Helping You Avoid Life's Financial Mistakes

5 Steps To Buying Elderly Life Insurance

January 30, 2011 By 9 Comments

Buying life insurance for the elderly people can be a bit a challenge when you have no place of reference to start from.   This can lead to making wrong or bad decisions that could cost you some big bucks down the road.  So in this article I’m going to walk you through a 5 step process of buying elderly life insurance.

Step 1: Why Do You Need Life Insurance

When your a senior buying life insurance for the elderly, such as yourself, shouldn’t even be thought.  By now you should be debt free and the only expenses you should be paying right now are the normal living expenses and taxes.  However this isn’t a perfect world and you may still need life insurance.

First off, you need to consider the real reasons you need life insurance at your age before you buy.  To prove my point I once talked to life insurance agent who told me a little more life insurance could never hurt.  This may be true but just because some life insurance agent claims it might be better for you consider why you would really need in the first place.

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If you have no debts, and extra money in the bank their may be no need to have extra life insurance but on the other hand if you have 10 years to pay on your mortgage yet, your credit cards are loaded to the max and you have no extra money to spare in your bank accounts this may be a great reason to have a life insurance policy at your age.

So take the time right now and list the reasons you need a life insurance policy.

Step 2: What Is Your Current Physical Condition

You need to consider your current physical condition.  Your physical condition has everything to do with how much coverage you can get, and what type of policy you can get.  This is where things like age, physical disabilities, and diseases you may have such as diabetes, heart problems, or even cancer.

However just because you have one of these problem does not mean that you can’t get a policy to fit your needs.  While working in financial services I’ve seen people who have suffered congestive heart failure get coverage, so don’t count yourself out yet.

In this step you need to consider what is physically holding you back.  Take the time write those down now.

Step 3: How Much Life Insurance Do You Need

Once we’ve considered why you need life insurance and your current physical conditions you need to figure out how much you should need.  This is a very important number for you to know, why you might be asking?

The reason you want to know how much life insurance you need is because at older ages life insurance becomes more expensive, on top of that the cost of life insurance is charged per $1000.  For example if ever thousand dollars cost $2.47 and some agent recommends you get $100,000 of  coverage this could add up in a hurry if you purchase way to much coverage.

So how much coverage do you need?  The first thing you need to consider is funeral expenses.  This typically will run around $15,000 when you consider the casket, vault, and services altogether.  Next consider what kind of debt that you have.  If you have credit card debt, a car loan or a mortgage you will want to figure balances of each of these debts into your death benefit amount.

Here is an example to help you out.  First off start out with a death benefit of $15,000 to cover funeral expenses,  on top of that if you still have a $15000 balance on your mortgage add this as well.  Finally, you also have a car loan of $5000.  This means you should have death benefit of $35,000 altogether.

Take the time to figure out what kind of coverage you need now.

Step 4: Choose A Life Insurance Program That Fits

Now that we know how much coverage you need we need to find a program out there that fits your needs.  Unfortunately, this can be harder than you think with so many different options out there.  Some options are really good options while others should never be considered.

  • Variable Life Insurance. Variable life insurance is a cash value life policy that invest the money into the stock market through sub accounts within the policy.   This kind of policy should be avoided when considering the elderly simply because variable option is much to risky and may result in a lose of funds.
  • Whole Life And Universal Life Insurance. Whole life is also a cash value life insurance policy however the cash value account is not invested in stocks and bonds but rather in fixed investments where money can’t be lost.  This type of policy is good for those who would like something permanent and the payments will stay fixed as long as you continue to make your premium payments.  If you would like to learn more about this option check out my article on Whole Life Insurance Explained.
  • Term Life Insurance. The next option is term insurance.  These policies are meant to cover you for a specific amount of time.  These policies typically range from 5 years to as long as 30 years.  The benefit of this type of policy is to cover you for a specific length of time after which you should no longer need the coverage. For example if you have ten years to pay on your mortgage a 10 year term policy could be the perfect solution since it will cover you until the mortgage is paid off and can be a much cheaper solution than a whole life or universal policy.
  • Guaranteed Acceptance Life Insurance. Next you need to consider guaranteed acceptance life such as that offered through the AARP.  This is a program that can give you as much $15000 in coverage and the best part is that you can’t be turned down.  This policy is great for those who have poor health conditions and can’t qualify for a traditional policy.  However one downside you should know about is that these policies will come with two year rule that says if you die from natural causes in the first two years you will receive a deprecated amount of the death benefit.  To learn more read my article on guaranteed acceptance life insurance.
  • High Risk Life Policies. However before you consider a guaranteed life policy you may want to look into a high risk policy, also know as  impaired risk life insurance.  These are companies that take on specific health related risk.  The benefit of these companies is that they can allow someone who needs more life insurance than a guaranteed acceptance life policy can offer.  To learn more check out this list of 5 high risk life insurance companies that may be able to help you out.
  • Save Up. The final option you may want to consider is none of the above, you heard me.  Sometimes it may be better not to get a life insurance policy.  Consider this, let’s say it cost you $150 a month  for a $15,000 guaranteed acceptance policy.  Instead of sticking that money towards a policy like this, start your own life insurance fund and save the money in a separate savings account or certificate of deposit at your local bank.  This way you will have the money when you need it and you won’t even have to qualify for it.  This account should be set up as a joint with right of survivor that way your spouse can access the account  to cover funeral cost.

