A common misconception about life insurance is that its only purpose is income replacement—compensating for a departed insured’s lost earnings.

Applying that limited perspective, it’s easy to mistakenly conclude that life insurance for seniors isn’t all that important.

After all, if the kids have embarked on their own careers and are no longer dependent on a parent for financial support, the need to replace a departed breadwinner’s income is lessened.

It is true that, when fewer people depend on your earning capacity, income replacement becomes less of a concern.

But the idea that life insurance’s only role in estate or retirement planning is income replacement overlooks some major advantages of life insurance.

Indeed, there are numerous reasons why seniors might want or need life insurance other than income replacement.

Life insurance can be an integral part of a comprehensive estate plan designed to reduce taxes and protect family assets.

In many plans, a policy is intended as a guaranteed source of estate liquidity, providing surviving loved ones with cash to cover the high costs of funeral and burial arrangements, for instance.

Or, it might be an integral component of a business succession plan that ensures a company continues operations after the death of a key person.

And, for that matter, providing a means of support for loved ones may remain a high priority after you’ve reached retirement age.

Many seniors still need life insurance to provide long-term support for a surviving spouse or disabled loved one.

Even if loved ones are financially independent, you might just want to leave behind a substantial, guaranteed cash legacy.

Unfortunately, though, it sometimes becomes more difficult to obtain affordable life insurance for seniors.

Term Life Insurance Rates for Seniors

Each of the sample life insurance quotes are from top rated life insurance companies. Each quote is for a preferred best or preferred plus rate class.

Sample term life insurance rates are for informational purposes only, are subject to change, and must be qualified for.

Best Life Insurance Rates Ages 50-59

Best Life Insurance Rates Ages 60-69

Best Life Insurance Rates Ages 70-79

Best Life

Types of Life Insurance for Seniors

Insurance companies recognize that there is no one-size-fits-all insurance product suited to every applicant’s situation.

In recognition of that, insurers have developed numerous forms of life insurance and supplemental riders designed to optimize coverage for individual policyholders.

No form of coverage can be “the best” because a policy that’s perfect for one person might be inappropriate for another.

Even so, these are some of the forms of coverage that are the most popular among many seniors.

Term Life.

Term life is the most common and functionally simple type of life insurance.  When a policy is issued, it has a precise “term”—a period of years during which the policy remains effective.

During the term, the policyholder pays premiums to the company and, if the insured dies, the insurance company pays out the death benefit.  When the term ends, the policy lapses, and life insurance coverage ceases.

A few term policies are guaranteed renewable through a certain age (usually 80 or 90), though premiums inevitably increase at each renewal.  Term coverage does not accrue any cash value.

So, if you reach the age when renewal is no longer possible at any price, all of the prior premium payments are gone.

The advantages of term life are that it is relatively cheap and generally allows for higher coverage amounts.

However, term coverage is much, much more expensive for older applicants than for insureds in their thirties or forties.

The biggest drawback for seniors is that coverage is not guaranteed for life, so buying a term policy does not ensure a death benefit will eventually be available.

And, because term coverage doesn’t earn cash value, it is not useful in retirement planning.  Insurance companies also won’t issue new term policies to applicants above a certain age, which varies between companies but is usually somewhere around 70 or 75.

For these reasons, term life is better-suited to younger applicants focused on income replacement than for seniors who need genuinely permanent life insurance.

Best Term Life Insurance

The following companies offer the most competitive rates and favorable underwriting for seniors looking for term life insurance.

• AIG
• Protective
• Transamerica

20 year term life insurance is available up to age 70. Also, 25 year term life insurance is available up to age 65.

The policy is convertible, allowing you to convert the term policy to permanent coverage within the specified parameters in the policy.

Whole Life.

Whole life is the most straight-forward permanent life insurance coverage.  Whole life policies accrue cash value that increases with every premium payment.

Although cash value ordinarily builds slowly at first, the value earns tax-deferred interest, usually at guaranteed rates.

Participating whole life policies also pay out dividends, which can be taken as cash or invested back into the policy, increasing cash value.

