We know the topic of life insurance for seniors is a bit of a difficult discussion, but it’s extremely important. Whether a plan is needed for you or a loved one, it’s extremely imperative to select the best possible policy you can, because it’s likely the last policy you or the insured will ever own.
We focus on three key factors when attempting to find the perfect life insurance policy for an aging person:
- Product Type
- Company Selection
You’re best served in reviewing your options in this order.
We focus on value first because, at the end of the day, any life insurance plan is about leverage; pay less now for more benefit later. Second, the type of product you choose makes all the difference in making sure the plan you get meets your value goals. And last, the company you decide to go with needs to be trustworthy, affordable, and offer the product which suits your needs best.
Navigating This Guide
- Why Life Insurance Is So Important For Seniors
- How To Get The Best Value, Every Time
- How To Select The Proper Product Type
- What Makes A Company The Right Fit
- Should You Consider A Rider
- How A Life Insurance Agent Can Help
- How To Speed Up The Application Process
- Sample Rates You Might Expect
- Advanced Planning For Larger Estates & Gifting
- Closing Notes
Why Life Insurance For Seniors Is So Important
When comparing senior life insurance plans, the very first thought should be tied to why you want the policy in the first place. There are several reasons to buy life insurance, however, someone aged 60 or older is going to have a very different set of needs and wants than a young, married couple with adolescent children.
Recognizing this, having a defined purpose for obtaining coverage is going to make all the difference in what you should ultimately buy. Here are just a few reasons you might be considering:
- Simple Burial Costs
- Pay Outstanding Debts
- Estate Taxes
- Pension Maximization
- Legacy, or Gift Giving
- Charitable Donation
For most, basic burial costs are the primary concern. More than 46 million people today are over the age of 65, and this rate is expected to double in the next few decades. Of this group of Baby Boomers, as they’re often called, life expectancy is increasing, and so are the financial responsibilities of living longer.
Living longer means the retirement nest egg will need to last even longer. In addition, it means a higher exposure to medical needs, one of the fastest rising costs for seniors. What this means, fiscally, is many folks are using their hard earned money while they’re alive, and less reserves remain to pay for burial insurance costs, unpaid medical bills, and other liabilities.
On the flip side, those who have accumulated large estates have another set of concerns.
Instead of the possibility of large debts being left to their heirs, they are more concerned with large inheritance or estate taxes. The IRS declared estate taxes for those with an estate of a gross asset value of, or in excess of, $5,450,000 in 2016, which rises to $5,490,000 in 2017. The tax rate on the excess is as high as 40% currently.
Though income replacement from a job is a lesser concern, considering a large percentage of seniors are either retired or unable to work, income sources for a surviving spouse can be protected through something called a pension maximization plan. This refers to using a small percentage of a current pension income to pay for a life insurance policy, which, upon death, would then replace the income from the pension to the survivor.
Last, if a large estate or pension max plan is not an issue, but leaving a large gift to family or a charity is, a life insurance policy can still be a plausible solution. Because the death benefit is both leveraged and tax free, it makes for a great way to leave a lasting legacy to heirs for years to come.
No matter the situation, knowing which of these categories you or your loved one falls into really matters. The type of plan you purchase and the kind of value you’re seeking is largely dependent on why you want coverage in the first place.
Getting The Most Value Out Of A Senior Life Insurance Plan
Once you know why you need life insurance as a senior, it’s time to figure out what you actually need to look for. And, regardless of what you are planning for, there is one thing you want to make sure: you’re getting the best value possible.
When discussing life insurance, value is both getting the most bang for your buck as much as it is solving a solution in the most efficient manner. If burial costs are your main concern, the solution is relatively simple. You need a burial life insurance policy, also called a final expense plan, and you want to pay as little as you can.
However, even this comes with a few caveats:
- Is the policy you’re buying guaranteed to never lapse, as long as you pay your premiums?
- Will the policy pay out immediately, or is there a waiting period (or graded benefit)?
- Is your health going to be an issue in obtaining the most affordable policy?
- How will your current age affect your ability to buy life insurance?
These are important questions to ask because you don’t want to outlive your policy, die before you’re eligible for benefits, or miss the opportunity to buy because of health or age. There is almost always some kind of life insurance available, but whether it’s worth it or not is another story.
Price is the most obvious factor most seniors consider when buying their life insurance. Ideally, a policy needs to be affordable, and the idea is to pay the least amount of premium for the most death benefit, up to your needs.
The first constraint to price is budget.
No matter how much you can get approved for, or how much leverage you can create, if it’s beyond your budget, it’s a poor purchase. Eventually, you won’t be able to maintain the premiums, and if you don’t die before then, you’ll be left with no coverage, and no money. In this scenario, a self-funded account would be best.
The next thing to consider is the premium to benefit ratio.
In other words, for every dollar you put in, how many dollars will you get out? The question never has an exact answer, because you don’t know the exact date you’ll pass away, but using common sense and basic mathematics should lead you to an educated decision.
For example, if you could buy a $25,000 burial policy and it cost you $10/month, or you could buy a $30,000 for $35/month, which one is a better value?
The first choice. Even though it’s $5,000 less in coverage, you’re paying less than a third of the premium. It’s a much better leverage, regardless of when you die.
For life insurance, efficiency means how well you’re transferring today’s dollars to their final destination. Life insurance, and it’s many different types, are all just financial vehicles to move money you have now, to a beneficiary or heir at some point in the future.
