Life insurance provides vital financial protection for adults of all ages. Whether they're younger and just getting started in their careers, older with financial dependents and small children or a senior who recently retired, life insurance is generally worth it.
However, seniors – many of whom may be living on a tight budget – need to take a more judicious approach to life insurance. Life insurance for seniors doesn't have to be expensive, but to get the most out of a plan, older adults should first familiarise themselves with the nuances of types of life insurance.
That means understanding the different options on the market, including term life insurance. In this article, we will break down three important things seniors should know about term life insurance to better inform their decision-making.
It may be their cheapest option
Term life insurance is arguably known for its price more than anything else. Term life insurance is generally the cheapest type of life insurance on the market for a variety of reasons.
Because it only lasts for a set term (hence the name) like five or 10 years, it's generally inexpensive to maintain.
It also doesn't come with a cash reserve that can potentially be accessed while the insured is still alive. Because of these factors, term life insurance is less expensive than whole life insurance. This is true for applicants of all ages, even seniors.
How much does term life insurance for seniors cost? Prices range depending on your age, health and other personal factors, but they can potentially secure it for less than $100 a month (women typically have lower premiums than men). So, for seniors who need life insurance but don't want to break the bank to get it, term life insurance may be their cheapest option.
It's flexible
Term life insurance comes in amounts ranging from tens of thousands of dollars to more than $1 million.
It can also come in varying time frames, ranging from just a few years to decades.
And it's convertible, so if policyholders ultimately decide that they want a whole life insurance policy instead, they can convert your term policy into a whole one (depending on the individual insurance provider).
The flexibility term life insurance policies offer can be particularly appealing for seniors who may just need coverage until their mortgage is paid off or their children have moved out on their own. In such instances, a term life insurance policy may be best for seniors.
They don't need to take a medical exam to get it
Some seniors and older adults may be hesitant to apply for life insurance because they're unsure of what a medical exam will reveal. Medical exams are a traditional part of the life insurance application process and check for items like heart rate, blood pressure and more. Positive exam results can go a long way in securing cost-effective and comprehensive life insurance. But poor exam results could severely hamper the insurance provided (if it doesn't disqualify the applicant in full).
Fortunately, seniors concerned about the prospective results of a life insurance medical exam can skip it altogether by securing a no-exam term life insurance policy instead. These types of term policies essentially guarantee coverage and, because there's no medical exam, the application process is significantly expedited.
That said, a medical exam gives insurers vital insight into the health and well-being of the applicant. Without it, expect to pay more for a life insurance policy than you may have if you took the exam and did well.
The bottom line
Life insurance is a fundamental part of sound financial planning, even for seniors. Older adults looking for the protection a life insurance policy can provide should consider turning to term life policies. This type of insurance is likely to be their cheapest option and has flexible terms and conditions. It also comes in a no-exam form for seniors concerned about the possible results a medical exam could reveal.
This is an abridged version of an article by Matt Richardson which appeared on CBS News.