Life insurance often makes the most sense for people who are far from retirement. But life insurance for seniors is easier to buy than you may realize.
Just because you can do something doesn’t mean you should.
In this article, I’ll explain the life insurance options for seniors, whether any of the choices are particularly attractive and how much money life insurance costs for seniors.
Table of Contents
- Can Seniors Buy Life Insurance?
- What Type of Life Insurance Is Best for Seniors?
- How Much Does Life Insurance Cost for Seniors?
- Do You Need Life Insurance as a Senior?
Can Seniors Buy Life Insurance?
The older we get, the harder it is to find affordable life insurance with big payouts — or to get coverage at all.
But seniors can buy life insurance. In fact, there are a number of choices depending on why you want insurance. Perhaps you want to cover a few more years of mortgage payments, protect your family in case you’re still earning income, make sure you can leave an inheritance or even cover your funeral costs.
But a lot of seniors don’t actually need to buy life insurance. And there are options that just aren’t appealing or don’t make financial sense.
“The most important thing is not that it’s really difficult for somebody who’s older to buy life insurance,” money expert Clark Howard says. “The bigger issue is why would you buy life insurance anyway if you’re old?
“Remember that the purpose of life insurance is to provide replacement of income when you’re gone. Who’s in your life that may need to replace your income?”
What Type of Life Insurance Is Best for Seniors?
What It Covers: the remainder of your working life (if you’re still earning income) or outstanding debt (such as ongoing mortgage payments).
Typically the cheapest type of life insurance for seniors, term life insurance can be reasonably priced, especially if you’re in great health for your age and you’re willing to take a medical exam.
The older you are, the lower your maximum available benefit and term length will be. It’s a challenge to find companies willing to offer you term life insurance once you’re well past 70 years old.
In most cases, term life insurance exists to replace the income you would’ve made in your working lifetime. The average retirement age in America in 2022 is 61. If you plan to retire at 65, you probably don’t need term life insurance that lasts until you’re 75.
According to Clark, by the time your working life is over, you’re at an age where you probably don’t have financial dependents. If you have a child at 35, they’ll be 30 years old when you’re 65.
Another way to look at it: Say you bought a 20-year term life insurance policy when you were 35 years old. You may consider purchasing a 15-year term life policy at 55 years old to get you through the end of your working years.
James Hunt, a life insurance actuary from the Consumer Federation of America and a source Clark trusts, says you need to be careful about the year your term life policy expires.
“If you own a 15-year term policy, you generally can’t renew after age 70,” Hunt says. “And if you have a terminal illness, you’re facing gigantic premiums that increase each year. Pay attention to the premiums that will be payable if you don’t [get offered] a renewal.”
Whole Life Insurance
What It Covers: a guaranteed cash payout upon your death.
Whole life insurance is permanent life insurance with an investment component. Unlike term life insurance, as long as you’re current on your premiums, whole life insurance will pay out upon your death.
However, Clark isn’t a fan of whole life insurance unless you make $400,000 or more annually — or you’re wealthy, in your 50s or 60s and buying it for investment or tax purposes.
The older you are when you buy whole life insurance, the more expensive your premiums will be.
Hunt is less dismissive of whole life insurance policies for seniors, such as end-of-life policies (which I’ll cover in detail shortly). Keeping a lot of your money in the stock market — or even in bonds — is a risk that some seniors just don’t want (or need) to take.
“Say you’re age 60 and worried about long-term care, and you have the means to buy a whole life policy from a quality company, of which there are several,” Hunt says. “The best companies are now paying between 4 and 5% interest, which is well above what you can get at a bank or safely buying bonds, because bonds are taxable.
“Life insurance for seniors can be a good investment because seniors are going to be more risk-averse and want to stay away from the stock market, maybe.”
Here’s the Clark.com list of the best life insurance companies.
Long-Term Care Insurance
What It Covers: seniors who need supervised care.
