Life Insurance for Seniors: Advice from Experts

Life insurance purchases should be based on your needs. Before buying a life policy, you'll want to carefully evaluate your needs to make sure that life insurance is something you need. To ensure that you get the best advice as you make this decision, consult with a trusted financial advisor.

"There are a lot of very smart sounding 'life only' agents or 'advisors' as they refer to themselves that have no fiduciary duty to make sure they put your interests ahead of their own. I would put a large amount of emphasis around finding yourself a fiduciary who is legally bound to do what's right for you without regard to how much commission they will receive if you buy a product through them. 

The two places you can look to find honest, trustworthy advice are going to be what are referred to 'fee based' financial or retirement advisors, and if you work with an Estate Planning attorney they will likely be able to get you going in the right direction. Both have fiduciary responsibilities to act on your behalf, but nothing is ever guaranteed so you'll still want to do your own homework," recommends Ian Grove, associate advisor for Robert Green & Company.

While you set up your meeting, this article can help you start thinking through several aspects that are part of the life insurance decision and purchase process. I reached out to life insurance experts to learn more about what aging adults need to know as they're buying life insurance.

If you're buying life insurance for a parent, grandparent, aunt, uncle, or other senior loved one, the expert advice below will help you understand how to evaluate policies to find the best fit for your needs.

• Do you really need it?
• How much do you need?
• What can you afford?
• What kind of policy should you get?
• How should you buy it?

Do you really need it?

Before you work with a life insurance agent or contact an insurer, you should consider whether or not you actually need life insurance or if you just think you need it. 

"As you get older and into your senior years, it can become less critical to have life insurance. For many people, they have paid off many debts at this stage and no longer have fully dependent children. 

However, that’s not the case for everyone, and there are still important reasons to at least consider if it’s necessary for your family. If your spouse or a child is still heavily dependent on you for financial support, that may be reason enough to have a policy. There may be a time where it simply no longer makes sense to have life insurance; however, it’s best to carefully consider this every step of the way and make the decision that best fits your life at each stage," says Brett Wilson, Ethos vice president.

If you are considering life insurance, here are questions to think through before you buy it:

• Do you still have dependents?
• Would your spouse become responsible for paying your debts?
• Will you need to be in an assisted living or have long term care?
• How will your funeral be paid for?
• Are you trying to leave an inheritance?
• Do you have enough saved for retirement?

Do you still have dependents?

If you have dependents or a spouse, a life insurance policy may be right for you because it can provide money to pay tuition, living costs, etc. that you would pay for if you were living.

Think about your current financial situation, retirement savings, and other assets before purchasing a policy. Charles Read, CPA, and former life insurance agent shares his experience:

"I am now a widower and carry no life insurance. While my wife was alive, I carried no life insurance the last ten to fifteen years or so of her life. Why? No need. I have a retirement program that would have kept her in the lifestyle she was accustomed to for her entire life."

If you don't have dependents, you may not need to buy life insurance.

"When is life insurance desirable? When you have small children that need to be raised.  So unless you are a senior raising a grandchild that will need to be brought up and educated if you are not there, why buy a poor investment?" adds Read.

Back to "Do you really need it?"

Would your spouse or someone else become responsible for paying your debts? 

In most cases, your outstanding debt will just be paid by whatever amount of cash or assets you leave behind, which will reduce or eliminate any inheritance. But, the bottom line: most of your debt, if it's solely in your name, won't be passed on to your dependents.

"What if you have outstanding debt? So what. They can’t get money out of a dead person and your kids are not responsible," says Read.

Before you get life insurance to cover outstanding debt, take stock of your debt and understand what would happen to your debt if you passed away. Your debt may not go to your kids, but your spouse or partner may become fully responsible if they're still living. Depending on what the rest of your financial situation looks like, you may want to purchase a life policy to alleviate those burdens.

Back to "Do you really need it?"

Will you need to be in assisted living or have long term care? 

While you can't predict the future, you need to think about what health challenges you may face down the road. What are your options if you can no longer live on your own? Do you have children, nieces, or nephews that can help you? Will you need to live in an assisted living facility or pay an aide to help you at home?

If you think you'll need assisted living or long term care, understand what your payment options are. You may be in a position to pay for that with savings. If you qualify for Medicaid, that coverage may help pay the costs.