Now that I’ve covered several options here take the time to pick the option that works best for your situation.

Step 5: Get Quotes

I know what your thinking getting life insurance quotes are about as dull as reading the dictionary but it  is a necessary step.   The great thing about getting life insurance quotes is that they’re free, so why not get as many as you can?

I once got a call from an insurance agent who wanted to run some quotes by me and I said sure.  After I told my wife of the situation she complained it was just a waist of time but the reality is he may be able to offer us a better deal and that’s why it’s important to shop around.

Take the time to get at least 10 different quotes before you make a final decision.  You never know who’s going to have the best option. 

Do you have questions or comments about buying elderly life insurance, please submit them below.

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Life Insurance For Elderly People: Should They Buy Term And Invest The Difference

December 17, 2010 By 1 Comment

Have you ever heard the phase buy term and invest the difference?  This is a phrase that was coined by several life insurance companies many years ago as a strategy to buying life insurance however is this method a good way for seniors to go or not?

In this article I’m going to cover why the buy term and invest the difference strategy may or may not be the best life insurance for elderly people.

What Is Buy Term And Invest The Difference

First off buying term and investing the difference is a method to setting up a life insurance policy.  If you have a whole life or universal policy it contains an investment account called a cash value account within the policy itself.

With the buy term and invest the difference approach you are not keeping these two financial products in one place but rather separating them usually into a term policy and the other into a place to save the extra money such as a mutual fund, IRA, or even a bank certificate of deposit.

Why Is It Better And Why Is It Not

However when you’re considering the elderly their are some up sides and down sides to doing something like this.  First off, one reason this is a good way to go is because term insurance is usually a lot cheaper than permanent insurance products.

Second, with buy term and invest the difference it will give you better access to your money.  With permanent policies their are only two ways to get the money out of of your cash value account, a withdrawal or a policy loan.  Using a withdrawal will trigger a taxable event by taking the money out.

Taking a policy loan will get you the money out tax free but the lender will charge you an interest rate and you will have to pay the money back.  This means that the insurance company will be charging you interest on your money.  With the buy term and invest the difference method you have complete control of the money and where you want to invest it at.

However the downside to the buy term and invest the difference option for seniors is that the cash value account will work to help the life insurance policy.  As you pay more money into a permanent policy, like a whole life policy, the less you’ll have to pay for the cost of insurance.  For example if you have a $100,000 worth of coverage and $85,000 in the cash value account you’re only paying for $15,000 worth of coverage now, whereas with the term policy you’ll be paying the full cost of coverage.

Should You Buy Term

In the end should the elderly consider the buy term option or go with a permanent policy?  My suggestion is this, if your at least 50 or older a cash value life insurance policy isn’t going to benefit you because you won’t have enough time to build up the account.  This is where term insurance becomes the better option.

What are your thoughts?

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3 Ways Seniors Can Cover The Cost Of Life Insurance

December 16, 2010 By 1 Comment

So you’ve had thoughts about buying life insurance as a senior citizen but you’re not sure you can cover the cost.  This means you’ll have to make some tough decisions if you should get it or not.  So in this article I’m going to give you a few ideas as to how you could go about paying for life insurance in your older years.