However, not all life insurance policies have the same efficiency in creating future value. Let’s walk through an example so you can see exactly what the difference is.
Peter and his wife, Glenda, have $25,000 ear marked for their children upon their death. However, Glenda discovered they could potentially create a larger benefit by utilizing life insurance. She contacted a few knowledgeable agents and she has two options:
- Buy two life insurance policies, one on Peter and one on Glenda.
- Buy a single life insurance policy, covering both the lives of Peter and Glenda, but which pays only after both are deceased.
In this scenario, the second option is actually a better choice, because utilizing a second-to-die life insurance policy, called a survivorship policy, allows the cost of insurance to be spread over two lives, not one, reducing the overall risk of an earlier payout by the insurance company. The survivorship policy is more efficient than two policies purchased separately.
This is why understanding the many different types of policies is imperative. Because of the higher likelihood of buying for permanence, life insurance for senior citizens should aim to meet as many criteria as possible before being applied for.
The Many Types Of Life Insurance Available To Seniors
Once you know the reason you need life insurance, and you understand what kind of value you’re seeking, it’s time to start pairing it with a policy which meets your needs the closest.
There are plenty of types of life insurance for seniors to utilize, but some are going to be much better than others, relatively speaking. For the most part, here are the three types of policies you are going to want to seek out more information for:
- Guaranteed Universal Life
- Survivorship Life
- Guaranteed Acceptance Life
These all have something in common: they are permanent life insurance contracts. Simply, as long as you maintain your premiums, you will have coverage in place. Even still, each one is strikingly different than the next, and will be suitable in different ways. Let’s break them all down.
Guaranteed Universal Life For Seniors
If you can qualify based on your age and health, a guaranteed universal life insurance policy (GUL) will be the best way to get permanent coverage for the lowest cost. Not only will this product type meet your needs of benefits, they are highly customizable to meet a wide range of budgets.
They are similar to whole life insurance policies, but they are made more affordable. This is because, while they gain cash value in the first few years, that cash value is used to offset the increase in rising premiums down the line. A whole life insurance policy continues to gain cash value in all policy years, but this comes from higher premiums paid by you.
A big distinction you need to make when buying a GUL is to be absolutely certain it’s about it’s guarantees. You can buy universal life insurance from most life insurance providers, however, not all of them guarantee coverage regardless of market conditions, interest rates, and other risks which could cause your policy to “implode” due to outside factors.
A GUL is excellent in several other ways, including:
- Flexible Premiums – some policies allow you some flexibility in paying your premiums, so even if you’re late on a payment, you don’t lose your coverage or it’s guarantees.
- Flexible Benefits – some policies allow you to shift the guarantee, so your coverage can be guaranteed to be the same from age 90, or all the way up to age 121. The longer the guarantee, the higher the premium.
- Flexible Growth – depending on the type of GUL you choose, you might even have the option to more aggressively attempt to grow the cash value within the product, though it can limit the guarantees you have access to.
Again, if you are looking for lifelong coverage at the most affordable rate, and you’re healthy enough to qualify, a guaranteed universal life insurance product is going to meet the vast majority of your needs.
Survivorship Life Insurance (Second-to-Die)
For senior couples, a survivorship life insurance policy is one of the most effective products for your more advanced financial planning and planned giving scenarios.
As mentioned briefly above, a survivorship policy is a permanent coverage option, but only pays when both insureds have passed away. This allows a lower level of risk from the carrier to pay out sooner than expected, which results in lower costs for you, the buyer.
However, because of the nature of its payout, it is much more crucial to have it set up properly, using the help of financial advisors, estate planning lawyers, accountants or other fiscal advisors. It might also entail having the owner of the policy be a trust, for example, not the insureds.
These subtle nuances are why it’s critical to get sound advice before engaging in this type of product.
Guaranteed Acceptance Life Insurance
Purposefully left as the third of the three options, a guaranteed acceptance life insurance policy should always be your last resort. This is because, per thousand of coverage, they are the most expensive type of life insurance on the market today.
So, why would we have this on our list of recommendations? Two reasons:
- Low Coverage Amounts
- You Can’t Be Turned Down
For many, a small death benefit, like $5,000 to $25,000, is all you’ll need. For amounts this low, few carriers require much underwriting, if any, and can stay very competitive on pricing. In fact, a lot of carriers won’t even offer a fully underwritten option on death benefits below $25,000.
The second reason applies to those who wouldn’t be able to get approved for another type of policy. If your health (or even your age) would restrict you from being eligible for another, cheaper product, this is your only option. There simply aren’t insurance options you could obtain, so it’s this, or nothing.
In addition to high pricing models, these policies also pay out on a modified payment schedule, meaning they may only pay a small portion, or none at all, until a certain amount of time has passed. For example, here is what a graded payout may look like:
- First 364 Days – No Payout
- Year 2 – 45% Payout
- Year 3 – 75% Payout
- Year 4 and After – Full Payout
Are these constraints on prices and payouts hefty? Yes. Is it still the best and only option for many? Yes. But, again, it should be a last resort whenever possible. Explore all of your options before opting for a guaranteed acceptance policy.
Wait, What About Term Life Insurance For Seniors?
A common question we get about policy types for seniors is why level term life isn’t suggested? There are certain scenarios where we may suggest a term life insurance policy for someone over 60, though it’s less and less common.