You can also look into long term care insurance, but these policies can be expensive and difficult to qualify for. Grove explains why:

"The traditional LTC insurance underwriter will look to qualify you on what they call Mortality tables which basically means they are trying to make their very best estimate on how you are going to die or how sick or incapacitated they think you will get when you begin the process of 'moving on.' The later, Mortality table wants to know not how you die but instead when they think you will die. This makes it far easier to get past the underwriters with things like a bad hip or sleep apnea. 

Next, the cost. Traditional LTC insurance was one of the most expensive coverages you would ever purchase, primarily due to the likely need for a claim. If you make it to your sixties, it's more than a flip of a coin that you will need some type of long term care and the costs can be staggering. Where I live in Napa, California you can expect to pay upwards of 12,000 a month for a decent private room in a care facility."

If long term care insurance is out of your budget and you don't have savings to pay for long term care, you may want to consider a life insurance policy with a long term care rider or even an accelerated death benefit rider.

"Seniors need to know that more and more life insurance companies are offering life insurance with chronic illness or long term care benefits.

A life insurance policy can serve a dual purpose to help provide their beneficiary with a cash payout if they die and/or to help pay for possible long term care or home health care someday.

The living benefits mentioned above are available on both term and permanent life insurance," says Gordon Conwell, III, owner of Americanterm.com.

Back to "Do you really need it?"

How will your funeral be paid for?

While you won't be around to foot the bill for your funeral, you may want to think through how those costs would affect your loved ones and what you can do now to alleviate costs for them. 

"I carry no life insurance now because why would I need it. My funeral expenses will be paid for. Cremation is less than $2,000, and the VA provides my burial plot and marker.

The other reason is funeral expenses so as not to be a burden to your children. Save $5,000 and preplan. Buy the cheap casket that the funeral director would talk your children out of. Flowers, will you care? Give me a break! Here in Texas they can actually bury you in a cardboard box or nothing at all, cheap!" advises Read.

While your situation and final wishes may be different from Read's, you should explore your options for covering funeral expenses so that your family doesn't have to worry about it. Before you prepay for your funeral, vet the funeral home carefully. You don't want the funeral home to fold before you pass away since prepaid funerals can't be passed to a different funeral home. 

Alternatively, a burial insurance or final expense insurance policy will make a cash payout that can be used as the beneficiaries see fit. Just remember that you'll need to make premium payments to keep your policy effective.

Back to "Do you really need it?"

Are you trying to leave an inheritance?

Some aging adults may approach buying life insurance as a way to leave an inheritance without paying income taxes. If this is something you're considering, meet with a financial adviser to discuss the best way to move forward.

Depending on your situation, you may be better off investing on your own.

"Life insurance is a terrible investment as well. Take the same money and put it into a diversified portfolio, you will do much better. Life insurance funds large salaries and big dividends to investors, you get a fraction of what you pay for. They have buildings full of actuaries to make sure.

Do you want to leave an inheritance? Save the amount of the premium and invest it, in all probability you will leave more money than the life insurance will pay. The insurance company actuaries know this but won’t tell you. If they do, salaries at the insurance company will have to be cut, including that of the actuary and management," says Read.

Back to "Do you really need it?"

Do you have enough saved for retirement?

Consider what your retirement accounts look like, how much you'll get from Social Security, and how much longer you plan to work. Do you have enough to cover your expenses?

If you have a permanent life insurance policy that accrues cash value, you can use your policy to supplement your retirement income. Keep in mind that your beneficiaries may not end up with a death benefit payout if you use your policy's cash value.

"One of the benefits to leveraging these permanent insurances is there is a savings component built into the policy. If designed properly, you can gain the protection the life insurance provides and at the same time have a savings account inside that policy you can access while you're still alive to help supplement your lifestyle in retirement. As attractive as that function is, it is not the main reason most seniors look to fund a life insurance policy," says Grove.

Alternatively, you can invest or save what you would spend on monthly premiums to have additional retirement income.

Back to "Do you really need it?"

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How much do you need?

If you do need life insurance, you'll want to consider what you can afford and carefully calculate the amount you need.

Reviewing the questions in the previous section will help you understand whether or not you need life insurance and why you're buying life insurance if you do need it. Understanding why you're buying a life policy will help you determine how much to buy.

"Seniors, like all life insurance shoppers, need to evaluate what a policy will help protect. A thorough needs analysis should be performed to make sure they are not under or overinsured," says Michael Quinn, Life Insurance Blog owner and director of marketing.

If you're young and overinsured, there isn't usually much of a difference in premium amounts. It will make a big difference if you're an aging adult.