The Reverse Mortgage

The first option to consider is a reverse mortgage.  This is a mortgage program that works the exact opposite of a traditional mortgage.  That’s right the mortgage company will pay a monthly payment to you.  This payment could be used to help cover the cost of your life insurance.  However their are some catches though.

First off, in order to get approved you’ll have to own your home free and clear.  This means no more mortgage payment or tax liens owed on your home.  Second, it also means you’ll have to consider how to payback the mortgage company after you do pass away.  For this I suggest a portion of the life insurance proceeds go towards paying this debt off.  This way you won’t put your spouse or family members into a financial hardship position.

A Part Time Job

The next option for life insurance for elderly people is to consider a part time job to pay off the debt.  With a part time job you should easily be able to earn an extra few hundred dollars a month to cover the cost of the premium.  However you may be wondering why would you want to get a job when your retired.

The truth is retirement doesn’t mean you have to stop doing everything, it just means you shouldn’t have to do all the hard work you’ve had to do for so long.  In fact a part time job can keep you occupied and in better physical shape than sitting around the house all day.

Get A Return On Premium Or Cash In

Finally, the last option is to consider the policy you currently have.  If you currently have a permanent policy such as a whole life or universal policy you may want to think about cashing that policy in and using the money inside the cash value to take out a term policy that may cost far cheaper.

However it doesn’t stop there.  If you have a term policy or your planning to start one consider using a return of premium rider.  This is a rider that will pay you back on all the premiums you’ve paid towards the policy minus the cost of the riders, and minus the cost of any health related risk.  In the end once your term policy is up you can get most of the money back you could put it towards your next policy if necessary.

In the end hopefully this article has given you some good ideas as to help you cover the cost of your life insurance policy in your older years.  If you have other ideas you would like to share feel free to leave a comment.

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The Type Of Life Insurance The Elderly Should Buy

December 15, 2010 By 1 Comment

With so many different places offering life insurance for elderly people you might be wondering what type of life insurance policy should you really buy?  In this article I’m going to cover several different types of life insurance policies and show you which is the best to buy at your age.

Permanent Life Insurance

The first type of policy you may encounter is what is known as a permanent life insurance policy.  This is a policy that will last as long as you live and pay the premiums.  This would include whole life, universal life, index universal life, and variable universal life.

However this type of policy would not make a great fit for someone in their older years.  The reason for this because permanent policies usually run a bit pricier.  In fact they usually start out at around $50 a month.  To boot they also contain a cash value account within the policy itself.  A portion of premium payments made to the policy will go to fund the cash value.  The point of the cash value account is to cut down the cost of insurance over time.  For example if you have $80,000 in the cash value of a $100,000 universal life policy you would only be paying for $20,000 worth of life insurance as a result, but if your 60 and older you’re not going to have enough time to build up a cash value account.

Guaranteed Life Insurance

The next option is to consider a guaranteed life insurance policy.  You may have seen this type of policy on TV such as the Colonial Penn commercials, or the AARP.  This type of will give you a guaranteed life insurance policy no matter what, in fact you won’t be turned down.

However this may be a suitable choice if your age an health are to the point were no insurance company will accept you.  However if you’re above age 60 and still in good health it would be better to go with a traditional policy because with guaranteed life insurance you are much more likely to pay far more.  The reason for this is because with most traditional life policies you have to qualify by answering health questions and taking a medical evaluation.  However with guaranteed acceptance life you will more than like be graded at the lowest class possible which will result in paying more in the end.

Term Life Insurance

Finally, the last type of policy an elderly person should look into is term life insurance.  This is a life insurance policy that will protect you for a specific period of time.  The typically type of term policies range from as short as 5 years to as high as 30 years.

This type of policy can make a great fit for seniors because the cost is so much cheaper.  An elderly person who buys a term life policy will pay around half the price of someone who has a permanent policy.  In fact if you take out a lower term policy it can be cheaper yet.  Lower term policies like a 10 year term will be far cheaper than a 30 year policy.

In the end term is the way to go however if your looking for an insurance company that takes on seniors, most will.  In fact most insurance companies will work will people up to the age of 85 to 90 depending on the type of policy they get.

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Buying Life Insurance For Elderly People: 3 Questions To Consider Before You Buy

December 14, 2010 By Leave a Comment

If you’re retired and above the age of 60 you may have been considering the idea of buying life insurance at a time in your life you thought you would never need it.  However before you do consider this you may want to ask yourself these three questions to see if it really is necessary for you to do so, because if you don’t need it you could be saving yourself a bundle of money.

