Anyone shopping for life insurance for seniors probably already knows that the older you are, the higher the price. But that doesn’t mean senior life insurance is always a bad idea. It just means you have to keep some basic facts in mind so you can get the wisest policy for your age and financial situation.
So let’s walk through the facts about who actually needs life insurance, how much it costs for seniors on average, and the best kind of senior life insurance to get—if you need it.
Who Needs Senior Life Insurance?
For most people, life insurance is necessary. The exceptions are those hard-working people who are both debt-free and self-insured—meaning they can replace their annual income through the growth of their investments. If that’s you, way to go! You no longer need life insurance to provide for your loved ones if something happens to you.
But even as a senior, you could be in a place like most Americans: either in debt or not yet self-insured. (It’s a big group that includes many older Americans as well.) The truth is, you can change that situation. And it’s never too late to start! Anyone can become a debt-free, self-insured millionaire through the Ramsey Baby Steps!
But until then, life insurance will be a key protection for you and your family. The purpose of life insurance is to replace your income following your untimely death. That way, the people you love don’t have to struggle financially at an extremely hard time.
Even in your 60s, 70s or 80s, senior life insurance could make a lot of sense if any of the following apply to you:
- You have dependents (children, or an aged spouse or parent).
- You have consumer debt or a mortgage.
- You’re still growing your retirement accounts up to that comfy, nest-egg size.
You may not be a husband and father of two young children, but you still have people relying on your income to make ends meet. And even though your responsibilities might look a little different as a senior, life insurance could help fill the financial gap left by a mortgage or an undersized nest egg (or both).
Let’s look at a couple of common situations where senior life insurance is a good fit.
The Empty Nester
Suppose you’re in your 50s and blissfully married. Chances are your children are out on their own and supporting themselves by now. What a lovely time of life for you lovebirds!
But where do you and your spouse stand on the mortgage—not to mention your retirement plan? If you’re still paying off your house, or your investments aren’t yet substantial enough to replace your income, senior life insurance makes sense. Here’s why. If you or your spouse died now, the surviving spouse would have to deal with that debt on their own. A spouse’s death is hard enough without the extra burden of lingering debt and questions about the rising cost of living.
Are you retired? If so, congratulations! But even so, it’s not too late for life insurance—if you need it. Again, you could still have debt, or you don’t have the savings to be self-insured. Even in retirement, a small term life plan is pretty affordable and a great way to cover your spouse and any dependents until you get into a stronger financial position.
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Can a Senior Get Life Insurance?
Seniors can get life insurance. In fact, there’s no technical age limit on who can buy life insurance. But as we’ve said already, the cost of life insurance goes up as you age for the simple reason that your risk of death keeps rising too. That’s why if you compare the rates on life insurance between, say, people in their 20s and people in their 80s, the group with more life under their belts will definitely pay more.
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The Average Cost of Senior Life Insurance
The word seniors covers a pretty broad range—basically half the age spectrum if you define it as people from 50–100! Not everyone in that age range needs life insurance, but quite a few do. As we mentioned, the average cost of life insurance is generally higher for this group. But again, it’s a huge range—so let’s look at a few scenarios to get a general picture.
Clark is 67 years old and a nonsmoker. And he’s married to his high-school sweetheart, Sherry. Thankfully, they have no consumer debt. But they do owe $50,000 on their mortgage. Clark’s still working and earning a $50,000 salary. He definitely wouldn’t want Sherry left with that mortgage payment if he was suddenly out of the picture. A 20-year term life policy worth $500,000 would cost between $700 and $750 a month. It would be more than enough for Sherry to pay off the house and have plenty to live on if Clark died.
But maybe Clark feels confident that his retirement accounts will grow enough to allow him to become self-insured within 10 years. The same payout amount of $500,000 over a 10-year term would only cost between $323 to $354! Either way, this smart couple is making the best choice based on their unique situation and future needs.
What Is the Best Life Insurance for Seniors?
The best kind of life insurance for seniors—or for people of any age—is always term life insurance. It’s not only the most affordable, it’s also the easiest to understand. Everything else is complicated and not worth your money.
As a quick reminder, there are two basic kinds of life insurance: term life (which, as the name says, lasts only for a certain period or term), and whole life (which we’ll discuss more below). We’ve already mentioned that people who are debt-free and self-insured at any age no longer need life insurance. That’s one thing that makes whole life a bad choice. It lasts longer than you need it.
But the coverage for term life only lasts for a set amount of time. Ten, 15 or 20 years are common terms, but the term you choose is up to you and your needs. If you die during the term, the insurance company will pay your survivors a death benefit for the amount you’ve settled on in your insurance agreement.
