.
- Whole life insurance: Whole life is a form of permanent life insurance that can cover you for your entire life, as long as you make on-time payments. Perhaps the biggest difference between term life and whole life is that the latter includes a cash value account that grows tax-deferred at a minimum rate of return. You can also withdraw or borrow money from your cash account, but understand the pros and cons of doing so before proceeding. Because of the lifetime coverage, cash value account and other benefits, whole life insurance premiums can be five to 15 times higher than those for term life insurance.
How to Determine if You Need Life Insurance
Life insurance offers peace of mind, financial protection and other valuable benefits at any age, but it may not be for everyone. You may or may not need life insurance, depending on your unique circumstances. Consider the following scenarios to help assess your need for coverage:
You May Need Life Insurance If…
- You have a spouse and dependents. One of the most common reasons to purchase life insurance is to provide a financial safety net for your loved ones should you pass away. Knowing that your spouse and dependents, including your children or other family members, have financial coverage in the future can be reassuring.
- You have outstanding debts. Insurance coverage is also valuable to carry if you have outstanding debts such as a mortgage, car loan or tax bill. Remember, your outstanding debts are paid out of your estate, which could reduce the value of any assets you leave behind. However, your life insurance isn't used to pay off debts. Instead, the death benefit pays out to your beneficiaries, which can provide them with financial relief.
- You want to replace income. If your dependents rely on you for income or employer benefits like health insurance, you may want life insurance to ease their burden when you pass. Keep in mind, your spouse or dependents may be eligible for Social Security survivors benefits based on how much you've paid into Social Security. If the amount they receive is insufficient to cover their needs, however, you may want a life insurance policy to provide them with additional support.
- You want to cover final burial costs. According to the National Funeral Directors Association, the average cost of a funeral with a burial is $7,848, while funerals with cremation average $6,971. Medical care during the last 12 months of life, whether paying through private or public health insurance, is an astounding $80,000, according to a study by The Lancet. While Medicare, Medicaid and other insurers may cover a majority of these expenses, the remaining bill can still be substantial.
- You want to leave an inheritance. Because life insurance policies can provide a tax-free inheritance to your loved ones, many older adults purchase life insurance as a way to leave a significant impact on their heirs' future.
You May Not Need Life Insurance If…
- You don't have any dependents. If you don't have a spouse, children or others who rely on you for income, you may need little to no life insurance. However, it's wise to periodically review your financial situation to make sure your assets can cover your future obligations and final expenses.
- Your spouse and dependents are already covered. If your retirement income, assets and Social Security benefits are sufficient for your loved ones to live comfortably after you're gone, you may not need life insurance. Review your existing financial situation and consult your financial advisor to ensure your survivors are protected.
- You don't have outstanding debts. Will your survivors be saddled with mortgage payments, outstanding taxes and other debts when you die? If you're retired, the kids are grown up and you've paid off your mortgage and other debt obligations, you may not need life insurance. Alternatively, you might opt for minimal coverage or a final expense insurance policy.
How to Get Life Insurance if You're Over 50
If you're over the age of 50 and want to get life insurance, follow these steps:
- Determine what type of insurance you need. Review the different types of life insurance policies to determine which one may be the most beneficial. For example, if you're single with no dependents or debt, you may only need a final expense insurance policy. Conversely, if you're concerned about qualifying for coverage later in life, you may want to lock in a whole life policy. This type of permanent insurance will cover you for the rest of your life—or at least until age 99 with some policies.
- Review your finances and calculate your needs. Next, you'll need to determine how much life insurance you need. One general rule of thumb is to set your death benefit amount to 10 times your annual income, or higher if needed. However, a more practical method may be to total up your current and future debts and obligations. Include the amount of income your survivors would need to replace. Then, subtract your liquid assets that could be converted into cash to support your survivors. The resulting number should give you a strong idea of how much life insurance you need.
- Shop and compare insurers and policies. Contact several life insurance companies to compare policies and premiums. Ask the agent if you're eligible for the term duration you want. Alternatively, most insurers offer an online quote process that may save you time. Shopping and comparing your options can help you find the right balance of coverage and price.
If a life insurance company denies you coverage due to your age, don't despair. Underwriting criteria vary from one insurer to another, and many providers offer policies for older adults. One potential option is guaranteed issue life insurance, especially if you have health issues. This type of life insurance typically guarantees you coverage without a health exam, although the insurer may set a maximum age limit. But with lenient eligibility requirements come potentially higher premiums and lower benefit limits, so review any policy carefully before proceeding.
You can also explore alternatives to take the place of a life insurance policy. For example, you could ease your survivors' financial burden by directing money you would've paid for life insurance to build up your savings, retirement funds or other assets. You could also set up a sinking fund to save for funeral costs and other final expenses.
The Bottom Line
While it can be challenging to purchase life insurance when you're older, it is possible to find the policy you need. Before taking out a policy, review your financial situation and available resources to determine if you need life insurance and, if so, how much.