Senior Life Insurance FAQs
Life Insurance is complicated enough. We're here to help.
From feeling frustrated with complicated industry jargon to feeling informed and confident - we've simplified things for you.
When shopping for senior life insurance, it can be easy to get caught up in all the options, industry jargon, and technical terms. Here you will find answers to some of the most common questions surrounding life insurance to assist your search in finding the policy options that work best for you.
Life Insurance FAQs
Your life insurance beneficiary is a person you name in your policy to be the recipient of your death benefit payout. Most people name a spouse, child, relative, or trusted friend to be their beneficiary.
You can choose to have one beneficiary or multiple. If you select to have one primary beneficiary, it’s wise to also select a contingent beneficiary.
As an individual with unique needs, your life insurance policy may need to be customized to meet those needs. This is where riders come into play. Riders are supplemental coverage options that you can add to your policy for a fee, or some companies may even include them at no additional cost. Some policy rider options may include:
- Family insurance rider - family insurance riders allow you to add family members, such as a child or grandchild, onto your current policy so that a death beneﬁt is paid out in the event that one of them passes away.
- Term conversion rider - this allows your policy to be converted from a term policy to a whole life policy after the term expires.
- Accelerated Beneﬁt Payment rider - if you’re diagnosed with a terminal illness, this will pay a portion of your death benefit in advance of your death.
- Accidental Death Benefit rider - this type of rider provides an additional death benefit if you die as a result of an accidental injury.
Note that this may not be available on all life insurance policies.
If you find yourself unable to pay your policy premium, you may experience a lapse in coverage, and have to pay additional fees to reinstate your policy. Additionally, you may need to prove your insurability.
However, with whole life insurance policies, you do have two additional options if you can’t pay your policy premium:
- Cash out your policy With this option, you have access to your policy’s cash surrender value, but you cancel your policy and lose your life insurance coverage and death benefit payout. Cash Surrender Value is equal to the Cash Value minus any debt to the company. Be mindful, however, that you may have to pay taxes on this amount.
- Non-forfeiture optionsDepending on how long you’ve held your policy, you may be able to stop paying premiums in exchange for a reduced death benefit payout or cash value. Or, you may be able to convert your policy into a term policy instead. Note that this may not be available on all life insurance policies.
Life Insurance for Seniors
Life insurance for seniors works exactly how it does for everyone else: you pay a monthly premium in exchange for a predetermined amount of coverage that’s paid out upon your death (this is called a death benefit payout).
Seniors also have the same basic life insurance options: term and whole. Term life insurance provides coverage for a specific set of time, typically anywhere from 5 to 30 years. Whole life insurance, on the other hand, doesn’t expire until age 120. It’s a form of permanent life insurance, so you’re covered for your entire lifetime.
The short answer to this question is yes, even seniors over the age of 75 are eligible for life insurance. However, it is significantly more difficult to acquire life insurance the older you are.
Like all insurance policies, term life insurance policy options become more limited and more expensive as you age. Some providers will only provide five or ten-year terms if you’ve reached a certain age, and they may require a medical exam to determine approval.
Whole life insurance policies tend to be much easier for seniors to qualify for, as they have no term limits and often don’t require a medical exam.
In general, yes – the older you are, the more life insurance costs. But this shouldn’t deter you from securing a life insurance policy to leave behind something for your family and loved ones. If you’re looking for life insurance for seniors, the primary concern should be value: getting the most coverage for the most affordable cost.
Term life insurance can often be highly expensive if you’re over the age of 75. Plus, you’ll have limited term options and may need to pass a medical exam to qualify.
For these reasons, life insurance companies for seniors often offer small whole life insurance policies. If your outstanding debts, estate taxes, and medical expenses are already covered, you can select a small amount of coverage that will cover only your final expenses like your funeral, embalming, or cremation (this is called final expense insurance or burial insurance). This type of policy is affordable while still providing the coverage you’ll need to ensure your family and loved ones are cared for after your passing.
For term life insurance, most providers require a medical exam for seniors over the age of 60. If you have significant medical conditions or risks, you may either be denied coverage or have to pay higher premiums.