About 60% of individuals need some type of long-term care insurance (LTCI). The longer you live, the more likely you are to need to pay someone to help you with basic needs such as bathing, eating, getting dressed and going to the bathroom. Regular health insurance and Medicare don’t cover these services.
I’d like to note that LTCI isn’t life insurance. But it is relevant when thinking about insurance for seniors.
Depending on the policy, long-term care insurance may cover nursing homes, home health care and assisted living. So it’s a nice way to de-risk some of the potential health care costs you’ll face late in life. The best time to purchase it is in your late 50s or early 60s, according to Clark.
Other Life Insurance Terms That Seniors Need To Know
- Universal or Variable: Clark says these types of permanent life insurance are “radioactive” for your wallet.
- Guaranteed Issue: These are insurance policies that don’t require medical exams. If you’re older and in fair or poor health, and you need at least some coverage, this is an option. As you can imagine, the premiums get quite expensive.
- Simplified Issue: These policies let you skip medical exams (at least initially) in favor of short health questionnaires. Seniors and those with health issues may get asked to submit to a medical exam anyway. Simplified issue allows for a bigger benefit than final expense insurance (which is typically guaranteed issue).
- Final Expense: a specific type of whole life insurance. Often limited to a benefit of $25,000 or less and not requiring a medical exam, it may also be called “senior whole life” insurance. It can help with final expenses such as funeral and burial costs and debt that a surviving family might have to pay such as your medical bills.
- Graded Death Benefit: offers affordable premiums to high-risk applicants. Usually, there’s a two- or three-year waiting period after you start paying. If you die of natural causes before then, the policy issuer typically returns your premiums and gives your beneficiary a percentage of the benefit. Graded death benefits can be attached to several types of life insurance.
- Longevity Insurance: Not life insurance, it often comes in the form of a longevity annuity, which Clark thinks is a good idea for some people. We’re living longer than ever. Longevity policies typically begin paying out at 80 or 85 years old. That helps you insure against a particularly long life and provides you with somewhat of an end date to spend your retirement savings.
How Much Does Life Insurance Cost for Seniors?
If you’re looking for free term life insurance price quotes for seniors, Hunt recommends term4sale.com.
I looked up quotes for a 10-year term life insurance with $250,000 in coverage. I assumed no tobacco use, excellent health and a minimum A.M. Best rating of A+. For the purposes of this exercise, I also put in my ZIP code in Florida.
The table below lists the lowest available price quote via Term4Sale for each scenario.
As you can see, a 55-year-old male would pay $37.28 per month, while a 75-year-old male would pay $322.93 per month for the same policy. The price curve for life insurance premiums steepens fast after retirement age.
Do You Need Life Insurance as a Senior?
If you’re debt-free and you have funds set aside for retirement, possibly including your final expenses, you probably don’t need life insurance.
Some possible reasons to buy or maintain a policy include to help cover estate taxes (if your net worth is high), to guarantee an inheritance or charitable donation, to help cover an outstanding debt or expense that your spouse or family will have to pay or to protect against at least a decade of income you still expect to earn.
In many instances, even if you want to account for those things financially, there’s a cheaper or more efficient way. (Clark recommends joining a local funeral or memorial society, for example, “where you have the ability to provide for your funeral at a fraction of the cost of what it would be otherwise with your survivors in their moment of grief trying to figure out how to get it done,” instead of end of life insurance.)
A lot of insurance policies for seniors aren’t worth the bang for your buck, Clark says. Particularly if you’ve done a nice job of saving for retirement.
Ask yourself the following questions:
- Why do you need coverage?
- How much coverage do you need?
- For how long do you need coverage?
- How much coverage can you afford?
Clark is wary of almost all types of life insurance for seniors. He also admits it’s a nuanced, specialized area that he isn’t ultra confident about.
If possible, it’s ideal to “self-insure” by the time you retire. Life insurance for seniors can be exceptionally expensive.
There are some forms of life insurance that make sense for some seniors, as James Hunt pointed out. If you need some guarantees or you want to mitigate some risk, it’s worth considering. Just be thorough and careful before you buy.