Making sure our loved ones are cared for when we're gone becomes a top priority as we age. One way to do this is by getting a life insurance policy. Life insurance is a contract between you and an insurance company that guarantees financial protection for loved ones if you pass away. 

Navigating the complex waters of life insurance can be daunting, especially for seniors. With so many options out there, it's important to understand the specifics of each policy to ensure you're making the best choice for your needs. Here's a comprehensive guide to help you through this important decision.

Key takeaways:

  • Life insurance is one way to provide financial protection to your dependents after you pass.

  • There are many factors to consider when choosing a life insurance policy, including the duration of the plan, your age and health status, and the monthly premium.

  • There are four main types of life insurance: term life insurance, whole life insurance, universal life insurance, and final expense insurance.

Benefits of life insurance for seniors

The main benefit of a life insurance policy is that it provides financial protection for your loved ones after you pass. A “death benefit” is the insurance payout to your beneficiaries. It can help replace lost income, pay off any outstanding debt, and provide your loved ones with an overall financial safety net.

Similarly, life insurance can help cover final expenses such as funeral and burial costs, relieving your loved ones of added stress in a time of grief. 

Some policy types accumulate cash value over time, which can be a supplemental source of retirement income. A cash value benefit can be used as a financial cushion to cover unexpected expenses or as additional income to your retirement savings.

Life insurance can also be a valuable estate planning resource if you have significant assets. It can help cover estate taxes and other expenses so your loved ones don't have to pay for the assets you leave them. 

Ultimately, life insurance can provide you with the peace of mind of knowing you've taken proactive steps to financially protect yourself and your loved ones.

Who has the cheapest life insurance for seniors

Unfortunately, life insurance becomes more costly as you age. However, there are affordable policy options for older adults, regardless of your health condition. As of 2024, the three most affordable life insurance policies for older adults are Transamerica and Geico, with an average monthly cost of about $176, and Protective at about $203. 

While signing up for the cheapest policy might be tempting, keep in mind that there are many factors to consider when choosing the best possible plan. The cheapest insurance may not always be the best choice for you. 

Factors to consider when choosing the best life insurance for seniors

When choosing a policy, it's important to consider the type and amount of coverage best for you. First, take some time to assess both your financial situation and the financial situation of your loved ones. Next, determine what you need from a policy. Some guiding questions you might ask yourself include: 

  • What is the ideal duration of the policy? 

  • Do I have any outstanding debt? 

  • Do I want to cover my funeral and burial expenses? 

  • Do I want to cover any estate taxes for my beneficiaries? 

Your age and health status can impact your life insurance premiums and eligibility for many plan types. In fact, most policies require you to undergo a medical exam before you are approved. 

Premiums for life insurance policies

Another point to consider is the monthly premium you'll pay to keep your policy active. Average monthly premiums for life insurance depend on various factors including where you live, what type of policy you purchase, your health status, your age, and your term length. Monthly premiums can be a concern for seniors on a tight budget. Consider working with a financial advisor to help you compare plans and find a policy with a monthly payment that works for you.

Before committing to any life insurance policy, determine what matters to you. Regardless of how simple or complicated your situation is, you can find a good fit for you and your loved ones. 

Types of life insurance options for seniors

There are a few different types of life insurance policies available to you. You’ll find a breakdown of each type below:

Term life insurance

This type of policy is usually the cheapest and most straightforward. The purpose of a term policy is to pay your beneficiaries any proceeds from your policy if you pass. Insurance providers offer coverage for term policies for specific lengths of time, such as 5, 10, 20, or 30 years. While term policies are the least expensive, they don't provide any cash value, and your beneficiaries will not receive a payout if you outlive your policy. 

Whole life insurance

Whole life insurance covers you for your entire life and includes a cash value component that grows over time. Your monthly premium and death benefit amount don't change with a whole-life plan. Whole life insurance policies are straightforward, but the monthly premiums are typically higher than term life insurance policies. 

Universal life insurance

Universal policies offer lifelong coverage and include a cash value component that grows based on the market. While universal policy premiums are usually more affordable, the monthly premiums increase over time. Unlike whole life policies, the death benefit and cash value fluctuate over time and are not guaranteed. 

Final expense insurance

Also known as burial or funeral insurance, final expense policies only cover end-of-life expenses, such as funeral costs, medical bills, and outstanding debts. There is a coverage cap at a low amount, but the death benefit is guaranteed and typically ranges from $5,000 to $25,000. You don’t need a medical exam to secure coverage for final expense insurance. 

Tips for seniors when shopping for life insurance 

Once you have determined your needs and the type of policy you're interested in, it's time to shop around. The following tips might help you to pick the best policy for you and your loved ones:

  • Shop around and compare monthly premiums and death benefit coverage from multiple insurers.

  • Consult with a fee-free financial advisor or insurance agent. 

  • Review and understand policy terms and conditions.

  • Consider any existing coverage or benefits. 

Planning for retirement 

Choosing a life insurance policy is just one of many decisions you make when planning for retirement. Planning for retirement requires careful attention to healthcare costs, estate planning, life insurance costs, and more. If you're feeling overwhelmed or are looking for additional resources, Chapter can help! Read our blog to learn more about what retirement looks like across the country, or call one of our licensed advisors if you have any questions about your healthcare coverage.

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