Old age and life insurance seem to be two polar opposite things. As you grow old, the chances of insurance companies having to pay back the premium increase. So it’s no surprise that there is a general disinterest among companies in old insurers.
Typically, the oldest ratified age for getting insurance is 85. But most insurance companies do not go beyond 75 to 80. But there are instances of getting insurance at 90 as well. It all depends on the circumstance and health aspects.
However, the question is, should you get insurance in old age? And if so, what are the best options out there for you? Here’s a comprehensive guide to answer all your questions.
Why Should You Get Insurance at an Old Age?
We are going to look at this from the perspective of someone who is over 60 years old and never had insurance in their life. This is the age where it is naturally difficult to secure insurance.
The most common way to get insurance at this age is to renew the existing one, which usually covers till 60, with trauma and income protection running up to 75 and life insurance covering up to 99.
However, renewing also has its issues which we will discuss in a later part. For now, let’s look at the benefits of getting insurance in old age.
Leaving a Substantial Inheritance Behind
When you’re looking for insurance in your 70s or 80s, it’s not necessarily for you. Sometimes you want to leave your family, wife, or children with a lump sum amount. While this type of insurance isn’t an uncommon practice, it is certainly more prevalent in the latter stages of life.
Because the premium that you are paying gets disbursed to your nominee as a lump sum amount without any tax levy. Your family can convert it into an annuity to get a perpetual return from the lump sum of death benefits.
Converting to Multiple Usage
In most cases, people over 70 or 80 may go for death benefit insurance. Some may even go for long-term care insurance from an even earlier age. But in most cases, these long-term insurances don’t really get used up, and the death benefits are accrued after death.
But with a renewed system, an insured person can reap the benefit of insurance riding that allows them to draw from the death benefit. For example, if a person is diagnosed with a terminal illness, they might be eligible to draw from the death benefit insurance, which was otherwise not possible before.
Stabilizing Portfolio
At the age of 60, you’re probably planning for retirement. And if we’re to go by the law of economics, people are naturally risk averse. And as a study shows, it holds true for people nearing retirement.
Most people hold their assets in several portfolios like liquidity, stock, or bonds. While stocks and inflation can take you through a roller coaster ride, life insurance is a safe bet.
Investing in life insurance is guaranteed to pay you out without the hassle and rollercoaster ride of stocks or bonds.
Reduce Tax Burden
What’s the main source of income for a retired person over the age of 60? You will either say that it’s the pension or the interest generated from the portfolio in the form of stocks or bonds.
In any of these cases, the tax levy is very high, which takes away a substantial portion of the income. To reduce the tax burden, a retired person can choose to invest in life insurance.
We have already mentioned that life insurances are interest-free and can generate lump sum value after death. So it’s a pretty secure investment to reduce the tax burden.
A Different Stream
Insurance brings flexibility to the expenditure habits of a retired person. For example, if you solely rely on your existing asset, you might fear running out of cash at some point in your life.
Investing in life insurance brings another secured channel into your savings stream. You can either leave it as an inheritance for your spouse or family, annuitize it to generate an income stream, or even sell your policy as a life settlement. No matter how you look at it, it’s a win-win situation.
It’s obvious that investing in insurance, even at a later stage, is a secure choice. But the question is, which insurance should you go for?
Best Insurance for Old Age People
Remember we mentioned the complications that come with getting insurance if you’re over 60? Well, the complication will only increase as you age from there, and by 80, there will possibly be no insurance option left for you except for exceptional cases.
Now let’s look at some of the common insurances that you can put your money on. Find details here…
Term Life Insurance
Term life insurance, as the name suggests, is basically designed to mature within a certain time frame. Since it matures within a certain time frame, the premium on the term insurance is generally low.
The most common form of term life insurance for a senior citizen would be to sign up for final expenses insurance. Here you can keep paying a comparatively smaller premium until your death when the policy matures.
However, it is important to note that most insurance companies do not offer term life insurance after the age of 75.
Whole Life/Permanent Life Insurance
While the term life mostly covers the final expenses for a senior citizen, the Whole Life or Permanent Life Insurance is a more flexible insurance option. It also offers higher age bounds for insurance with some conditional health checkups and a higher premium.
The premium of permanent life insurance is already higher compared to general term insurance. And for senior citizens, the premium only compounds.
But since permanent life insurance takes care of your whole life, you will be able to leave a sizable inheritance for your family.
You will also receive dividends on the insurance which can be used for varied purposes as mentioned above.
Guaranteed Universal Life Insurance
Each of the two insurance schemes mentioned above has its own pros and cons. Some have a strict age limit whereas others have mandatory health checkups to determine the premium level.
But what if there were a policy that had no age restriction and no health checkups? That is where GUL insurance comes in. Through the premium on this type of insurance is very high, it also provides the best ROI.
As you can see, it’s perfect for leaving a sizable inheritance, bypassing estate taxes as well as maximizing your pension opportunities.
Frequently Asked Questions
Now let’s look at some of the common queries regarding insurance in old age.
How much life insurance is enough for final expenses over 80?
You can either get insured for $5000 or $10000. It depends on your personal preference. Know that choosing one over the other will invariably double or half your premium payment.
Can I get Life Insurance without a health checkup?
Yes, you can get life insurance without a health check-up. In that case, you will need to get Guaranteed Universal Life Insurance. The cost of term life insurance is generally low because it matures within a given period of time.
What type of insurance is best for a 60-year-old?
Term life insurance is better suited for a 60-year-old person. It will allow you to choose a certain time frame and the premium for the policy is also much lower compared to permanent or GUL life insurance.
What is the policy maturity duration for GUL insurance in case of accidental deaths?
GUL insurance covers both during and the afterlife. But in the case of accidental deaths, the policy maturity and disbursement may take up to 2 years.
Conclusion
So there you have it, a complete insurance guide for old people. The odds are somewhat stacked against senior citizens when it comes to insurance. That’s mainly because the older you are, the less duration of the premium applies to you.
While Term, Permanent, and GUL is the most common and preferred form of insurance among old people, GUL is still better when considering the overall benefits.
You may choose any of the above three policies depending on your financial state and premium repayment abilities. It would still end up being a secured investment choice compared to volatile investments.