After a whole life policy has been in place long enough, cash value catches up with and surpasses the premium invested into the policy.

A whole life policy that remains in place for twenty or thirty years will have earned a respectable return on the total premium investment and become a valuable asset in retirement planning.

Overtime, whole life policies also reach “paid-up” status once they have been in place long enough.  At that point, guaranteed coverage stays in place, but no additional premiums are owed.

If a policyholder elects to “surrender” a permanent policy, the insurance company issues a check for the cash value.

Or cash value can be borrowed against for a relatively low-interest loan from the insurance company.

Alternatively, cash value can be converted into an annuity.

Whole life is a practical pick for seniors due to its versatility and usefulness in both retirement and estate planning.

The biggest drawback is that coverage amounts are limited—or premiums are higher for the same coverage—for applicants who wait until later in life to obtain whole life coverage.

Interested in whole life insurance for seniors rates would be for you or a loved one? Please give us a call today for a personalized quote.

Best Whole Life Insurance

• MassMutual
• Penn Mutual
• New York Life

These mutual insurance companies offer excellent dividend paying whole life insurance options. Each policy can be designed based on your specific need, whether your focus is on death benefit protection or accumulating cash value in a tax deferred environment.

Your dividend can be used to purchase additional paid up insurance, to pay your premium for a time, or to take cash in hand to use however you wish.

Universal Life.

Universal life is life insurance geared more toward policyholders whose emphasis is more on the investment and growth potential of a policy than on the death benefit.

Each premium payment made by a policyholder is split between the cost of insurance (“COI”—the percentage of the premium devoted to underwriting the death benefit) and cash value accumulation.  Any excess premium above COI is applied to cash value.

Because COI is lower for younger insureds, universal life can accumulate cash value more quickly early-on than whole life.

On the other hand, COI increases over time so that comparatively less premium is applied toward cash value in later years.

Premium flexibility is the hallmark of universal life.  As long as the insurer receives enough to cover COI, the policy will remain in place.

And cash value can be applied toward COI so that, once a policy has enough cash value, premium payments become effectively optional.  In most cases, policyholders can choose to contribute extra premiums to increase the policy’s cash value and sometimes the death benefit, depending on the structure.

A downside of universal life is that most policies are technically not guaranteed for life.  A newly issued policy has a “maturity date” at some point in the future.

If the policy hasn’t been triggered by its maturity date, the insurer pays out the cash value to the policyholder and the coverage terminates.

However, a policy’s maturity date can be timed so that it does not occur until well after the insured’s life expectancy.

In that case, you still need to make sure COI is covered during the later years (either through premium payments or cash value)

Guaranteed, Variable, and Indexed Universal Life.

Universal life policies vary in how cash value growth is measured.  The three principle options are fixed, indexed, or variable.

Guaranteed Universal Life

If you like the universal life model of flexibility but need to be absolutely sure the policy will pay a death benefit, guaranteed universal life is a good option.

Guaranteed universal life policies are certain to pay a death benefit and are not designed as a retirement-savings product like other universal life policies. The policies accrue very little if any cash value and have a no-lapse guaranty.

If retirement savings is not a priority, but coverage absolutely certain to still be in place when you die is, guaranteed universal life may be an appropriate selection.

Interested in guaranteed universal life insurance for seniors rates would be for you or a loved one? Please give us a call today for a personalized quote.

Variable Universal Life

Variable Universal Life policies tie cash value growth to investment performance.  The insurer offers a menu of investment options for policyholders to choose from, and growth levels depend on how the chosen investments perform.

In strong markets—or if you happen to select the right investment options—variable universal life policies have the potential for excellent growth.

But, the other side of the coin is that, when markets turn sour, cash value can stagnate or even decrease.

It’s important to remember that the insurance component of a variable universal life policy stays in place regardless of how cash value performs.

Necessary premiums might rise or fall depending on performance—as more or less growth is available to contribute to payments—but the death benefit stays intact.

So, you have the potential for significant growth, but you still have the insurance either way.