"For a 30-year-old man, the difference between $500,000 and $1,000,000 of 10-year term is less than $10 per month. For a 70-year-old man, the difference per month for the same policy could be $300 or more. By taking the time to correctly assess your coverage needs, you could save yourself thousands of dollars a year in premiums," notes Dennis Ho, cofounder and chief executive of Saturday Insurance.

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What can you afford?

You also need to buy a life insurance policy that you can afford long-term. If you stop making premium payments, you'll lose your coverage.

"Seniors should only buy life insurance they can afford from someone they trust," advises Ross Quade, Insurance Agent and Owner of Prime Mutual. 

Buying a policy from a trustworthy agent is also important because life insurance is a big financial commitment, and you don't want to be upsold or buy more than you need.

As you work with your agent, be clear about budgetary restrictions and any health conditions that may affect your premium rates. Being clear will help them find a policy that fits your needs and budget.

"It's also very important to be honest and forthcoming to their agent about their health and other qualifying information. Their agent will be researching which companies they can qualify with based on this information," says Quinn.

Keep in mind that what you can afford may change depending on your age and health circumstances.

"Seniors should understand that health and age are the biggest factors that play into life insurance. The healthier and younger one is, the cheaper the life insurance policy will be. 

Seniors should understand that acquiring health insurance before after being diagnosed with a condition will lower their chance of obtaining an affordable life insurance policy or obtaining one at all as most insurance policies require medical exams," says Jasmine Young, MBA, CPA, CFE, and Southern Tax Prep founder and CEO.

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What kind of policy should you get?

There are many kinds of life insurance policies available, each with different features that make it advantageous for certain situations. While some insurers have ages at which they'll stop issuing policies.

"The most important thing that seniors should understand about insurance is that options are available. Insurers are much more comfortable offering new coverage older ages today and insurance can be issued to folks as old as 80," says Ho.

Term life insurance

Term life insurance only offers coverage for a set period of time. Term policies typically have lower premiums than permanent ones, which can make these policies attractive. 

"Term life insurance is the best option for seniors. Term life insurance guarantees payment of a stated death benefit during a specified term. Once the term expires, the policyholder can either renew it for another term, convert the policy to permanent coverage, or allow the policy to terminate.

As seniors get older, they may have paid off all their debts or their children may become fully independent. In this case, they may not need or want life insurance anymore, and therefore would not want to be stuck with a whole life policy," suggests Wilson.

A term policy may work for you if you're primarily buying coverage for debts. If you think you'll need coverage longer, term coverage may not be a good idea.

"While it may be tempting to purchase a 10-year term policy to minimize costs, if there is a chance you need insurance longer, you might be better off getting a 20-year term or permanent insurance to be safe because extending your coverage in the future or purchasing another policy may be prohibitively expensive or even impossible if your health changes," cautions Ho.

Quade agrees: "For many seniors, it's imperative that the coverage does not expire before they die, which is why term policies are often not the right fit."

Whole life insurance

Whole life insurance is permanent life insurance coverage. As long as you make your premium payments, you'll maintain coverage with no premium increases. A whole life policy also accrues cash value that you can use while still living. The downside is that these policies are the most expensive type of life insurance.

"Whole life insurance is the best life insurance option for seniors. Whole life insurance does not terminate at a specific age like term insurance is designed to do. Term life insurance for seniors often increases in price every five years and cancels after age 80. With whole life insurance, your coverage will last up to 121 years old.

Whole life insurance is guaranteed to be there when you need it the most, as long as you keep paying the premiums on time," says Randy VanderVaate, Funeral Funds owner and president.

If you're in good health, you may be able to find lower premium rates by buying a fully underwritten whole life policy than a guaranteed issue final expense policy.

Before you buy a whole life insurance policy, remember why you're buying life insurance. Is it a permanent need like funeral costs and leaving an inheritance?

Final expense insurance

"A more popular option for seniors is final expense insurance because they allow for elderly people to obtain an affordable policy without a medical exam. The benefit is smaller, often under $25,000, and can be approved within the same day," says Quade.

If you're just looking for a policy to cover funeral expenses or have health issues that would affect underwriting, a final expense policy may be a good fit. These policies offer permanent coverage and level premiums. These policies are sometimes also referred to as burial insurance.

"Most of the best burial insurance companies have lenient underwriting for the typical health problems that come with age, such as high blood pressure, high cholesterol, or diabetes are generally accepted for first-day coverage.