However, while issuance of a policy may depend on answers to medical questions, final expense whole life insurance policies typically do not require medical examinations at all, making this option ideal for seniors and people with medical conditions that may otherwise be excluded from qualifying for term insurance.
Whole Life Insurance
Whole life insurance is a permanent policy that lasts an entire lifetime. This is the main difference between whole and term life insurance – a term life insurance policy only provides coverage for a specific term period (typically anywhere from 5 to 30 years). Whole life insurance does not expire.
Whole life insurance also carries a cash value benefit in addition to the standard death benefit. This cash value can be used during the policyholder’s lifetime as a loan or withdrawal.
Everyone should have life insurance, but the type depends on your age, financial situation, family life, and many other factors.
Whole life insurance is ideal for seniors who do not already have a life insurance policy in place. If you’re a senior, and you don’t have a plan in place to cover your funeral or other final expenses, whole life insurance can help you cover those expenses at an affordable monthly premium rate that doesn’t go up over time.
Whole life insurance policies are designed to cover any expenses you may incur upon your death, including:
- Medical expenses
- Funeral costs
- Cremation or embalming
- Estate taxes
- Any leftover debt
If your policy payout is large enough, or you have already paid off the majority of your end of life expenses during your lifetime, your beneficiaries may use your death payout however they see fit. It can act as a sort of secondary inheritance to care for your loved ones in your absence.
Your whole life insurance premiums are not tax-deductible. However, any interest your whole life insurance cash benefit accumulates is not subject to taxation. You will only pay taxes on your cash benefit if you choose to withdraw it. Additionally, proceeds from a life insurance policy are generally passed to loved ones tax-free.
Here’s some great news about whole life insurance – you can’t outlive your policy! This type of policy is permanent, meaning it provides coverage for your entire lifetime. Unless you stop making premium payments or a loan exceeds the death benefit, your coverage will be in effect.
Final Expense Insurance
Final expense insurance is a type of whole life insurance with an additional benefit designed to cover expenses that you may incur upon your passing, for example:
- Memorial service
- Casket and burial
In the U.S., cremation typically costs about $4,000, while a traditional funeral and burial costs upwards of $10,000. Final expense insurance can help cover all these expenses, so your family or friends aren’t left with burdensome bills after your death.
Final expense insurance works just like any other type of whole life insurance. You pay an affordable monthly premium in exchange for a set amount of coverage. You can decide your coverage amount based on what you hope to pay off with your death benefit payout. If you have a large funeral with burial planned, you’ll want a death benefit payout of at least $10,000 – $12,000. However, if you have a more modest budget in mind, you can trim back your coverage as you see fit.
Your final expenses will vary depending on what your end of life plans are. Again, traditional burials can be costly, and you’ll need to factor in a number of items including your casket, embalming, memorial service costs, cemetery plot, and other miscellaneous expenses.
However, you may also want to factor in things like end-of-life care. For example, if you incur any medical expenses before your death, these can also be paid off with final expense insurance. Calculate your final expenses generously, keeping in mind that unexpected expenses may occur that will need to be paid off.
Since final expense insurance is a whole life insurance policy, your rates are locked in and will not change. That means no matter your age, your premiums remain the same, and you’re covered for a lifetime. However, if your policy lapses due to lack of payment, you may incur fees upon reinstatement or see an increase in your premium costs.
Most final expense insurance companies will let you apply entirely online. But, if you’re more comfortable speaking with an agent, you can call to get a quote and start your application that way.
Although final expense insurance does not typically require a medical exam for approval, you will need to provide some basic information, such as:
- Your age, weight, and height
- Medical history
- Family medical history
- Current medical conditions
- Income and assets
- Lifestyle (i.e., level of activity, smoking, etc.)
Remember when shopping for final expense insurance, just as with any other form of insurance shopping, you should get several quotes from several companies before you choose a provider. This will give you a broad range of options, and help you decide which company offers you the best coverage at a price that works for your budget.
*Americo Life, Inc. is a holding company and is not responsible for the financial condition or contractual obligations of its affiliate insurance companies. Americo Financial Life and Annuity Insurance Company (AFL) is a member of the Americo Life, Inc. family of companies.
**“Admitted Assets, Top Life Writers-2020,” A.M. Best Co., as of October 2020.