Someone seeking coverage at this age is almost always looking to solve a long term financial need, whereas term will only aid in covering a short term obligation. Here are situations where a senior may need to consider a term product in lieu of something more permanent:
- Pre-Retirement Income. If you’re still working and only have a few years remaining until you retire, you may want to purchase coverage to protect those last few years of your income generating potential to make sure your spouse doesn’t lose the opportunity to retire on schedule.
- Mortgage Pay-Off. If you’ve still got a mortgage and you’re confident it’s the last residence you’ll have, buying life insurance to cover the remaining mortgage may help your spouse to have the confidence the home could be paid off if something happened to you.
- Large Medical Bills. Medical bills are more common among elderly, but some health concerns can raise large amounts of debt, fast. The spin here is, if this is the case, getting approved may be the toughest task, yet it could provide peace of mind a surviving spouse won’t be left with a painful reminder in the form of a bill for the rest of their life.
Other than these three, there are few scenarios where a short term obligation can be resolved with a term policy. While a term life insurance policy is cheaper, per thousand, they just don’t provide the long term benefits of permanent insurance.
In addition, the life insurance carriers who offer term coverage to those in the upper age brackets do restrict how long the policy can stay in force. A 67 year old man can’t purchase a 30-year term policy. A 10-year term is much more likely, so any need which would go beyond 10 years would be unmet unless the primary insured passed away before the policy ended.
What About Whole Life, Then?
Whole life is becoming a more outdated type of policy. The primary benefits are its permanence, guaranteed death benefit, and guaranteed premiums. While the death benefit can grow as cash value builds up, it’s not enough to offset the price hike when compared to a guaranteed universal life insurance contract.
In the past, a universal life policy didn’t have the guarantees it does now. In fact, poorly structured universal policies from the late 1980’s are notorious for their implosions because the interest rate environment they were initially set up in is no longer keeping the policy afloat. They were set up to take in less premium because more growth was expected.
However, policies aren’t set up in this way any more. Because of the low interest rate environment currently, and new regulation, carriers and their agents are more respectful of guideline premiums, or the minimums required to keep the guaranteed death benefit.
The Top 10 Best Life Insurance Companies For Seniors In 2017
Based on your situational need and product selection it’s time to find the best company for you to apply to.
The best life insurance companies for seniors are, again, trustworthy, reputable and established, and have an affordable product which matches your need. Your focus is likely permanent coverage, so you want this company to be around when your beneficiaries need the benefits you paid for. This could mean decades. A company’s financial strength ratings are helpful, but only a piece of the puzzle.
But, there are also more subtle nuances, like whether you want a specific kind of rider, or if you are buying for estate preservation versus strictly minimal death benefit. However, the carriers list below can often serve more than one need. Just because you don’t see a carrier listed below doesn’t mean we won’t offer their product to you, if the shoe fits, so to speak.
Given these parameters, we’ve done a lot of the legwork for you. Here are our top 10 best life insurance companies for seniors this year:
- Northwestern Mutual
- Fidelity Life
- Mutual Of Omaha
Transamerica Life Insurance Company
Our all around best company for senior life insurance is Transamerica Life Insurance Company for this year. Already on our list for one of the best burial life insurance companies and our list of overall top carriers, it’s no stretch to see them as a top solution for seniors when you consider their entire lineup of products.
Transamerica has everything from simplified final needs options up to fully underwritten choices to meet the needs of more complex scenarios. Whether you require a small death benefit and want to skip the medical exam, or you and your spouse need long term estate planning with the use of a universal life insurance product, seek no further than Transamerica Life.
Backed by more than 110 years in the business, they are a long-standing, secure company. A.M. Best, Fitch, Moody’s, and Standard & Poor’s all agree, having awarded the Transamerica Life Insurance Company “A” or better ratings across the board, something few carriers achieve.
With the added ability to purchase accidental life or even long term care insurance, what’s not to love about what Transamerica offers?
Northwestern Mutual Life Insurance Company
Coming in as the second best company offering affordable life insurance for seniors is Northwestern Mutual Life Insurance Company, who also sits at the top of our best overall life insurance companies in 2016. One of the longest standing and last remaining mutual companies, it also boasts the highest ratings of any single life insurance company.
This company is ranked so highly on our list not only because of a strong financial presence, but because of their top notch pick for the more advanced financial planning solutions when it comes to using life insurance. Though a final expense policy won’t be your best bet with Northwestern Mutual, you can get everything from term to permanent, and even variable products, when needed.
As with Transamerica above, Northwestern currently offers long term care, often a great match with high level financial planning for seniors.
Protective Life Insurance Company
One of the best companies for a guaranteed universal life insurance policy is Protective Life Insurance Company. More than a century old, Protective Life is where you’ll find some of the best value you can get on the market, dollar for dollar.
Protective is a top rated, trustworthy carrier, with several different options of products within the universal life insurance realm. Their life insurance plans for seniors are customizable, very competitively priced, and there are selections for both individuals and survivorship plans alike.
You won’t find much for small, burial type policies from Protective, but you can get relatively low face amounts for permanent coverage with the fully underwritten options. These make great options for those who want to have a little flexibility with long term coverage.
You can read more on our page about Protective.
Banner Life Insurance Company
Having come in as a top 5 carrier on our overall list, Banner Life Insurance Company has two distinct advantages in the senior life insurance market: price and risk underwriting. Those with serious health concerns may see a little help in the lower tables from Banner.
One of the more pronounced companies to have made an impact on the life insurance market in the past few years, Banner has great term options, but few know how good of a fit they are for seniors with their universal products and more liberal underwriting style. Their strong financial status and excellent use of independent agents makes them a great selection.