Remember, life insurance has only one purpose—to pay out a death benefit when you die. That’s why buying term life is way more affordable than a permanent whole life plan.
Other Life Insurance Options for Seniors
We love term life, and that’s absolutely the kind of life insurance we recommend for seniors. But there are a couple of other kinds you’ll hear about when you look specifically for senior life insurance. Here’s the deal: None of them are good options. We’ll explain why.
Burial Insurance for Seniors
You might hear about burial insurance for seniors, sometimes called final expense insurance. The idea is that you can buy a policy with a death benefit and your family can use it to cover the cost of your final expenses. It’s advertised as being more affordable than other kinds of life insurance.
While it’s technically true that your premium amounts may be lower with final expense insurance, the cost is actually higher per dollar of coverage than you’d pay for the same benefit amount with other types of life insurance.
For example, for a burial insurance benefit of $50,000 for a 70-year-old man, your monthly premium could be double (or even triple!) what you’d pay for the same $50,000 benefit amount with a term life policy for the same guy.
We definitely don’t recommend final expense insurance as a smart form of life insurance for seniors. After all, the job of life insurance is only to replace your income, which is something burial insurance can’t do.
Instead of getting burial insurance, you’re far better off getting the same amount of coverage in a term life policy, or at least taking the premiums you’d pay into a burial policy and putting that amount into tax-advantaged retirement accounts. Those dollars will grow a lot more value there and give your family a much better shot at financial security when you’re gone. Again, neither alternative would replace your income after death, but either one is a better way to plan for final expenses.
Whole Life for Seniors
With whole life insurance, you’re locked into the premium and benefit amount for your whole life. Doesn’t that sound constricting? But it’s worse than that. Every time you pay your monthly premium on a whole life policy, some of the money goes into a cash value account that’s supposed to grow during the life of the policy. Can you say overcomplicated? Then when you die, your beneficiaries get the death benefit. But what about the cash value account? Assuming you never got around to spending it, the insurance company pockets the whole amount!
Whole life is a gigantic rip-off for seniors, or anybody. It’s expensive because you pay for it for your whole life, and because part of your payment goes toward growing your cash value. You’re ultimately paying more for less insurance. Yikes!
Variable Life for Seniors
Variable life insurance is a type of whole life insurance—and it’s actually worse! Like whole life, it includes the life insurance part (obvious), and the cash value account. Only this time, the cash value can be invested in a variety of options. And the value of that investment can go up and down over time—which means you can lose money.
This is another boondoggle seniors (or anyone) should avoid if you want your life insurance to do its actual job—replacing your income at a decent price in the event of your untimely death.
What Should Seniors Look for in a Life Insurance Policy?
We’ll say it one more time (so you know we mean it): The only job of life insurance for seniors is to replace their income when they die. That’s how they provide for their loved ones until they’re self-insured. It’s really that simple. That’s why term life insurance is the only way to go.
But the length of a term you need and how much the death benefit should be will depend on your personal situation. The factors to keep in mind when you’re shopping for the best senior life insurance policy include:
- Are you married? You’ll want your spouse to be provided for.
- Do you have dependents? You have to cover them too.
- How much debt do you have? The bigger this amount, the more likely you are to need life insurance.
- Are you self-insured? If your savings haven’t reached the point where they grow enough each year to replace your income, it’s worth looking into a term life policy that could!
How to Choose the Right Life Insurance Company
No matter your age, it’s likely you need an inexpensive term life policy with a fixed rate to give yourself and your whole family peace of mind. But everyone’s situation is different, and seniors are more likely than most to have achieved that high point of being debt-free and self-insured. Or are at least moving in that direction!
The goal of term life insurance is not to make your family rich. The goal is to replace your income if you die. When you buy life insurance, you’re providing ahead of time for the possibility of a very hard event in the future. In the meantime, keep working the Baby Steps and invest wisely when you’re ready.
Sometimes seniors have unique life situations that only an expert can speak into with the right amount of wisdom and care. If you’re in the market for new life insurance or want to talk to an expert, we recommend RamseyTrusted provider Zander Insurance. Don’t let another day go by without being protected.
Why Should You Trust Our RamseyTrusted Brokers From Zander Insurance?
You can trust the brokers from Zander to help you get the best life insurance for your stage of life because everyone we endorse is RamseyTrusted. If you don’t know what that means, it’s this: Our providers are advocates for Ramsey's financial and business principles. They know their job is to serve—not sell. And before getting the seal of approval, each provider is fully vetted by our team. They have to earn our trust, and we make sure they keep it through an ongoing relationship.