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Best Life Insurance for Seniors

The age at which we become “seniors” will always be a subject of debate and may even be a moving target. For many of us, life’s considerations begin to change around age 50. Financially, it’s the beginning of a new chapter in life, a chapter where estate planning and life insurance start to become more important themes.

We’re living longer now when compared to prior decades and that’s good news for life insurance rates. The gender gap in life expectancy may be closing as well. On average, a man turning 65 today can expect to live to age 84.3, while a woman turning 65 can expect to live until age 86.7, again looking at averages.

Advances in medicine and healthier habits are helping us to live longer and to make life insurance more affordable. Still, rates go up every time you have a birthdaythe time to lock in your policy is now.

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Tip: Compare 2-3 Companies

Quick Look: Best Life Insurance for Seniors

  1. New York Life
  2. State Farm
  3. Pacific Company
  4. Mutual of Omaha

What is Life Insurance?

Life insurance can serve many functions depending on where you are in life, how your policy is structured, and what you want your policy to provide. For younger insurance buyers, life insurance often serves as income replacement to meet the needs of a growing family as well as cover financial obligations like a mortgage or other types of debt.

As seniors, mortgage debt may be a lesser consideration, either because the mortgage has been paid off or because the balance has been paid down significantly. However, final expenses are always a consideration, which may include burial expenses and any lingering medical bills. A life insurance policy can cover these expenses, ensuring that surviving family members aren’t unnecessarily burdened at an already difficult time.

Your life insurance policy pays a death benefit to a beneficiary of your choosing, with the proceeds of the policy payout often being tax-free to the person receiving the life insurance payout. This makes life insurance not just a way to provide for basic expenses but also a valuable tool for estate planning because it allows a tax-advantaged way to pass wealth from one generation to the next.

In many cases, life insurance benefits can be accessed early, like in the event of a disability requiring long-term care due to critical illness, making your life insurance policy even more valuable as a planning tool.

Why It’s Important To Buy Life Insurance Now

If you’re over 50, life insurance rates can start to creep up at a faster pace.

  • By the time you reach your early 50s, rates can increase by up to 8 percent each year for many types of policies.
  • This trend can accelerate, with rates often going up by as much as 10 percent each year by your late fifties.
  • For most types of policies, once you have a policy in place, your rates are set. Often, it’s waiting that costs the most.

Costs aren’t the only consideration, however. As you get older, you’re likely to find that fewer coverage options are available. For example, term policies are often only available for shorter coverage periods after a certain age. You can begin to find these limitations as early as age 50 with many life insurance providers.

Another consideration for some households is that the coverage amounts available often go down as you approach retirement age. This purchasing limitation is due to a limited insurable interest. When viewing life insurance as income replacement, insurers calculate how much income you’re likely to generate during the remainder of your working career, which limits the amount of coverage you can purchase.

If you’re retired or will be retiring soon, that number is typically much lower. Getting a policy in place sooner rather than later can help ensure that you’ll be able to secure enough coverage.

Types Of Life Insurance

Term Life Insurance. As its name suggests, term life insurance is meant to provide coverage for a predefined “term”, meaning a fixed amount of time. At the end of the coverage term, in many cases, premiums can increase substantially or the policy may simply terminate. As you get older, you’re likely to find that the term lengths available to you with fixed premiums will be shorter.

For example, many insurers don’t offer 30 or 40-year term life policies to seniors. Expect coverage lengths to be 20 years or less if you’re over 60. The primary advantage to term life insurance is cost. Because the coverage doesn’t last forever, term life insurance is often much less expensive than permanent life insurance.

Many people use term life insurance to provide coverage for large financial responsibilities that they’ll have for a fixed amount of time. Term policies can be purchased with a term as short as 5 years, which can make a term policy ideal for providing a safety net for other types of debt, like a car loan or a personally guaranteed business loan.

Permanent life insurance.  This can be any of a number of policy types, with the most common being a traditional whole life insurance policy. In nearly all cases, a permanent life insurance policy has a savings or an investment element as well, which helps to build cash value in the policy.

By contrast, a term life insurance policy has no cash value. The cash value in permanent life insurance policies can be accessed (as a loan against your policy) or can be used to pay premiums on the policy if you face a temporary cash crunch.

Whole Life. Whole life insurance is the most common type of permanent life insurance. Your policy builds cash value in addition to offering a death benefit because some of your premiums are put aside as tax-deferred savings (with interest). This cash value amount can be borrowed against.

