Whole, term, or modified life insurance — what do they all mean?
There are thousands of policy options, and each one has pros and cons. So which options offer the best life insurance for seniors? And which one is right for you?
Keep reading to find out: we’ll explain what goes into a life insurance policy, what choices make the most sense for seniors, and how to choose the policy that will benefit you the most.
Low Policy Rates
What’s the most important factor in choosing the best life insurance for seniors? Finding an affordable plan.
Buying life insurance as a senior is more expensive than when you were a 40-year-old.
One reason for this is that seniors are more prone to health problems, which increases life insurance costs. Another reason is that you’re paying for the same amount of life insurance but over a shorter period of time.
Not only does insurance tend to cost more for seniors, but retirement is also a time of financial downsizing. Many seniors living on a fixed income need an affordable policy. For many seniors, the best insurance policy will be the most affordable one.
No Physical Assessment
Many life insurance policies require a physical examination to confirm good health before the insurance company will certify the insurance. Others simply ask for a medical questionnaire. But due to the health challenges of aging, senior citizens often can’t pass either.
As a senior, your best option is an insurance policy that doesn’t require a physical exam.
Guaranteed Level Monthly Premiums
Some life insurance plans charge the same premium amount every month. By paying a fixed amount every month for a set number of years, you’re eligible for a payout that exceeds the total amount that you have paid.
Guaranteed level monthly premiums are the best option for seniors because of their predictability and stability.
Modified Life Insurance
On the other hand, modified life insurance gets you the same payout amount in the end, but it starts with a lower monthly premium for the first several years and increases to a higher monthly premium later.
This type of plan is geared toward younger customers who want to start investing in life insurance, but need to offload the greater part of the cost to later in life. As their income increases over the course of their career, they’ll be able to pay the higher premiums.
However, modified life insurance doesn’t make sense for senior citizens living in retirement or on a fixed income. Guaranteed monthly premiums are a better choice.
No Waiting Period
Some insurance plans have a waiting period before they take effect.
For example, you might pay a premium of $200 per month. But your plan requires you to pay at least $7,200 before they will disburse full coverage. That means that for the first 3 years of your plan, you’re not fully covered.
If you choose a plan of this type and happen to die within the first 3 years (or whatever the plan stipulates) you might receive partial coverage (the company paying out a part of the policy money), or none at all.
This type of plan can work well for younger people who are not expecting to need their plan’s coverage for many years. But most seniors who are buying life insurance want their coverage to begin immediately.
Generally, only modified health insurance plans have waiting periods. As a senior, choose a plan that gives you full coverage right away.
Sufficient Term Length
How long will your life insurance cover you?
When you purchase life insurance, its purpose is to last until the end of your life. If the term of your policy is too short, you will outlive it.
Outliving your insurance policy means you would have to purchase another one after the term has expired. This is not only an inconvenience but also an additional expense, since the longer you wait to buy an insurance plan, the more it will cost.
However, longer plans (or plans that extend indefinitely to the end of your life) tend to cost more.
For seniors purchasing life insurance, it’s important to choose a plan that balances your financial needs in the short term (with affordable premiums) and the long term (with long-term coverage).
Term vs Whole Life Insurance
Though insurance plans come in all shapes and sizes, there are two main types: term life insurance and whole life insurance.
Take a look at how these two types meet seniors’ health insurance needs in different ways so that you can choose the one that fits your priorities.
Term Life Insurance for Seniors
Term life insurance is the simplest and most affordable type of insurance.
With term life insurance, you pay a fixed amount for a guaranteed payout. You also choose the term length (for seniors, you can usually choose 10-year and 15-year terms).
Term life insurance is beneficial for seniors in many ways:
- Less expensive
- Simple to choose and understand
- You choose the term length
- Fixed monthly premiums
- Some do not require a physical exam or health questionnaire
For all its benefits, though, term life insurance isn’t lifelong. If your term runs out, you will have to purchase an additional term.
You should choose term life insurance if you prioritize a straightforward, low-cost insurance solution that gives you lots of options. But beware of the risk of having to re-purchase a plan if you outlive your policy.
Whole Life Insurance for Seniors
Whole life insurance is more expensive and more complicated.
As its name implies, whole life policies cover you until the end of your life. In addition to the payout at the time of your death, the money you pay towards your whole life plan accumulates as an investment component. You can choose to withdraw that investment, earn interest from it, or even borrow money against it.
Whole life insurance has benefits for seniors like:
- Usually no physical exam
- Lifelong coverage
- Invested money that you can earn from
Whole life insurance has added complexity and cost. However, if you’re looking for a comprehensive, one-time insurance investment, it might be the right choice for you.
Choosing the Best Life Insurance for Seniors
Life insurance doesn’t have to be complicated, even as a senior. With this guide, you’ll be able to navigate the best life insurance for seniors and choose the policy that suits your unique needs the most.
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