Seniors won’t be able to utilize Banner’s no exam products because of age, but their Step Up UL® is a great choice for anyone who is looking for a very competitively priced permanent product. If health is an issue at all, you will definitely want to look at Banner as they are consistently one of the best priced carriers for seniors with medical conditions who can only qualify for Sub-Standard rates.
Sagicor Life Insurance Company
Rounding out the top 5 best life insurance carriers for seniors is Sagicor Life Insurance Company, a premier no exam company who fits the needs of life insurance for seniors because of some of their no lapse guarantee products.
A 170 year old company with an “A” rating by A.M. Best, they are reputable, strong financially, and meet our criteria of offering outstanding value.
With issue ages going up as high as 85 years old, Sagicor also hits a sweet spot many other carriers don’t tend to for the elderly. While the ability to skip the exam is there, also, it may not always yield the lowest rates, yet it’s something to mention. The no lapse guarantee of their universal life insurance product is a great way to maintain the guarantees of permanent benefits, but keep the premiums low.
For more sophisticated cases, Sagicor Life also hosts a couple indexed universal life insurance products, a much more niche growth and advanced planning option. It’s not for everyone, but can be a nice choice for several scenarios.
To learn more about Sagicor, read our review.
Fidelity Life Association
One company who narrowly missed the top 5 is Fidelity Life Association, an “A” rated carrier which got its start before the 1900’s.
Most of you will know the name Fidelity, though likely not as much for their life insurance division, but rather for investing. However, it’s the first of our top 10 life insurance companies for seniors to hit the list strictly because of its final expense products. Fidelity Life is second-to-none in a couple different product areas for burial coverage, including its hybrid and graded policies.
Made specifically for people aged 50 years old and over, Fidelity offers some guaranteed life insurance products for those with health conditions who would be otherwise denied. There are no exams, issue is near instant, and payout structure is very fair. Their Hybrid Life product is also an option mixing life and accident, something you can’t find many other places.
Here is our full review on Fidelity Life if you want to read more.
Assurity Life Insurance Company
Coming in 7th on our list of best life carriers for seniors is Assurity Life Insurance Company. An “A” rated company, Assurity has been around around a very long time, even though the brand itself has only been named since 2007. A mix of three previous insurance entities, it now stands as one, Assurity.
Most notably among the top tier no medical exam companies, Assurity also fits nicely into the portfolio for many people seeking coverage over the age of 55. One facet to consider is your access to critical illness and disability coverage, alongside their selection of term and universal policies.
Assurity may be a little more selective than other carriers on the underwriting side, but for those who can qualify, expect very competitive rates, especially on universal life insurance coverage. On the advanced planning side, they even offer a Single Premium option, great for something like funding a policy up front, and then enclosing in an ILIT (irrevocable life insurance trust) to satisfy estate plan needs.
If Assurity may be right for you, continue reading the full details here.
5Star Life Insurance Company
Though newer to market, 5Star Life Insurance Company has squeezed into the top 10 this year for ease of access and excellent value. While not the biggest and most prominent name in the industry, they have solidified a spot for meeting our criteria on value and product availability.
Rated an “A-” from A.M. Best, 5Star is a secure company who offers a nice suite of choices for short term and long term needs, including final expense. In addition, simplified underwriting (and guaranteed underwriting) mean fast approvals, and you still won’t feel the price hit as you do with other carriers for opting for this type of policy.
The product to take note of is their Family Protection Plan- TI, which has level premiums as far as age 100 (though the benefit could decrease over time). Even more, it’s got just seven questions and no other database checks. For anyone looking for simple, fast coverage to meet a specific budget, this is a great option.
Mutual Of Omaha Life Insurance Company
Another mutual life insurance carrier to hit our list of best senior life insurance companies is Mutual of Omaha.
Look no further than this 100 year old, triple “A” rated carrier to meet your needs for both fully underwritten life insurance, and guaranteed issue coverage. Whether you want easy-to-get coverage up to $50,000, or you require more death benefit for as long as you live, Mutual of Omaha Life Insurance Company has you covered with their full line of different types of choices.
Mutual of Omaha would be higher on our list, considering its reputability and strength, as well as selection, but the value you get is not always there for each demographic. For some, it’s going to be the best bang for your buck, but it’s a more select few. If you want selection, simplified underwriting, and an extremely strong company, then you may want to dig a little deeper on Mutual of Omaha.
Here is more information on the products they offer.
Finally, rounding out our list of the 10 best carriers for seniors is Foresters.
From Foresters, you can enjoy confidence of security and a pretty wide selection of final expense options from a company established all the back in 1834. An “A” rated, non-profit company, expect good value with a lifetime of benefits you know you can trust.
The primary reason Foresters made the cut was for their selection of whole life, burial and even accidental coverage. While a small portion of people will need it, their whole life policy is a great option for those who want an easier approval with benefits paying the day the policy goes in force. There are also several universal life options to choose from if the whole life doesn’t fit the bill.
As mentioned above, these are our choices of top companies when considering life insurance for a senior, but the final choice is yours. Remember, there are hundreds of life insurance carriers to choose from, so feel free to take your time. Most people search up to 30 days before they start to make a decision.
The type of company, their ratings, the products they offer, and the people who will service your policy are all things you need to consider. Yet, even when you find the right company and product, you may be curious to know how adding a rider to your policy could benefit you in the long run.
Do You Need To Consider Any Riders?
