Here at IBUSA, we have found that as many of our clients turn 60 and beyond, their priorities will often shift from accumulating wealth to protecting it. And one important way to protect your assets and your loved ones is through life insurance.
As a result, some individuals who previously didn’t see the importance of insurance may now be exploring the available options, whereas those who have had insurance for an extended period may be reassessing their current coverage.
The good news is that are a lot of options out there for those in their 60s which is why we wanted to take a moment and discuss what it’s like to apply for life insurance later in life.
Most common reasons to purchase life insurance in your 60s
The most common reasons to purchase life insurance in your 60s include:
- Providing financial security for loved ones: Life insurance can provide financial protection for your dependents, such as a spouse or children, in the event of your passing. The payout from the policy can help cover living expenses, pay off debts, and provide a source of income to replace your earnings.
- Covering final expenses: Funeral costs and other end-of-life expenses can be a significant burden on your loved ones. Life insurance can cover these costs, so your family doesn’t have to bear the financial burden.
- Estate planning: If you have a significant estate, life insurance can provide liquidity to pay estate taxes and provide an inheritance to your heirs.
- Leaving a legacy: Life insurance can be used for charitable giving, allowing you to leave a lasting impact on the causes you care about.
- Business purposes: If you own a business, life insurance can provide funding for a buy-sell agreement, key-person insurance, or other business-related needs.
Types of life insurance policies available in your 60s
There are three main types of life insurance policies available to those in their 60s: term life, whole life, and guaranteed issue life insurance.
Term life insurance:
Term life insurance: This type of policy provides coverage for a specified term, usually between 10-30 years. Term life insurance is typically the most affordable type of life insurance, but it does not build cash value. It’s a good option for those who want coverage for a specific period, such as until their mortgage is paid off or until their children are grown and financially independent.
- Affordability: Term life insurance is typically the most affordable type of life insurance, making it a good option for those on a budget or those who need coverage for a specific period.
- Simplicity: Term life insurance is straightforward and easy to understand. There are no complex investment or savings components, which can make it easier to manage.
- Flexibility: With term life insurance, you can choose the coverage amount and length of the policy that best fits your needs.
- Convertibility: Many term life insurance policies offer the option to convert to a permanent life insurance policy without undergoing a medical exam, which can be beneficial if your health changes.
- No cash value: Unlike permanent life insurance policies, term life insurance does not build cash value over time.
- Limited coverage period: Term life insurance only provides coverage for a specific period. If you outlive the policy, you will need to purchase a new policy, which may be more expensive due to your age and health status.
- No investment component: Since term life insurance policies do not have a savings or investment component, you may miss out on potential investment returns.
- Limited customization: Unlike whole life insurance policies, which offer a wide range of options for customization, term life insurance policies are generally less flexible.
Whole life insurance:
Whole life insurance: This type of policy provides coverage for the rest of your life and includes a cash value component that builds over time. Whole life insurance is typically more expensive than term life insurance, but it offers more comprehensive coverage and can be used as a source of savings or investment. It’s a good option for those who want permanent coverage and want to leave an inheritance to their loved ones.
- Permanent coverage: Whole life insurance provides coverage for the rest of your life, which can be beneficial if you want to ensure that your loved ones will be financially protected after you’re gone.
- Guaranteed cash value: Whole life insurance policies have a guaranteed cash value component that grows over time. This can be used as a source of savings or investment.
- Tax-deferred growth: The cash value component of a whole life insurance policy grows tax-deferred, which can be beneficial if you’re looking to maximize your savings and investment returns.
- Guaranteed death benefit: Whole life insurance policies have a guaranteed death benefit, which means that your loved ones will receive a payout when you pass away, regardless of market fluctuations or other external factors.
- Higher premiums: Whole life insurance is typically more expensive than term life insurance due to the permanent coverage and cash value component.
- Complexity: Whole life insurance policies can be complex and difficult to understand, particularly with respect to the cash value component and how it grows over time.