Interested in variable life insurance for seniors rates would be for you or a loved one? Please give us a call today for a personalized quote.

Indexed Universal Life

A third universal life option, Indexed Universal Life, is a relatively new insurance product that has quickly grown in popularity due to its “best-of-both-worlds” approach.

With an indexed policy, a policyholder gets to divvy cash value between a fixed-rate account that grows at a defined rate and an investment account with growth pegged to an equity index (such as the NASDAQ or Dow Jones).

If the index increases during a month, cash value increases proportionally.

An advantage indexed universal life has over variable universal life is that, with indexed policies, the insurer agrees to shoulder the risk of poor market returns.

In most cases, the insurer either guarantees a minimum growth rate or guarantees cash value won’t lose money.

To compensate for the risk, indexed universal life policies come with a “participation rate,” which is the percentage of market growth a particular policy will enjoy.

A policy with a 50% participation rate grows at a rate equal to half of the market gains over the relevant period.

So, if the Dow goes up by 10%, the policy growth would be 5% for an indexed policy with a 50% participation rate.  The insurer gets the other half to make up for the losses it bears in down markets.

Indexed universal life gives you a death benefit that’s reasonably likely to eventually pay out and the option of earning strong returns in good markets.

By allowing fixed and indexed growth in the same policy—and letting the policyholder select the allocation—an indexed policy allows the policyholder to choose the growth potential and risk level at any given time.

You can allocate cash value more aggressively while you’re younger and then minimize risk by shifting toward fixed returns as you get closer to retirement.

Interested in indexed universal life insurance for seniors rates would be for you or a loved one? Please give us a call today for a personalized quote.

Final Expense Insurance for Seniors

Final Expense Insurance (also called “funeral insurance,” “burial insurance,” or “senior whole life insurance”) is permanent life insurance specifically designed for and marketed to seniors who want insurance proceeds available to cover final expenses (e.g., costs of burial and funeral, estate debts, and end-of-life medical bills).

Final expense policies are essentially whole life insurance but with relaxed underwriting and reduced emphasis on cash value.

Available coverage limits are usually relatively low, ranging from about $3,000 to $30,000.  Coverage is offered to new applicants from around age 50 to 80 (depending on the company).

Final expense policies accrue cash value that can be borrowed against, but the assumption is that a senior applying for funeral insurance intends to retain the coverage rather than cash out and surrender the policy.

Where most whole life policies require a detailed health assessment during the application process, final expense coverage is normally either “simplified issue” or “guaranteed acceptance.”

Guaranteed acceptance life insurance is what it sounds like.  The insurance company is saying that it doesn’t care about your medical history and isn’t going to consider it.

As long as you are within the policy’s relevant age bracket and can pay the premiums, the company will issue a policy that never lapses.

Guaranteed acceptance is convenient, non-obtrusive, and allows many seniors to qualify for life insurance that would otherwise be unavailable.

The downside is that premiums tend to be higher because the insurer has to assume the applicant’s health condition is worse than average.

And, to mitigate potential big losses from a terminally ill patient dying a month after buying a guaranteed-acceptance policy, they always come with a waiting period.

The waiting period for most guaranteed acceptance policies is two years.  If the insured dies during that window, the insurance company will refund all premiums to date, with interest at a good rate (often 10%).

But the full death benefit does not take effect until the waiting period concludes.

As an alternative to a premium refund, some policies pay out a defined percentage of the death benefit (typically, 25-50%) in the event of death during the waiting period.

When a final expense policy is “simplified issue,” the application process does not include a physical, but the insurance company does require completion of a medical history questionnaire.

Certain medical conditions and high-risk factors are disqualifying, though some insurers will allow some health problems not accepted by others.

Simplified issue policies are usually available with no waiting period, and, all things being equal, the premiums are lower than guaranteed acceptance coverage.

Due to the relatively low available coverage amounts, final expense insurance is not a great pick for seniors who need life insurance for income replacement.

However, if you are older and have an otherwise disqualifying medical history—and you want life insurance certain to provide enough cash to pay estate debts, transaction costs, or funeral / burial expenses—final expense might be a great idea.