Riders can be a little confusing sometimes, but they are important and provide great benefits, so we need to take a minute to see if a life insurance rider is worth adding to your policy.
When you buy a car, do you buy the base model to save money, or do you like adding upgrades such as power windows, power locks, or heated seats? This is how a rider works, too. It’s an upgraded benefit on top of the death benefit.
Life insurance riders for seniors should aim to add accessibility, or provide an additional, non-life insurance type of benefit in order for them to make sense. Otherwise, it’s probably not worth adding. Here are benefits seniors might actually use:
- Accelerated Death Benefit Rider
- Critical Illness Rider
- Waiver of Premium Rider
There are tons and tons of riders out there, but most of them are not really crafted for seniors to use. However, these three are definitely worth looking into. Let’s discuss each one.
Accelerated Death Benefit
Cost: Usually Free!
The accelerated death benefit rider does what the name says. It quite literally will accelerate a portion of the death benefit of your life insurance policy to you, even when you’re still alive.
Now, you can’t just access it for any reason. Usually, in order to trigger this rider, you will need to submit proof of a terminal illness, a condition which has declared you have 12-24 months, or less, to live.
So, why does this rider make sense?
There are several reasons you might want this on your policy, because life insurance companies don’t really restrict how to use the benefit. In other words, you can use the proceeds advanced to you in any way you want. Here are ways to spend it:
- Medical Bills. Rather than let bills continue to increase and gather interest, it might be advantageous to pay them down sooner than later.
- Experimental Treatment. You could attempt to go through an experimental treatment which your insurance won’t pay for, and you couldn’t otherwise afford. There are cases where a terminal patient has used this benefit and survived many years after their terminal diagnosis.
- Experiences. Sometimes a final family vacation or reunion is a great way to create some long-lasting memories.
Even though it tends to be free from most insurance companies nowadays, you still have to elect to have the benefit. The reason for this is because some long term care plans will actually delay benefits until this provision has been utilized by the insured. These long term plans will require you to spend down any assets you have, which might include accessible death benefits, before it activates.
A critical illness rider is an especially useful rider for a senior, as it’s the demographic most affected by critical illnesses of all types. However, they can become cost prohibitive for some.
Often confused with the accelerated death benefit rider, there is a subtle difference. The critical illness rider advances a portion of the death benefit to you, but you don’t have to have a terminal illness.
If you had a stroke or were diagnosed with cancer, for example, you may have higher chances of survival, but hefty medical bills to follow. In this scenario, you wouldn’t have been declared terminally ill by a doctor, but these types of health conditions would still activate the critical illness rider.
The main issue with the particular rider over the past few years is cost. It’s very difficult for a life insurance company to price this kind of benefit in, because it’s like they’re mixing life and health insurance together, in a way. This has caused a generally high cost as more and more companies are attempting to add this rider simply to stay competitive with others.
Waiver of Premium
Something to consider for some, it’s not going to be available to everyone simply due to age at the time of application.
The waiver of premium rider allows you to stop paying your premiums in the event of a disability. For the length of the disability, the insurance company pays the premiums for you, and you resume the costs once the disability ceases.
There is definitely a cost to this rider, and its cost to you is largely based on your age. In addition, your eligibility for the rider is also based on your health profile when you apply. You can be accepted for a life insurance policy, yet turned down for this rider if your health warrants the decision.
Should You Use An Agent Or Go Direct To A Carrier?
In some situations, you won’t have an option to choose between an agent or carrier. Though, it’s unlikely. This is because there is a type of agent called an independent agent, who actually doesn’t work for any single carrier at all.
Here are your choices, as you progress through the buying process:
- Independent Agent
- Captive Agent
The independent agent is always your best choice, hands down. An independent agent (like us) can be licensed in all 50 states, and be appointed with virtually any life insurance company necessary. Often called brokers, they can match you with pretty much any product from any carrier.
The captive agent is one who is employed by a single company. The only time you’ll want to work with a captive agent is when you absolutely know you need a certain product from the company they represent. While this scenario is pretty rare, it does exist for products offered by some of the major mutual companies.
The carrier would be the life insurance company, directly. Believe it or not, most carriers don’t really even offer this buying path. Most either have an internal or external call center, which have hired agents, or they use independent agents across the country to offer their products for them.
Because of the internet and digital buying age we’re in, the independent agent is used by a vast majority of purchases. Of course, this makes sense because an independent agent is synonymous with choice. If you go to a captive agent or individual carrier, you can only get what they offer, and nothing else.
Therefore, we always recommend an independent agent or agency to start. There’s no reason to pigeon hole your entire purchase to a single place. Utilize the independent agent’s resources to do the shopping for you. A good agent will be able to present you with all of your choices, and simply allow you to pick what’s best.
Ask your agent to present you with options based on price, by company rating, by cash value growth, and it can be done. Let them do the leg work for you.
The Application Process (And How To Speed It Up)
When you’ve found what you want and it meets your needs, it’s time to apply. The application process for a senior citizen life insurance policy will vary slightly based on product selection, but for the most part, it’s pretty similar from person to person. Here are the steps, in order:
- Phone Interview
- Database Checks
- Medical Exam
- Medical Record Requests
- Approval Decision
The application itself will vary based on product type, and company chosen. Overall, it will be a lot of the same pieces of information, though questions may be asked differently from one to the next.
In a nutshell, the application will always begin with basic contact information, your chosen beneficiary information, and the details of the policy you are applying for (amount, duration, type).
