Life Insurance for Seniors

As you reach your senior years, you may be taking a fresh look at your expenses and plans for retirement. Whether you aim to keep working, relax with the grandkids or spend time on hobbies, you might have overlooked something that can still play a key role in your finances: life insurance.

While life insurance looks very different in your 20s than in your 60s, there are still plenty of options available when you're older. Here's why it could make sense for many households.

Seniors have options

To pick the right life insurance policy, first consider why you want it. Then think about your long-term coverage goals. Do you want to secure your spouse's financial future, cover your final expenses or donate to favorite causes? You'll find options for those situations and more.

The sign-up process (and cost) may depend on your health and the type of coverage you choose. Most policies require a medical exam; any serious medical condition, including diabetes, high cholesterol and high blood pressure, can significantly increase the cost. So can participation in activities insurers consider risky, like skydiving and piloting small aircraft.

Also, terminal illnesses such as cancer may disqualify you from certain policies or make the premiums unreasonably high.

Beyond your health and lifestyle, consider your goals, budget, how long you want coverage, how much insurance you need, and what you want to leave to heirs. There's no right or wrong solution; your needs depend on your situation.

Types of coverage

Seniors can choose among most popular types of life insurance. You can also modify a policy with extra benefits (at extra cost) with riders. (Depending on the policy, you may be able to add riders only when you first set up coverage.) Common options include:

• Term.

  Term life insurance is temporary—it only lasts a set period, such as five or 20 years. It's usually the least expensive kind of coverage you can buy, but the older you are, the more it costs. And because a term policy could expire before you do, it's usually not a good fit for retirement.

  Even so, term insurance can be appropriate in certain situations. For example, if you or your spouse is still working, a policy that lasts the rest of your (or their) career can help protect your income. Or if you still have a mortgage, you might buy coverage that lasts until your home is paid off.

• Permanent.

  This kind of coverage doesn’t have an expiration date; as long as the required premiums are paid, the policy stays in effect. Permanent can cost a lot more than term, but it may be a good choice to help cover final expenses (like your funeral and related costs) and inheritances. Also, you may be able to buy a rider with "living benefits"—early payments while you're still alive to cover long-term care or critical illness costs. What's more, permanent policies can have an investment component: Their "cash value" can rise, and you may be able to use that value to pay premiums or borrow against the policy. (Note that if you use these living benefits, the policy’s cash value—and the death benefit available for your heirs—will fall.)

  Different types of permanent insurance offer different benefits. With whole life, the policy's cash value grows at a consistent rate. The trade-off: It's generally more expensive than other types of permanent coverage. (Some policies, with smaller death benefits, are designed to cover only final expenses.)

  By contrast, universal life insurance allows you to adjust the premium each year, as long as you cover the policy's underlying insurance cost. If you opt for variable life, you can invest the cash value in the policy’s investment options, enabling the value to potentially grow more quickly. (The cash value could also fall, of course, depending on how the investment options perform.) Other kinds of permanent insurance combine features; for example, variable universal life insurance lets you adjust the premium and invest your cash value.

  (Note that variable policies are considered securities, so they’re riskier than other policies and have a better chance of losing value. So, talk to a financial professional about whether this type of policy is right for you.)

• Guaranteed issue.

  As the name implies, you can buy this coverage no matter your age or health. This means you won't have to take a medical exam—but you'll likely pay a much higher premium. A guaranteed-issue policy can make sense if you face a terminal illness and can't get other coverage.

What if you don't have dependents?

Even if your kids are grown, life insurance can be helpful to your spouse or independent children. It can also be a part of your estate plan. So even if you don't "need" coverage to protect your family, it may be worth considering.

For a spouse, life insurance can add peace of mind and a financial safety net if their partner passes away. Beyond funeral costs, they may want to move to a new home or make other lifestyle changes. Insurance can make that easier to manage.

For adult children or grandchildren, a policy's death benefits could fund a down payment on a home, cover a big chunk of college costs or help alleviate a challenging financial situation. For families with a lot of assets, it may help with estate tax planning.

Life insurance can be part of your legacy

There are many reasons to leave life insurance benefits to your spouse or children. But you also can name beneficiaries beyond your immediate family.

For example, you can designate almost anyone—or a charitable cause—as a beneficiary. Dedicating some of your life insurance to a nonprofit that's important to you is a powerful opportunity to define your personal legacy.

Ultimately, it's up to you to decide what, if anything, to leave behind. But if you have loved ones or causes you care about dearly, life insurance can prepare you to leave a gift that helps cement your family legacy for generations to come.

Footnotes

Eric Rosenberg is a finance, travel and technology writer in Ventura, Calif. He has in-depth experience writing about banking, credit cards and investing.

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