- Limited flexibility: Whole life insurance policies offer limited flexibility, particularly with respect to the premium payment schedule and the coverage amount.
- Potential for lower returns: While the cash value component of a whole life insurance policy does grow over time, the returns may be lower than what you could achieve with other investment options.
Guaranteed issue life insurance:
Guaranteed issue life insurance: This type of policy does not require a medical exam and is available to those who may have health issues that make it difficult to qualify for other types of life insurance. Guaranteed issue policies are comparatively more expensive than other types of policies, and the death benefit is usually limited to a smaller amount, such as $15,000 or $25,000. Guaranteed issue life insurance policies will also contain a waiting period (usually 2-3 years) before the policy will provide any coverage for death caused by natural causes. This waiting period is referred to as a graded death benefit.
- Guaranteed acceptance: Guaranteed issue life insurance policies are typically available to anyone, regardless of their health status or medical history.
- No medical exam required: Since guaranteed issue life insurance policies do not require a medical exam or health questionnaire, the application process is typically faster and easier than other types of life insurance.
- Simple application process: The application process for guaranteed issue life insurance policies is typically straightforward and can be completed online or over the phone.
- No health questions asked: Guaranteed issue life insurance policies do not require you to answer any health-related questions, which can be beneficial if you have pre-existing health conditions.
- Higher premiums: Guaranteed-issue life insurance policies are typically more expensive than other types of life insurance due to the higher risk that the insurance company assumes by accepting anyone who applies.
- Limited coverage amounts: Guaranteed-issue life insurance policies typically have lower coverage amounts than other types of life insurance, which may not be sufficient for your needs.
- Waiting periods: Many guaranteed issue life insurance policies have waiting periods before the full death benefit is paid out (graded death benefit), which can be a disadvantage if you need coverage immediately.
- No cash value: Guaranteed-issue life insurance policies do not have a cash value component, which means that you cannot use the policy as a savings or investment vehicle.
How much life insurance will I be able to qualify for?
You can use the following life insurance calculator to get an idea of how much life insurance you need.
Your total cost for years of retirement at per year is:
Assuming you retire at age , you have investing years left. Using a annual rate of return for your investments, you're expected to earn a total of .
Now, one thing that people don’t necessarily realize about buying life insurance is that insurance companies will place limits on how MUCH life insurance an individual can buy based on their age and current income levels.
The main reason…
Many folks aren’t aware of this because the “formula” that many life insurance companies use to determine how much insurance someone can purchase on themselves is pretty liberal (especially at a young age). For example, let’s take a look at what a 30 year old earning 40,000 dollars a year might be able to qualify for.
Using the most common formula for determining a “financial justification” most life insurance companies would allow someone in their 30s to purchase up to 25 times their annual income. This example means that he or she would be able to purchase up to 1 million dollars in coverage.
“Which is great for a 30-year-old!”
The only problem is that as one age, the “multiple” used to determine how much an individual will be able to purchase will decline. And in the case of those in their 60s, this number is going to decline rather rapidly.
For someone between the ages of 56-65, the limit will usually drop down to 10 times the applicant’s annual income. Then after age 65, this number is reduced down to 5 times the applicant’s annual income.
A number that can significantly reduce the amount of life insurance one can qualify for, particularly because only “ACTIVELY” earned income will be used in this equation, meaning that any “PASSIVE” income or income that would continue to be earned after you died would not.
So, when we look at what a 60-year-old would be able to qualify for making 40,000 a year, we see that they would no longer qualify for a million-dollar life insurance policy. Instead, they would only be able to qualify for 400,000. And a 65-year-old would only be able to qualify for $200,000 in coverage.
This may seem like a lot, but remember, this is right around the time that a lot of folks are thinking about retiring. And once they do decide to retire, most folks will see the vast amount of their “active” income drop down to zero, making it very difficult to qualify for any significant amount of traditional term or whole life insurance coverage (regardless of whether or not they can afford it).
