Life insurance for seniors: What you need to know

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senior citizens in nursing home
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Looking for life insurance for seniors? We all know life insurance is particularly helpful as a safety net when you’re raising a family. But what can you do if you’re older and want to buy life insurance?

How can I find term life insurance for seniors?

Life insurance for seniors: Table of contents

What exactly is term life insurance?

term life insurance policy

The “term” in term life insurance refers to how long you buy a policy for; typically that’s 20 or 30 years.

Money expert Clark Howard favors level term life insurance, a specific type of term life insurance, where you pay one fixed premium for the life of the policy and that premium never goes up.

The purpose of a term life policy is to replace your income for dependents should you die prematurely.

If a term life policy is not “level,” then it’s likely annual renewable term (ART) policy.

An ART policy covers you from year to year. At the end of the year, you can renew the ART policy for another 365 days — usually at a slightly higher premium.

So those are the two flavors that term life comes in: level term and annual renewable term.

Why it’s hard to find life insurance for seniors over 70

Older senior office worker

Unfortunately, when you get to be over 65, insurers are typically only interested in writing whole life policies for you, according to AARP.

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That’s because chances are there’s not what’s called “an insurable need” for a term life policy.

Remember, you get insurance for replacement of income to support your dependents in the event of your death. The older you get, the less likely there are dependents who need support to begin with.

Meanwhile, whole life policies typically add an investment component into the insurance equation, and there’s no limit on how long the term can be. That’s where the name “whole life” comes from; you could in theory have a policy cover you from cradle to grave.

But according to Clark Howard, whole life isn’t ideal for a lot of people.

“It’s only a good choice if you are ultra-high income earner — earning about $400,000 annually. If that’s you, you can benefit from some tax advantages that come with a whole life policy,” Clark says.

Consider longevity insurance as an alternative

blueprint income longevity calculator

There is an alternative to term life and whole life insurance you may want to consider. It’s called longevity insurance and it doesn’t start paying a living benefit until you hit 85.

The best time to buy longevity insurance is when you retire, although you may still be able to do so into your 70s. Again, these policies won’t pay out until you hit 85 — and insurers are using actuarial tables to bet that most people who buy a policy won’t make it that long.

“The idea is that with a longevity policy in place, you could plan to blow through all the cash in your retirement plan through age 84,” Clark Howard says. “Because the minute you turn 85, you get a check every month for as long as you live.”

Longevity insurance — which goes by a variety of names but is widely known by insurance agents as “the policy that doesn’t pay out until age 85” — is similar to a a life annuity (also known as an immediate payout annuity).

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The most common way to buy longevity insurance is in $100,000 increments. The money you put down generates far more income each month after you reach 85 than you could on your own.

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