NOTE: A guaranteed acceptance policy may stop here. This is because, as long as you’re eligible based on age, you are approved, without regard to health or underwriting of any kind. No medical is needed, and no records are requested. There are no health questions to answer. The application and payment information are all which are needed.
Once the first portion is complete, medical questions are next. The number of questions you’re asked and the amount of detail required of you is based largely on the carrier, and policy type. All things being equal, a term policy from one company to the next would ask similar questions, as would a simplified issue policy from one to the next.
The more questions you can answer “No” to, the better. Less questions answered means there is more the company doesn’t know about you. The less they know, the higher of a risk you are. The higher risk you are, the more you pay.
While not always required, a phone interview may either take place of the medical questions on the application, or be a supplement to them. Sometimes the questions can be asked directly by your agent, however, other situations may require the company to call you and ask them directly.
A phone interview tends to take 15-20 minutes, and is used to clarify or go into greater depth on several health related, occupation related, or criminal related questions. If you answered “Yes” somewhere on the application or during this call, more questions on the topic will be asked.
For example, let’s say you said “Yes” to having diabetes. Follow up questions would be related to what type, how long you’ve had it, what kind of medication or insulin you take, what your current numbers are, and more. The company needs to know as much as they can to assess your total risk to them as it relates to your diabetic condition.
Similarly, it also offers you a chance to clarify anything you need to. Errors do happen from time to time, so this is your chance to let your agent or underwriter know if they may come across any inaccuracies now or later in the process.
After you have completed, signed, and turned in your application, the very next thing the insurance company will do is hit outside databases for more information. These are the hits:
- MIB (Medical Information Bureau)
- Rx (Prescription Database Check)
- MVR (Motor Vehicle Record)
Every once in a while, there is enough information in these three databases which tell the life insurance company to stop immediately. Let’s say, for example, an applicant’s MVR showcases several DUI’s and a couple speeding tickets, too. Many carriers would discontinue right away, if this were the case.
However, the company is not looking to deny you. In fact, it’s never the case. They want to approve you, but you have to fit within an acceptable amount of risk.
If one of these databases reveals too much risk, it’s a way for the company to avoid going through the rest of the process, which can be expensive and time consuming, only to find out they wouldn’t haven’t approved the applicant anyway.
Even while the information from the database checks is still being received, you’ll be asked to go ahead and schedule your medical exam (if required). The medical exam involves several vital bits of information for the insurance company to evaluate. They include information from:
- Height and Weight (BMI) Measurement
- Blood Pressure Check
- Blood Sample
- Urine Sample
Medical exams are completed by a disinterested, third party exam company. The agent or company who helped you complete your application or phone interview can schedule it for you, or the exam company will have one of their examiners call you to do so.
The typical exam lasts about 20 minutes, where the examiner measures your height and weight, takes your blood pressure (an average of 3), takes a blood sample, and collects urine for a urinalysis. Many seniors may be required to complete an on-the-spot EKG, too, if the death benefit amount requires it. Depending on health history, it could also be requested regardless of standard requirements.
If you chose a simplified issue (no exam) policy, or applied for a graded/guaranteed product, you won’t be required to complete this step.
Medical Records Requests
Medical record acquisition is a process between the underwriting department of the company you applied with and your doctor(s). You will rarely need to do anything for this step.
An APS, or attending physician’s statement, will be needed to verify your health. They may be ordered from your primary care physician, specialists, gynecologist, or any other type of medical professional you’ve seen. If you visited a hospital recently, they could also request information from there.
The only time you should need to intervene is if your doctor has not sent the files. A doctor’s office does have a time frame in which they are supposed to send the records, but they don’t always get sent right away. In fact, some offices simply push orders once a month.
If you need records faster, you may need to call your doctor to have them expedited, if possible. This is especially important when you need to be approved in a certain amount of time.
The all important underwriting process only begins when all information has been obtained from each step above, where required. This is why skipping the medical exam and applying for a simplified issue product moves so fast; they skip all the steps above up to this point (database checks may still be run, but happen very quickly).
As the underwriter moves through the files and comes across any amount of information they aren’t sure about or need clarification on, they can stop and hold the decision until the information is obtained. It may be a simple clarification for the agent to ask you, or it might be another APS from another doctor or specialist they come across within your records.
If you’ve drafted a cover letter, which we recommend, this is when they’ll read it.
Each company has its own guidelines on how they approve a senior for life insurance, but for the most part, they are somewhat similar. However, it’s in those details where it truly matters. One company might look at your BMI and give you a Sub-Standard rate, where it’s good enough for Standard from another.
Once every bit of information has been assessed, the underwriter will give their rating and either make an offer, a postponement, or a decline.
If the underwriter makes an offer, it’s on a scale which would typically read like the following, from best to worst:
- Preferred Plus
- Standard Plus
- Sub-Standard, Table (1 – 10)
This assumes a non-smoker classification. Smokers will differ slightly, usually only having Select Smoker and Standard Smoker, with the additional Sub-Standard ratings.
All rates above Standard are considered discounted rates, and Standard is usually what is referred to as the base premium. Most applicants are approved around Standard.
If you were approved at a Sub-Standard rate, each additional Table is 25% more premium than the base premium (Standard). A Table 2 would be 50% more, a Table 3 would be 75%, and so on.
If the underwriter postpones your application, it’s different than a full decline. It simply means you may be accepted at a future point, but based on your current information, you are too much risk or there is an undefined amount of risk for the carrier.
