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The cost of life insurance is based on statistics related to health and longevity. Nobody is immortal though, so the older you are, the more it’s going to cost to buy life insurance. As soon as the insurer looks at your age and sees that you are 60 or older, they are going to put you into a more expensive bracket. Insurance companies predict that you won’t live much longer and won’t have time to make many insurance premium payments before you die. That puts them in a risky situation because your insurer will have to hand over a large amount of cash to your beneficiaries, unless, of course, they charge a really steep rate.
For the elderly, age complicates their decision regarding whether or not to buy life insurance and what kind of policy to choose. There are various things to consider that may not be significant issues for a young person and, if you are in the 60+ age group, then you’ll want to do a careful analysis of your options, based on how life insurance policies work for those in the older demographic.
Budgeting for Life Insurance
One factor everyone evaluates is the cost of life insurance, but that’s especially taken into consideration for seniors. Adding a policy for the first time at a late stage in life could be a big shock to their budget. Living on a fixed income and then taking on the cost of monthly life insurance payments may not be easy to manage. Someone that’s very healthy and active, but over the age of 60, may nevertheless end up paying $2,000 or more each month for a $1 million whole life policy. That’s prohibitively expensive for many consumers, and will be even harder to budget for those folks who have a history of poor health.
That same healthy individual could save a lot of money by instead investing in 20-year term life insurance coverage. The problem there, however, is that there’s still a chance they will outlive the policy. There are a few alternatives to that route:
- Renewal-Everyone is able to renew, but it must be done before the policy ends and each time they renew, the premiums will likely become more expensive. In hindsight, that may not even be an option for seniors since most life insurance companies don’t sell policies to people beyond age 75 or so.
- Small Policy-Another alternative is to avoid it altogether by purchasing small life insurance policies to cover the expense of their funeral; it’s worth noting that the premiums for that kind of coverage tend to be expensive compared to the benefits they offer.
The bottom line is to shop, compare and evaluate your pros and cons for each policy.
Life Insurance vs. Long Term Health Coverage
Many older Americans would also rather apply whatever extra money they have toward extended health care coverage, not life insurance. After all, the cost of medical procedures or extended nursing home stays can be astronomical. If you are in your 60s or older and don’t have young dependents who rely on you for direct financial support, life insurance may not sound as practical and useful as health insurance.
Think of it this way; if you have long-term nursing care coverage, your grown children won’t be forced to shoulder that financial burden to provide for expensive medical costs. That kind of strategy and financial planning may make more sense than trying to leave money to your children through a life insurance policy that will only pay them once you are dead and gone.
One Simple Way to Save Money on Life Insurance
No matter what you decide, one thing’s for sure. Taking care of yourself and taking proactive steps to remain healthy matters a great deal when you shop for insurance. One insurance company recently sent out a marketing packet advertising its term life insurance, for example, and the mailer included a chart that showed the standard rates for various levels of coverage. For men who are in their mid to late 50s and do not use nicotine, the rate shown on the chart was less than $120 per month for $200,000 worth of coverage.
The chart showed that those in the same demographic who do use nicotine, however, can expect to pay more than $275 for the same amount of insurance. For those of you not yes dissuaded by the exorbitant cost of cigarettes, crunching the numbers on life insurance policies may serve as a powerful incentive to stop.