Can You Cover Your Funeral Expenses?

The first question you need to ask yourself is can you cover your funeral expenses in the event of your death?  What I mean is could you go to the bank pull at least $15,000 cash to pay for you or your spouses funeral right now?  The truth is most people can’t do this, in fact with an economy of increasing debt and less people saving it’s likely most people don’t have this kind of money in place to take care of an issue like this.

To boot you also have to consider the cost of a funeral these days.  Today’s average funeral cost run between $10,000 to $15,000.  This could leave your living spouse with a huge financial burden if you don’t have a life insurance policy in place to cover these expenses.

Do You Have A Large Amount Of Debt?

Next when your considering life insurance for elderly people you need to consider what kind of debt you still carry.  If you still have a mortgage your still paying off, a car loan, or even a large sum of credit card debt, you may want to have a life insurance policy to protect you from passing on this debt to others.

If you don’t have life insurance the burden of your debt could be passed on to your spouse, family members, or even those that cosigned on a loan for you.  Not protecting yourself could leave you very vulnerable to financial risk like this.

Are You Passing On An Inheritance?

Finally the last question you need to ask yourself is are you planning passing on an inheritance to your family and friends?  Life insurance can protect people from financial disasters like the first two situations I’ve mentioned above but it can also be used to help pass money to others.

The reason life insurance makes a great tool for passing on wealth is because when you pass away the money passed on to your beneficiary tax free.   This could help you avoid probate court and estate taxes all together.  In fact when it comes to estate planning seniors will use second to die policies pass the money on.  However, if you don’t have at least $200,000 or more this kind of option isn’t necessary.

In the end if you can answer yes to an any one of the three questions I’ve just shown you a life insurance policy may be needed but if you can’t then save yourself the time and money.

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The Guide To Life Insurance For Elderly People

November 8, 2009 By 23 Comments


Back a few years ago I was asked by an insurance agent from another company, “what is the most affordable life insurance for elderly people?”  I thought for a second and replied, “it all depends on the person’s situation.”

I could tell when I made this remark the other insurance agent did not agree with me at all.  In fact he proceeded to lecture me for next hour why term insurance is the only life insurance you should ever buy.   In the end I still disagreed and left it at that.

The truth is one type of life insurance for the elderly  is not always right for everybody, so if you’re  an elderly person looking for affordable life insurance you will want to read this article as I will be discussing all the options available as well as debunking a few myths that people have gotten caught up in.

What Options Do You Have

In this section I am going to cover the different types of insurances out there and how they work.  Take some time learn about these options before you get dead set on any particular one.

Term Insurance

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Term life insurance for elderly people, is usually your cheapest option available.   The way it works is you are buying life insurance for a predetermined amount of time.  They usually range from as little as five years to 30 years in length.

The length of time a policy last also determines the cost of the policy.  In most cases a five year term policy will cost a lot less than a 30 year policy because the amount of risk the insurance company has to take on is a lot less.  With longer term policies they have to take on more risk hence higher premiums.

Whole Life Insurance

A whole life insurance policy is a permanent policy the does exactly what it says, covers you for your whole life.   In fact, it not only last your whole life but the premiums last your whole life as well.

These types of policies are meant to be paid on till you die.  However, not all of the money you pay into this policy goes towards the cost of insurance.  Some of it goes towards your cash value which earns a fixed rate of return, usually ranging from 3% to 5%.

Index Universal Life

This is a newer type of insurance that is a close cousin of the whole life policy but with some much added benefits.  First, the policy is universal, which means it’s flexible.  For example in a whole life policy if you would stop paying your premiums on your policy would lapse and you would lose the coverage, but in a universal life policy you could miss a payment and be OK as long as you had money in the cash value of the policy it would continue to pull money from it till it would exhaust the account.

The policy is also called an indexed universal life policy because you can invest some or even all of the money in an indexed account based on the S&P 500 minus dividends usually.  In the indexed account you will never earn less than zero but there is usually a cap of 8%, which means you won’t be able to earn more than that.  Each company varies their cap on the interest rate but 8% is standard for most companies.