As an example, some carriers won’t approve you until at least 5 years after certain types of cardiovascular disease because of the on-going risk of re-occurrence. Another might be a postpone due to a DUI, or other type of infraction, where carriers may want to see up to 10 years pass since dismissal of the incident.
Finally, if the carriers is sure you’re simply too much risk, you will be declined. In some cases, you can apply to another carrier who will see it differently, though it’s not always the case. At this point, you may need to move towards a graded or guaranteed type of choice, where underwriting is more relaxed.
If you are approved, you have several options. Remember, it’s an offer, so there may choices for you to make moving forward. Here are some:
- Accept – If you’re pleased with your rating, you can accept. You’ll be asked to sign an illustration, showing you see exactly what to expect in the future as years pass, and you’ll be asked to begin making premium payments.
- Reconsideration – If you think you deserve a better rate, you can ask for a reconsideration. However, you have to bring new information to the table, so to speak, or the underwriter’s decision can’t be changed. You can’t simply ask for a reconsideration because you don’t like your rating.
- Refusal – If you simply don’t want the policy, for whatever reason, you can say no. If you’ve paid any premiums up to this point, you’ll be refunded those premiums.
There is one other choice, though it’s not as cut and dry. It’s called a policy modification. Let’s say you were approved, but at a much more expensive rate than you could afford. If you still valued the coverage, though, you could modify the policy details (death benefit amount, or coverage duration) to lower the premium.
If you request a policy modification, you can only decrease benefits, not increase them. If you did need to increase for some reason, you may be required to submit additional documentation or go through more underwriting procedures.
Sample Life Insurance Rates For Seniors
Sometimes it’s hard to know what to expect, price wise. A senior life insurance plan, by default, will be more expensive than a younger persons, because life insurance rates are based largely on age. The older a person is, the more expensive they will be to insure, per thousand.
Here are just a few sample life insurance prices for seniors based on different policy types. These monthly premiums are guaranteed for only the duration of the policy selected, and rise thereafter.
10 Year Term Life For Seniors
As strange as it might look, your eyes are not deceiving you when you see some of the premiums for $100,000 in coverage being cheaper than $75,000. There are price breaks as certain levels, and $100,000 in death benefit is one of those, as is the $250,000 mark.
If you find yourself looking for an odd amount, like $90,000, have your agent run the numbers for $100,000 as well, because it might actually be cheaper to get more death benefit.
Remember, for this type of policy, the premium is only guaranteed to stay the same for 120 months.
Universal Life to Age 90
If a permanent policy is out of budget, but you still required a longer duration of coverage than a 10 year term, it may be a good idea to check out a Term-to-90, or Universal Life to 90 type of option. As the name implies, it’s a level death benefit and level premium up until you reach age 90, regardless of how old are currently.
Someone who is 50 or 55 is a lot less likely to need this type of coverage, as a long duration term would probably be cheaper, but if you are 65 to 75 and need more than 10 years of death benefit, it’s a consideration.
Guaranteed Universal Life Insurance For Seniors (to age 121)
You’ll notice a couple points of difference from the UL90 to the UL121. First, there are more options for smaller death benefits. Essentially, on a longer timeline, the life insurance company is better able to price their products because they know they will pay out at some point. With the lesser durations, there’s more variables.
Second, you’ll note the price increase. Obviously, the longer duration you elect, the higher the price will be. With a GUL (guaranteed universal life), the company is guaranteed to have to payout, so long as the applicant keeps paying, so they can price accordingly.
This is also advantageous for you, the buyer, because you can see exactly how much you’ll pay out over a period of time, and know what to expect for a payout at any age.
Final Expense / Burial Life Insurance Rates For Seniors (Level)
These level benefit plans are permanent plans with a mix of straight and graded whole life options. In other words, there is still some amount of underwriting or questions involved to get approved for this level of insurance.
The main difference between these and the universal life choices from above are the lower face amounts, especially below the $25,000 threshold. If you are relatively healthy, need $25,000 or less of permanent coverage, and don’t want to pay the higher premiums of guaranteed coverage, this is what you’ll want.
Guaranteed Acceptance Life Insurance Rates For Seniors
Finally, the chart above hosts sample guaranteed acceptance life insurance rates for seniors with plans ranging from $5,000 up to $25,000. While you’d be hard pressed to find a single guaranteed policy over the $25,000 death benefit, you can get more than one (each from different companies).
As mentioned previously, these policies are last resort. The premiums are the highest, per thousand, and the death benefit is not fully available in the first few policy years. However, if you have poor health, this may be your only chance of getting coverage.
Having seen the prices from all the different options above, you can see why selecting the right policy from the beginning can weed out a lot of confusing charts of numbers. Once you narrow down the most suitable coverage option, you can avoid having to pick and choose from such a wide variety of premiums.
*All rates are monthly, based on a male at Standard ratings. Rates shown are based on many different carriers at the time of publishing this page, and are not an offer for life insurance. Final rates subject to underwriting by issuing life insurance company.
Advanced Planning For Seniors Using Life Insurance
As alluded to towards the top, there are situations where life insurance is used as a financial instrument to aid seniors and their advisors to solve difficult long term hurdles. Other times, it’s simply a way to create immediate leverage where another financial product can’t. These options for seniors use life insurance as a a long term planning tool, specifically.
When we refer to advanced planning using life insurance, we are no longer talking about term life insurance or final expense, really. Instead, universal and whole become the major focus because of how we can use their cash value components and permanent death benefits. Again, here are the situations where it makes sense:
- Pension Maximization Plans
- Creating A Legacy
- Charitable Giving
- Estate Tax Planning
There are others, but we’ll focus on these four, for now.
