Life insurance policies become more expensive as you get older. But that’s not the only thing that changes with age, especially when it comes to your finances. Your senior plan life insurance coverage bundle should account for those factors. Seniors, just as with any other generation, have their own risk tolerance and monetary needs. While anyone can buy instant life insurance online, an impulsive decision could cost you more than just the monthly premiums.
For example, if a 20-year-old consumer can no longer afford a whole life policy, they may get a new policy or switch to term insurance for a relatively low price. Seniors, meanwhile, don’t have that option. This is because premiums rise at a faster rate for older Americans. That is to say, if their policy cancels due to non-payment, consumers above 50 years old have to pay a much higher price when they reapply for the same coverage amount.
However, forgoing life insurance is a risky decision, too. Yet there are many policy options out there. The right bundle can adequately protect your needs at an affordable premium. For a start, your former employer’s life insurance might cover your retirement, but this is uncommon. Nonetheless, your senior plan life insurance coverage should combine term, whole, and/or variable policies. All of which depend on several key factors.
Filling the Gaps
About 50% of people die without having any, let alone enough, life insurance. Equally as important, only 31% had a policy that covered all of their final expenses. This includes paying for the funeral and property/inheritance taxes, as well as making up for the deceased’s lost wage. A burial, in itself, comes with an average bill of $7,000 to $10,000. While cremations cost between $1,650 and $3,725, consumers should take their entire final expenses into account.
In short, your senior plan life insurance coverage should include the following after-death costs:
- The funeral home, transportation from the hospital, and other related expenses: This is alongside the burial/cremation and type of service (at a home or religious site, for instance).
- Lost income, including Social Security payments and/or part-time work: If the deceased spouse is a homemaker, account for ordering food and hiring household management services.
- Existing debts and obligations: These include a mortgage, car lease, and medical insurance.
- Estate taxes: Consider all property, assets, and cash that the family inherits.
- Any other relevant expenses or lost income
Under the new laws, people pay the estate tax only when they inherit over ten million dollars. The IRS also notes, however, that beneficiaries don’t owe taxes on life insurance proceeds. The only exception is an interest-bearing policy.
Every household has its own needs, which makes it difficult to estimate the total final expenses. A family that paid off its mortgage in full, as an example, doesn’t need a policy to cover it. Similarly, some survivors may not lose health insurance when the spouse passes away. Yet this might impact their Social Security receipts. Therefore, in case of a tragedy, the household needs instant life insurance payments to offset the lost Social Security benefits.
Your Senior Plan Life Insurance Coverage: Term vs. Whole
Term policies will cover you for a certain number of years. Usually, they last for 15, 20, or 30 years. After that, the plan doesn’t payout when the policyholder dies, unless they purchase new term insurance coverage. This plan type is also relatively cheap. On average, a whole life policy is 600% more expensive than term life insurance for consumers aged 60-years and over.
The main positive side to a whole life policy is that it doesn’t expire. That is to say, you don’t lose coverage after a certain period of time. Instead, when you outlive the policy and your total premium payments equal the coverage amount, the insurance company refunds the money. Policyholders have access to these instant life insurance funds, but they don’t need to withdraw them. Most employers only offer term life, but unsure seniors should check if they had a whole plan and whether or not they are entitled to get the premiums back.
In fact, when you put together your insurance coverage bundle, this would be an ideal place to start. To clarify, it allows you to determine how much protection you already have. Subsequently, you can clearly establish the amount of additional coverage that your family needs. Ideally, if you’re eligible for proceeds from a whole life plan, it should cover all or most of your final expenses. The cheaper term policy, meanwhile, may take care of larger obligations, such as estate taxes or lost income.
What happens if you don’t have existing or active whole life coverage? This depends on your age. That is to say, 60-year-old applicants who get life insurance now will pay at least half the premium amount that their 70-year-old counterparts incur. Just as important is whether seniors get a 15, 20, or 30-year term plan.
Mix and Match
The older you get, the more risky whole life insurance becomes. The high premium makes it likely that policyholders will lose their plan and coverage due to non-payment. After that, in order to re-enroll at a latter time and age, seniors must pay even more in premiums. To offset this risk, purchase a whole life plan that suits your budget and dedicate it to a specific, urgent expense. Funeral costs or unpaid debts are amongst the examples. Whole life insurance fulfills these obligations, regardless of whether or not you outlive the coverage period.
As far as term policies are concerned, seniors certainly need them to cover the vast majority of their costs. This includes mortgage/debt payments, lost income, and more. The length of the protection period depends on how much you owe and what your existing whole life insurance entails. To illustrate, let’s assume that a retired couple is in their early 70s. Within ten years, they expect to pay off their entire mortgage and car lease. In addition, the household can cash out their fully-paid whole policy and access instant life insurance proceeds. However, the funds are dedicated towards their funeral costs.
One option for this couple is to secure a large amount of coverage for a low price through a 15-year term plan. After all, they will not owe any mortgage or auto loan debts within ten years. In another example, the same couple may not have an existing whole life policy. If this was the case, they could enroll in a longer coverage plan, such as a 20 or 30-year term. Alternatively, the household has the option of combining the initial 15-year policy with a smaller 30-year plan to take care of funeral costs.
Universal and Variable Life
These policies are also very risky, especially in a senior plan life insurance coverage bundle. The amount of universal and variable coverage that you have is tied to the stock market. When prices go up, so does the policy payout amount. At times, premiums might also become cheaper when the markets perform well. During financial and economic downturns, on the other hand, the story can get grim, especially for seniors.
Universal and variable life insurance plans have a great profit potential. Therefore, you could end up with more than what you initially bargained for (i.e. plenty of coverage for a low price). However, keep in mind that retirement-age consumers can’t afford to lose their coverage during a recession. When financial and economic conditions are bearish, their universal and variable life insurance premiums will go up. If you can’t afford the increased payments and the policy cancels, you would have to regain it at an older age for a much more expensive premium amount.
Sufficient and Instant Life Insurance Payments
When you put together a senior plan life insurance coverage bundle, several factors should guide your decision-making. Firstly, you must carefully calculate all of your final expenses. Healthier consumers may not need to decide between burial and cremation right now. Yet they certainly should identify instant life insurance needs, such making up for lost income and taking care of debts in the event of a death. Knowing how much the average funeral costs in your state/location is also a good idea.
Equally as important, determine whether you are entitled to any proceeds from a policy through a former employer. After that, cover the gaps and mix between term and/or life policies. Above all else, seniors should weigh their risks before they purchase a plan. Otherwise, they could lose the policy when they can’t afford the premiums.
We all want our beneficiaries to enjoy easily accessible and instant life insurance payments during tragedies. However, a financially stress-free and comfortable retirement also matters. A detailed and personalized senior plan life insurance coverage bundle should make both of those goals attainable.