However if you decide you don’t like the indexed option most companies also have a fixed option which earns a fixed return around 3% to 5%.  With some companies you may also be able to split where you invest the money as well, you could put 50% in fixed and 50% in the indexed fund.

Variable Universal Life

Variable Universal Life Insurance, also known as VUL, is a close cousin to the index universal life policy except for a few things.  First, the policy is universal and flexible just like the indexed policy.

Second, a VUL is variable and not indexed which means it is invested in the stock market just like your mutual funds and 401ks.  This also means it can lose money like any other investment.

Why Term Insurance Isn’t Always The Best

With all of the benefits term Life Insurance for the elderly has it may not always be the most suitable option.  It may be the most affordable life insurance for elderly people but it doesn’t necessarily mean it will do everything you want it to.

Recently I read a book by renowned author Dave Ramsey who claimed that term insurance was the only type of insurance you should buy.  In fact he went on to say that you should buy a term policy and invest the difference.

To everyone who reads his book and don’t know much about insurance probably thought this was a great idea.  However, let me just punch a few holes in this myth before we move on.  The first issue I have with this idea is that Dave mentions in his book, The Total Money Makeover, that if you would buy a term policy at a young age a cheaper price you could save the difference and by the time you got to retirement you would have enough money saved up that you wouldn’t need the insurance anymore.

I’ve worked in the insurance industry for four and a half years and there is one thing I learned in that time, if I did not physically help that person set up an account and help them save the money, it won’t happen.  You could tell them all you want but more than likely they will forget or some type of emergency will come up and they’ll spend the money any ways.

Second, if you got a 30 year term policy at the age of 30, this would mean the policies contract would expire at age 60.  Now let me ask you, would there be a better chance that you would die between the ages of 30 and 60 or 60 and older?

Now there is a chance that you might die before the 30 year term policy ends but in most cases that won’t happen.  You would be more likely to die at age 60 and older.  This means that you paid for 30 years of nothing and a risk that did not happen.  This would be like renting an apartment and not living in it.

Finally, when you past age 60 and realize you don’t have enough money in place to cover all of your expenses you realize that you need more life insurance, and that it’s going to cost you a lot more.  In fact you’re also more likely to have more medical conditions at that time such as heart problems, cancer, or any other life threating illness which could deny you from getting any coverage at all.

If you’re reading this article and have fallen into anyone of the above situations my heart goes out to you.

Why I Have A Permanent Life Insurance Policy

With all the mess a term policy could cause why do I like my permanent policy?  Think of it like this, if you’re reading this article you probably have some type of health insurance.  If you’ve had it for some time you’ve probably used it already.  You might have used it for you doctor visits, buying prescriptions, or even if you went to the emergency room.  The point is you used it, so why not your life insurance?

The point I’m trying to make is that I can’t guarantee how long you’ll live, or when you’ll die but I can guarantee that you will die someday and wouldn’t it be better to leave your loved ones better off then you found them.  Not with a pile of debt in their lap and not to mention going through the entire process of probate and paying estate taxes.

UGH!!!

This is why I have a permanent policy.

Your Options…

In this final section I’m going to give you a few tips to help you out.

  1. Talk to several insurance agents and get term and permanent quotes.  Getting several quotes will allow you to compare all the options.  Don’t just go with the guy you’ve known for years just because you know him.  You may be passing up better deals than you realize.  I did this for years with my car and homeowner insurance till a neighbor stop by one day and showed me what I was missing out on.
  2. The cheapest policy is not always the best policy. Make sure you check the companies ratings, A++ and A+ are the best a company can get.  This rating means that they are a superior company in meeting the needs of their of their client insurance obligations.
  3. What is the insurance for? If you don’t need it don’t get it.  I’ve seen some fast talking insurance agents that could sell penguins fur coats, but it doesn’t mean you necessarily need it.
  4. Get only what you need. If you only need $25,000 don’t get a penny more.  Insurance companies charge per thousand so if $25,000 will cover you just get that.
  5. Make sure it covers your needs. If someone says you need $500,000 of life insurance make sure it’s for the right reason?  If you don’t have debt or the need to cover the loss of a breadwinner why do you need the insurance?

In Closing…

Follow the tips I have shown you above and you’ll find the best Life Insurance for elderly people.  There are a lot of people out there trying to take advantage of people especially the elderly so make sure you consider all you options before you decide.

This article was recently featured on the carnival of personal finance by M is for Money.

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