Universal Life Insurance. There are several different types of universal life insurance, all of which contain an investment element as well as an annually renewable term life insurance policy, making universal life policies permanent life insurance. Discuss your options with your agent. Universal life insurance policies have important funding considerations.

Final Expense Insurance. Final expense insurance is a simple whole life insurance policy that is designed for seniors and typically provides up to $50,000 in coverage, enough to pay funeral costs and perhaps some remaining medical expenses.

Guaranteed Issue whole life insurance: Another type of final expense insurance promises to insure many applicants who may not qualify for conventional life insurance policies. Due to the inherent risk in the applicant pool for guaranteed issue life insurance policies, expect these policies to carry larger premiums.

Survivorship life insurance. This is a cost-effective way to insure two people without buying two policies, survivorship life insurance can provide insurance for a couple, with the death benefit being paid to the surviving spouse. Typically, you can find survivorship life insurance offered as an option with whole life or universal life insurance policies.

Our Top Picks

1. New York Life: Best Term Life

Term life insurance can be tricky for seniors. The available term lengths tend to decrease as you get older. While New York Life can have some similar limitations, the company is known for flexibility in its life insurance products.

Flexible terms and the ability to convert your policy to permanent life insurance — without another exam — are likely among the reasons that AARP has chosen to partner with New York Life. Your options don’t end with term life or whole life. New York Life also offers a number of universal life insurance options as well as annuities to provide permanent income.

2. State Farm: Best Whole Life

Customers who buy whole life insurance are often looking for three main characteristics in their life insurance policy: reliable, simple to understand, and affordable rates.

State Farm ticks all these boxes on the wishlist for many seniors and also has a nationwide network of agents who can service your policy, answer questions, and even help you build a complete strategy for retirement and legacy planning.

For seniors who want a simple life insurance solution that provides basic coverage, State Farm also offers final expense insurance with a $10,000 policy designed to provide for burial expenses and featuring guaranteed level premiums up to age 100.

3. Pacific Life: Best Universal Life

Pacific Life offers the most common types of life insurance. However, the company is best known for its universal life insurance products, including indexed universal life insurance and variable universal life insurance.

Some other insurers only dabble in universal life insurance options; Pacific Life prides itself on its expertise in providing a life insurance policies that not only cover the basics but also aid in the goal of building lasting wealth.

4. Mutual of Omaha: Best Final Expense

While some life insurance providers treat final expense insurance as an afterthought and offer few if any options, Mutual of Omaha has built its name. This is in part, by offering options and flexibility in final expense insurance policies.

Depending on your age and other considerations, you can choose coverage ranging from $2,000 up to $40,000 and choose from three types of final expense insurance offered by the company.

Eligibility for final expense begins at age 45, much younger than with many competitors, and coverage can be purchased for seniors up to age 85. Mutual of Omaha has over 100 years of experience, they’ve become a trusted provider of not only life insurance products but also medicare supplements, an important stop-gap when managing expenses for seniors.

Final Thoughts

Every household has unique financial priorities, which is why there are so many different life insurance options for seniors. Choosing the right type of policy for your goals and choosing the best life insurance provider are important steps toward providing for your family and avoiding additional hardship.

Consumers are encouraged to research their options and to avoid making decisions based on price alone. Although they may serve similar goals, not all life insurance policies are created equal. Life insurance is one area where it pays to invest some time speaking with agents to learn your options so you can make a better-educated purchasing decision.

Frequently Asked Questions

1) Q: What are the advantages of term life insurance?

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1) Q: What are the advantages of term life insurance?
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A term life policy allows you to purchase coverage at a guaranteed premium for a limited amount of time. This structure makes term life an affordable choice to protect your family if you have a financial commitment that won’t last forever, like a mortgage or the cost of raising kids. A 20-year term life insurance policy is the most popular life insurance policy purchased to protect loved ones if the unexpected happens. Get a quote here from top providers.

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2) Q: What are the advantages of whole life insurance?

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2) Q: What are the advantages of whole life insurance?
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Whole life insurance, along with universal life insurance and some other variants, is designed to provide coverage for your entire life. This differs from a term policy that offers guaranteed premiums for a limited time. Permanent life insurance has a savings or investment element that helps the policy to build cash value, making it an asset that can be borrowed against or even sold if you no longer need the policy.

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3) Q: Is life insurance taxable?

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3) Q: Is life insurance taxable?
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In most cases, the death benefit paid to life insurance beneficiaries is tax-free. However, if the policy premiums were taken as a deductible business expense, there may be a tax liability. There is also the possibility that a life insurance payout can change the way an estate is taxed.

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