Notably, final expense insurance proceeds do not have to be used for funeral and burial costs.  Policies are designed for that purpose, but an executor or beneficiary can apply final expense proceeds toward whatever makes the most sense in a given situation.

And if money is left over after covering final expenses, the remaining cash can serve as an inheritance for beneficiaries of the policy or estate.

Final Expense Insurance Rates

Sample final expense insurance rates for seniors from A- rated carriers and better. Rates are for informational purposes only and must be qualified for.

$25,000 Burial Life Insurance Rates ages 50-59

All whole life rates shown below are fixed and will stay the same for your lifetime.

$25,000 Final Expense Life Insurance Rates ages 60-69

All whole life quotes shown below are guaranteed to stay the same for your lifetime.

$25,000 Burial Insurance Rates ages 70-79

All whole life insurance quotes shown below are guaranteed to stay the same for your lifetime.

$25,000 Final Expense Insurance Quotes ages 80-85

All whole life insurance rates shown below are fixed for life and will not increase.

Why Seniors Might Need Life Insurance

Everyone’s financial situation is a little different, and there are nearly infinite reasons why any one individual might want life insurance.  With that said, though, there are some scenarios that come up fairly frequently with seniors shopping for life insurance coverage.

Providing for Loved Ones.

Just because the kids have moved out and the mortgage is paid off doesn’t mean that income replacement is no longer important.

For a senior with a dependent adult child with special needs, for example, life insurance offers a secure means of providing for continued long-term support.

Commonly, the proceeds of an insurance policy are used to fund a special needs trust that benefits a dependent without jeopardizing Medicare or other assistance eligibility.

Married seniors also use life insurance to allow a surviving spouse to maintain a consistent standard of living.

Or, if you have children from a previous marriage, a life insurance policy lets you provide for your current spouse without running the risk of disinheriting your children.

Business Succession Planning.

For seniors who are business owners, life insurance can be a valuable resource in business succession planning.

If you’re a “key person” in your business and it will take a while for your chosen successor to get up to speed, life insurance proceeds let the business withstand a temporary revenue reduction and continue operating without layoffs until the transfer of responsibility is fully ironed out.

Another common approach in succession planning is to use life insurance as a source of funding for a buy/sell agreement.

For example, if you have an agreement with your business partner that, upon one partner’s death, the surviving partner will purchase the decedent partner’s share, life insurance guarantees enough cash is available to fund the purchase.

This arrangement keeps managerial control of a business with people familiar with its operations, while also ensuring a departed partner’s heirs receive fair compensation for the ownership interest.

Retirement Planning.

Permanent life insurance (like whole life, universal life, and their many variations) is a versatile tool for both retirement and estate planning.

Most permanent policies accrue cash value, which over time becomes a significant financial asset, especially for retirees. In a nutshell, you get a policy with a guaranteed death benefit for as long as you need it.

And, if you reach a point where you don’t need it any longer, the cash value—which has been earning interest at a better rate than most savings accounts—becomes a source of retirement funding.

One of the most creative and effective uses of cash value is to convert a life insurance policy into an annuity upon retirement.

The way the strategy typically works is that you keep the life insurance in place while you’re working and others are depending on your income.

Then, upon retirement, the policy is rolled over into an annuity through a 1035 Exchange.

At that point, instead of a guaranteed death benefit you have the right to receive regular, guaranteed annuity payments from the insurance company for the rest of your life—or however long that particular annuity pays out.

Even better, the insurance policy’s growth (the amount by which the cash value exceeds the total premiums paid into the policy) is not treated as taxable income at the time of the 1035 Exchange.

Instead, there is no tax liability for the growth until it is actually paid out through the annuity (which itself also earns interest).

So, rather than getting a big tax bill for the policy growth when you cash out, you pay the income tax on policy earnings little by little over the rest of your life.

Estate Planning.

Of course, cashing out or rolling over a policy’s cash value assumes that you no longer need or want the insurance.  But, as we’ve discussed, there are plenty of reasons why you might prefer to keep the coverage in place—or even obtain additional coverage to aid in estate planning.