Cost of life insurance in your 60s
The cost of life insurance when you’re in your 60s can vary depending on several factors, including your age, health status, the type and amount of coverage you’re seeking, and the insurance company you choose. Generally speaking, life insurance premiums tend to increase as you get older, as the risk of death increases with age.
For term life insurance, which provides coverage for a set period of time, such as 10 or 20 years, the cost can range from around $100 to several hundred dollars per month, depending on your age, health, and the amount of coverage you’re seeking.
Sample term rates for ages 60-69
You may notice that there are no 30 year term life insurance quotes available and after age 65, there are no 25 year term life insurance quotes as well. This is because companies will not provide a term that extends past age 90.
For whole life insurance, which provides coverage for your entire life and includes a cash value component, the cost can be higher than term life insurance, ranging from a few hundred to several thousand dollars per month, depending on the same factors.
For guaranteed issue life insurance, which does not require a medical exam or health questionnaire, the cost will likely be lower than a term or whole life insurance policy simply due to the small coverage amounts that these policies offer.
You can check out the rates on a $25,000 life insurance policy below.
Factors that may affect your eligibility
When you’re in your 60s, there are several factors that can affect your ability to qualify for life insurance, including:
- Health status: Your overall health and any pre-existing health conditions can impact your ability to qualify for life insurance, as well as the cost of premiums. Some health conditions that can affect your ability to get life insurance include cancer, heart disease, diabetes, and high blood pressure.
- Age: As you get older, the risk of death increases, which can make it more difficult to qualify for life insurance, particularly if you’re seeking a policy with a high coverage amount or a longer term.
- Lifestyle habits: Certain lifestyle habits, such as smoking, heavy drinking, or participating in high-risk activities, can also impact your ability to qualify for life insurance or the cost of premiums.
- Medical history: Your medical history, including any hospitalizations or surgeries, can also impact your ability to qualify for life insurance.
- Financial stability: Some insurance companies may require proof of financial stability, such as income or assets, before approving your application for life insurance.
- Occupation: If you work in a high-risk occupation, such as a firefighter or construction worker, it may be more difficult to qualify for life insurance or the cost of premiums may be higher.
It’s important to note that even if you have pre-existing health conditions or other factors that may make it more difficult to qualify for life insurance, there are still options available, such as guaranteed issue life insurance or simplified issue life insurance, that may not require a medical exam or health questionnaire.
How can I improve my chances of finding the best life insurance policy for me?
Here are some tips on how to improve your chances of finding the best life insurance policy for you:
- Evaluate your needs: Start by evaluating your life insurance needs, including the amount of coverage you need, the length of the policy, and your budget. This will help you determine the type of policy that’s right for you.
- Shop around: Don’t settle for the first policy you come across. Shop around and compare policies from different insurance companies to find the best fit for your needs.
- Work with an agent or broker: Consider working with an insurance agent or broker who can help you navigate the complex world of life insurance and find policies that fit your unique needs and budget.
- Understand the different types of policies: Make sure you understand the different types of life insurance policies available, including term, whole life, and guaranteed issue, so you can make an informed decision.
- Consider your health: Your health can impact your ability to qualify for certain policies and the cost of premiums. Consider getting a medical exam or health checkup before applying for life insurance, and make sure to disclose any pre-existing conditions or health concerns.
- Read the fine print: Make sure you read the policy details carefully before signing on the dotted line. Look for any exclusions or limitations that may impact your coverage.
- Ask questions: Don’t be afraid to ask questions and clarify any doubts or concerns you may have before purchasing a policy.
By taking the time to evaluate your needs, shop around, and work with an expert, you can improve your chances of finding the best life insurance policy for you.
The good news is that we here at IBUSA can walk you through each of these steps and answer any questions you may have along the way. So, when you’re ready, give us a call and let us show you what we can do for you!