Buying life insurance for the elderly can be a struggle when someone is facing their older years. However their are solutions, such as AARP Life Insurance for seniors from New York Life. This program offers 4 different types of policies from term policies that cover up to $100,000, to permanent life insurance, to guaranteed acceptance life insurance.
However before you consider any of these programs you may want know that their are some down sides to these policies offered through the AARP, and in this article I’m going to cover three things you should know before you decide to get involved.
Go With Term
The first thing you should know as a senior is that at your age it’s much better if you go with a term policy versus a permanent policy, and their are a couple of reasons why this is. First off, term is typically cheaper than a permanent policy. In fact to prove my point a $50,000 permanent life insurance policy for a 65 year old male through the AARP will run around $287.
On the other hand a $50,000 term policy for a 65 year old male through the AARP will run around $144. The difference in cost is around $143. The reason for the cost difference is because the permanent policy through the AARP contains a cash value account which brings me to my next point.
Cash value life insurance is not worthwhile for seniors. The reason for this is because cash value accounts are meant to help lower the cost of insurance for you over time. For example, if you bought a life insurance policy at the age of 20 with a $100,000 death benefit and at age 60 you had $75,000 in the cash value account you would in essence only be paying for $25,000 worth of insurance because the first $75,000 would be paid up.
If you start a permanent policy at age 65 you are not going to have enough time to build up the cash value to see the advantage of lower insurance cost. This is why I suggest term because with this type of policy your only paying for the cost of insurance.
Protection May Only Last So Long
Next, when it comes to the AARP term insurance programs the coverage may only last so long. In fact with Level Benefit Term Insurance Program and the Extra Protection Term Insurance program coverage will only last as long as age 80 at which point you will lose your benefit.
However with the permanent Life Insurance plan and the guaranteed acceptance plan you will be able to keep the life insurance as long as you want.
Premiums Will Increase Over Time
Finally, the last thing you should know about the AARP life insurance programs is that premiums may increase over time. With the term programs through the AARP the premiums will typically start out a little lower and over will increase the older you get.
On the other hand the permanent and guaranteed acceptance polices will not change. You should also know that the price you start at all depends on the three health questions that you answer. However you won’t have to take a physical or blood draw but how you answer the questions could determine how much your premiums will increase.
In the end follow these tips I’ve covered and you should on your way to setting up a Life Insurance policy that fits your needs.