A whole life policy held within an ILIT (Irrevocable Life Insurance Trust), for instance, is a great way to minimize estate tax liability.

An ILIT legally owns a life insurance policy, and, upon the insured’s death, the policy proceeds are paid into the trust and then distributed to the trust’s beneficiaries as directed in the instrument that created the trust.

The principal advantage of an ILIT is that, when a life insurance policy is paid to the insured’s estate or directly to beneficiaries, it’s usually part of the insured’s “taxable estate” for federal estate tax purposes.

But a properly crafted ILIT keeps the proceeds out of the estate and therefore reduces total estate tax liability.  The proceeds end up with the policyholder’s chosen beneficiaries either way, but, when no estate taxes are deducted from the proceeds, the amount ultimately received is greater.

Estate Liquidity.

Another important benefit of life insurance for estate planning is that it guarantees liquidity.  When you know an insurance policy will pay into your estate, you know your estate will have at least that much cash available for estate debts and administrative expenses.

An insufficiently liquid estate may need to sell off other assets for cash.  Not only does an estate sale prevent heirs from receiving the specific assets that are sold, sale prices are often less than fair market value due to time constraints on the executor.

A sufficiently liquid estate won’t have to sell assets at a loss or give up family heirlooms.

Let’s say most of your wealth is invested in real estate that you want to bequeath to your children.  If you have any outstanding debts when you die, creditors have a right to pursue claims against your estate, which must be paid before assets are distributed to heirs.

If the estate doesn’t have enough cash to pay creditor claims, the executor will have to sell the real estate or liquidate other assets. On the other hand, a life insurance policy earmarked for estate debts can avoid an estate sale by providing the cash needed to satisfy all estate obligations.

Sometimes, the largest claims against an estate are derived from funeral and burial costs and end-of-life medical bills.

Funeral and burial costs in particular can run tens of thousands of dollars—more cash than even some well-off estates have available.

Final expense insurance is a life insurance product designed specifically to offset those costs.

Absent insurance proceeds (or other readily available cash), either estate assets will need to be liquidated or surviving family members will have to pay the high costs of funeral and burial.

Why it’s Sometimes Difficult for Seniors to Obtain Life Insurance

When insurers calculate premiums for a new policy, the single most important factor is the applicant’s life expectancy.  That’s why policies for women are usually less expensive than policies for men the same age—because, on average, women live longer.

The longer a newly insured person lives after a policy is issued, the more premium payments the insurer receives.  And, the more premium payments the insurer receives, the less it needs to charge per payment.

This principle makes life insurance more expensive for seniors, in general, and you eventually reach an age (around 85 or so, depending on the company and coverage type) when life insurance is effectively unavailable at any price.

Older people are also more likely to develop significant medical issues affecting premium cost.  Most health problems won’t preclude coverage altogether—they just result in higher premiums.

But there are some “knock-out” conditions that render an applicant ineligible for certain policies.  And those conditions tend to disproportionately affect older people.

The bottom line is that, if you’re at or near retirement age, you can most likely still get a policy of one kind or another.

It’ll just cost more than it would have cost earlier in life.  And, just as importantly, if you’re currently considering life insurance, it’ll cost less now than it will cost five years from now.

It’s like that old saying about planting trees.  ‘The best time to plant a tree is twenty year ago—the second-best time is now.’  You might say the same about applying for life insurance.

If you purchased a permanent policy earlier in life, it will almost certainly be simpler and cheaper to keep that policy in place than to apply for a new policy.

If the coverage is higher than you think you need now, most whole life policies include a “reduced paid-up” option that lets you trade a reduced benefit amount in exchange for relief from further premium obligations.

This can be a smart option for seniors who no longer need as much coverage for income replacement but still want some life insurance to cover (for example) final expenses or estate debts.

Unfortunately, not everyone is able to lock down permanent life insurance at a young age.

But, as many seniors have realized, a new life insurance policy can be a vital financial-planning tool for people at or near retirement age.