Pension Maximization Plans
Pensions are something many seniors receive income from in their retirement years. Although they aren’t quite as common as they used to be, they are still offered in some occupations.
One unique thing about pensions is they have choices on how you withdraw the money over time. However, once elected, you typically can’t change it. Here are two such options:
Life Only – this payment election allows the recipient to receive the highest benefit amount per month (or annually, if chosen), but the benefit ends when the recipient dies.
Survivorship – this payment elections offers the recipient and his or her survivor a payment spanning both their lives, but because it will pay out until both pass, the monthly payment is lower than Life Only.
A problem many retirees encounter is which to elect. Should you take the higher amount and hope to live a very long time to “get your money’s worth” for both you and your spouse? Or do you take the lesser amount with the added security of never leaving your surviving spouse without an income?
Enter, pension max with life insurance.
Essentially, the Life Only election is taken in order to give the recipient the highest possible income level, and then a portion of the income is used to purchase a permanent life insurance product on the recipient. The key to this working is the cost of life insurance.
A pension max plan can only work if the cost of the life insurance is less than the difference of the Life Only election and the Survivorship election. In addition, the life insurance policy purchased needs to be big enough to offer the surviving spouse and equal or greater income, once annuitized.
Ideally, the couple would then receive a greater amount than the Survivorship election, yet still have the security of a guaranteed income spanning both lives.
Creating A Legacy
Many seniors simply want to pass along any assets will they have remaining once they die to loved ones or friends. And, when the assets are liquid, they can be leveraged especially well using a life insurance policy.
There are two major key elements to this working:
- In most situations, a life insurance payout is significantly more than a person put in.
- Life insurance payouts are tax free.
When a senior has a particularly large amount of assets they want to pass down, these become increasingly important, especially the tax element. For example, money invested in CD’s would be treated different than money received from life insurance proceeds, even if it was the same amount, strictly because of taxation.
Money which is already earmarked for a certain person or establishment may be better utilized within a life insurance plan, because it could not only produce more of a benefit, but the taxability could be more favorable to the heir.
Throughout their lives, many find a charitable organization, a university, a hospital or other philanthropic group they wish to contribute to. Not only does it aid those groups in their missions, but it can also be tax deductible for the benefactor, creating a win-win situation for both parties.
While charities can accept many different forms of aid, monetary gifts are still the largest method in which people assist the organizations they support. With life insurance having a focus on leverage, it can be a logical method to arrange a gift.
If you are willing to transfer ownership of a life insurance policy in your name over to the charity of your choice, and simultaneously name them the beneficiary, you would not only be eligible for a tax deduction now, but on future payments you make into the policy as premiums.
On the back end, the charity would still receive the death benefit tax free. You are able to keep a tax deduction, and the charity is now going to receive more than amount you donated, because of leverage.
That’s a win-win-win.
Estate Tax Planning
Families who generate a large estate need special kinds of planning if they want to pass their estate to their heirs in a tax efficient manner. Taxes under our current tax law aren’t assessed to an estate until it reaches nearly $5.5 million in size, so you are exempt from this type of planning up to this point.
But once reached, any value, liquid or not, within an estate can be charged a very high tax rate when the owner of the estate dies. Again, for the power of leverage and the tax free nature of death benefits of life insurance, there are several ways a life insurance policy becomes a solution to long term efficiency needs.
If the estate is not liquid, for example, the beneficiaries would either need to find the funds to pay the taxes due, or sell off the assets in order to make the payments. Life insurance could, instead, absolve the issue by creating the liquid cash needed so the assets wouldn’t need to be sold at a discount just to pay taxes.
Estate planning with life insurance really does require more hands than your own, and will require a life insurance agent, tax lawyer or estate planning lawyer, accountant, and potentially more parties. This is to ensure everything is set up legally and properly to ensure maximum benefits are observed.
In addition, there are situations where the intent is not just a single generation, but multi-generational. In others, businesses are passed down, not just traditional assets, meaning there are more considerations to be made.
No matter the scenario you find yourself in, if you require some type of advanced financial planning with life insurance, due diligence is a must. Talk to financial professionals you trust, and educate yourself as much as you can before you make a decision.
As you can tell, there are many, many things to consider when buying life insurance as a senior. As our lives get more complex, so do our financial plans and insurance needs. But, you are not alone. We are here to help you understand your options, and choose the path which benefits you the most, now and later.
Remember, focus on these things:
- Product Type
- Company Selection
If you keep a sharp on satisfying these few items, you’ll find the process much more linear, and a lot less complex. It can be intimidating to think about buying the last life insurance policy you’ll ever need, so take your time. Never feel rushed, and don’t ever sign something until you’re sure it’s what you want.
If you are an adult child buying life insurance on your parents, be sure to be conscientious of your parents wishes, and put yourself in your shoes as you’re both having these conversations. It’s a difficult subject matter, so don’t make light of it.
If you are the insured and have kids helping you put these issues to rest, be sure to communicate openly and let them know exactly what you want so there is never any discrepancy down the line when you can’t be there to resolve it.
Finally, always ask questions, whether it’s to your agent, financial advisor, lawyer, accountant or otherwise. They are they to help, not to ridicule. Keep everyone informed, and the entire process will be smoother.
Whether you need a basic policy or something more advanced, we can help.
Feel free to contact us for a free life insurance quote or consultation today.