These whole life insurance plans for seniors are designed to be easy to qualify for and be affordable for seniors on a fixed or limited income," says VanderVaate.

As you consider final expense policies, you'll want to keep in mind that only lower amounts of coverage are available with these policies:

"Final expense benefit amounts usually max out around $50,000 which will pay for their funeral and other final expenses. Most seniors aren't looking for big policies like when they were in their thirties and needed typical coverage for their mortgage and income replacement," says Quinn.

You should also understand that your final expense policy may have a graded death benefit.

"Some final expense policies don't pay the full death benefit right away. They can have what's called a graded benefit that might not pay the full amount for a year or two. These types of policies are offered to those with health issues — those who might not qualify for a non-graded plan. If the owner passes away early, then their beneficiaries will only receive the premiums paid into the policy, 10 percent on top for example, says Adam Hyers of Hyers and Associates.

But, these policies may not be the best fit for you:

"The biggest thing seniors need to know about life insurance is that they shouldn’t settle for the common final expense plans advertised everywhere. These plans are more expensive and have low coverage amounts since they are more accepting of high-risk clients. 

As a senior, you should go with traditional permanent coverage because you’ll save a ton of money. In addition to that, you won’t have any waiting periods and be able to get much more coverage. So keep the final expense plans as the last resort," advises Mack Dudayev, founder InsureChance Inc.

Universal life insurance

There are several types of universal life insurance. A few experts recommended a guaranteed universal or fixed indexed universal life insurance policy:

Guaranteed universal life insurance

"For the healthiest seniors, looking for coverage that is $30,000 or above, I would recommend looking into a Guaranteed Universal Life. It is a type of policy that ensures that they would not outlive their policy and when the time comes, they have a policy in place. These policies are considerably less expensive when compared to traditional final expense policies. However, they have more extensive underwriting. Oftentimes they require a medical exam. Again, this is a great option for people with average or above-average health," recommends Zhaneta Gechev, founder of One Stop Life Insurance.

Fixed indexed universal life insurance

"The best policy to purchase would be a FIUL or fixed indexed universal life policy. The cash value will grow tied to positive stock market index performance, but not fall when the index drops in value," recommends Mark Charnet, founder and CEO of American Prosperity Group.

Policy riders

Whatever type of policy you decide is best for you, pay attention to policy add-ons called riders. You'll also want to consider other features built into the policies you're considering.

"Today, many policies have optional riders that can help you further customize your life insurance to your situation. For example, many insurers offer accelerated death benefit or long-term care riders that allow you to access a portion of your death benefit if you get a terminal illness or need long-term care. For seniors, riders such as these can greatly improve the value of their policy and are worth considering," suggests Ho.

Don't get caught up in policy features and riders, though. Remember the core reason you're buying life insurance. Grove cautions:

"I think the one biggest factor in all of this is to make absolute sure you've done your due diligence in understanding why you are going to look into the different types of life insurance policies and not get super distracted by one specific feature without weighing what you're sacrificing for that feature."

Learn more about life insurance policy riders by reading "7 Common Life Insurance Policy Riders".

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How should you buy it?

You've got several options when it comes to how you buy life insurance. You can work directly with the insurer, work with an independent broker, or buy online. Life insurers file their rates, so choosing one option over another won't find you a better rate from the same insurer.

We'll go over each option briefly here. For an in-depth explanation of the pros and cons of each option, read "What's the Best Way to Buy Life Insurance?: What You Need to Know About Buying from an Insurer, Agency, and Online Retailer".

If you buy directly from the insurer, you'll limit yourself to the policies and rider offered by that insurer. If you've looked around at a few insurers and have settled on one, then buying directly from an insurer isn't a bad option.

However, if you have health issues, you may want to work with an independent life insurance agent or agency. They are familiar with how insurers underwrite certain conditions, which means they can help you find an insurer and policy that fit your needs.

"Using an independent broker who offers multiple companies gives them the best chance at getting affordable coverage. This will avoid wasting time applying for companies or policies that may deny or rate them up at a much higher rate," says Quinn.

Be careful when you're looking at policies online. Some websites generate leads for companies. If you give these sites your contact information, you'll end up with a bunch of sales calls. If a site won't show you a quote unless you share your contact information, find another site to use.

Whatever purchase method you choose, be prepared to spot red flags in insurance companies and agencies. Choosing trustworthy and reliable companies will also help you make a good purchase.

Truly understanding whether or not you need life insurance, your options, and what considerations to make will help you make a wise choice for yourself and loved ones.