Thinking about their mortality can be somewhat unpleasant for some people, particularly if they’re in their younger years (20s and 30s). For that reason, they’re often reluctant to discuss life insurance, and they tell themselves they can wait until they’re a little older before they buy it.
Jump ahead to these sections:
- Are There Age Limits on Life Insurance Policies?
- What Should You Consider Before Buying Life Insurance as an Older Adult?
- Pros and Cons of Buying Life Insurance as an Older Adult
- Types of Life Insurance for Older Adults
- Do You Need Life Insurance as an Older Adult?
- Tips for Buying Life Insurance as an Older Adult
Unfortunately, many people procrastinate and don’t seriously consider buying life insurance until they’re in their 50s or older. They then can face several challenges qualifying for life insurance, such as having developed health conditions or no longer meeting the age requirements.
In this article, we’ll answer the question of whether there are age limits when buying a life insurance policy, what you should consider before purchasing life insurance as an older adult, tips for buying life insurance as an older adult, and more.
Are There Age Limits on Life Insurance Policies?
Yes, there are age limits when life insurance companies issue new life insurance policies. They vary from company to company, with the age range typically being from 60 – 80 years old, although you will find a few companies with a higher age limit of 85 years old.
Life insurance companies have set age limits for one primary reason: profitability. Over the years, life insurance companies have found that it’s not as profitable for them to insure older adults because they have shorter life expectancies, which means they’ll be paying a life insurance premium for a much shorter period than someone younger.
What Should You Consider Before Buying Life Insurance as an Older Adult?
You should consider three key things before buying life insurance as an older adult: your financial goals, age, and overall health.
Financial goals: As an older adult, you should consider the sources and amounts of your existing retirement plans (401k, pension, IRA, Social Security, etc.). If, after calculating what your total retirement income will be, you find that there is a shortfall and your expenses will exceed your income, buying a whole life insurance policy is an option.
The downside of this option is that as an older adult, you’ll have fewer years to accumulate a substantial cash value amount since policy fees and expenses are higher in the early years of your policy. As a result, it takes several years before you see any benefit from the cash value component of your policy.
Age: The primary item to consider with your age is the effect it’s going to have on your premiums. Life insurance premiums are significantly higher when you are in your 60s and 70s. In some cases, the high premiums may not justify the death benefit, particularly with guaranteed issue life insurance.
Overall health: Many older adults have chronic health conditions that developed when they were in their 50s or younger. These health conditions can cause a life insurance company to decline the applicant totally and not issue them a policy.
However, in some instances, if the older adult’s health conditions are less severe, the insurer may issue a policy, but with an increased premium that exceeds their standard rates.
If you have ample retirement income but would still like to increase it, and your premiums are at a level that you can comfortably afford, life insurance can be a good option for you as an older adult.
Pros and Cons of Buying Life Insurance as an Older Adult
Buying life insurance as an older adult has its pros and cons.
One of the pros of buying life insurance as an older adult is you typically don’t need to buy as large of a face amount of insurance as you do when you’re younger. The reason is that many of the expenses that motivated you to buy a life insurance policy when you were younger are no longer factors, such as protecting a 30-year mortgage or making sure there was enough money to send your children to college if you died prematurely.
Another pro of buying life insurance in your later years is creating a lump sum cash benefit for your beneficiaries. Even though the face amount may be smaller, the death benefit can be used to pay your final expenses, ensure that your spouse’s standard of living is maintained, leave money for your grandkids’ education, or other reasons that are important to you.
A significant negative with buying life insurance as an older adult is the high cost. For example, a $100,000 whole life insurance policy for a 60-year-old in excellent health costs about $257 per month, according to rates from Quotacy, a life insurance brokerage. On the other hand, the same whole life policy for 30-year-olds costs just $72 per month.
Another negative is qualifying for a policy. The majority of adults in their 60s and 70s have developed some type of health condition that could result in life insurance companies declining to issue coverage.
For example, older adults that are obese, have diabetes, have had a heart attack or cancer, or have other chronic health conditions often find it very challenging to find an insurer with an affordable policy that will approve their application.
Types of Life Insurance for Older Adults
Even though there are age limitations for older adults who wish to purchase a life insurance policy, you do have several types of policies to choose from.
Cheapest option: term life insurance
If you’re a senior in excellent health for your age, a term life policy is often a good, low-cost option. You have to be willing to take a medical exam, but the insurance company will pick up the exam cost.
Keep in mind that term life insurance is temporary coverage designed to protect a temporary need, like a mortgage, or provide financial support for a spouse or dependents.
Also, although you can typically qualify for a 10-year or 20-year term life policy if you’re in your 60s or 70s, you will likely find it challenging to find a life insurer that will issue you a policy if you’re in your 80s.
Lifelong coverage: whole life insurance
Many older adults prefer whole life insurance coverage over term life. It is more expensive, but you have the peace of mind knowing that your policy will pay a death benefit to your beneficiaries regardless of when you die, as long as you pay the premiums.
No medical exam: guaranteed issue life insurance
Guaranteed issue life insurance is an excellent option for older adults with chronic, pre-existing health conditions. No medical exam is required, and the application contains no medical questions. Just submit the application with a check, and you’ll be approved.
Also known as “final expense insurance,” guaranteed issue policies won’t pay the full death benefit for the first two years you’ve had the policy; it pays what is referred to as a “graded benefit.” If you die during the two-year waiting period, the insurer will either reimburse your beneficiaries the premiums you paid, plus interest, or pay out a smaller lump sum amount.
Burial coverage: funeral insurance
Also called pre-need insurance, funeral insurance policies are purchased directly from a funeral home. The death benefit is paid directly to them to cover the cost of pre-arranged services, such as a casket, embalming, funeral service, etc.
Do You Need Life Insurance as an Older Adult?
Before shopping for a policy, decide if you really need life insurance. If you have money set aside for your final expenses and have healthy savings and retirement accounts, you might not need coverage.
However, a life insurance policy might make sense for you if you:
- Have outstanding debt that other people will have to repay.
- Have a spouse or dependents that you support with your income.
- Want to cover your own funeral and burial costs.
- Need money when you die for estate taxes.
- Want to provide an inheritance for important people in your life that you leave behind.
Alternatives to Life Insurance for Older Adults
If you find it difficult to find a life insurance policy that meets your needs as an older adult, and you need liquidity in your later years for something like retirement, there is a viable alternative for you to consider: a life settlement.
A life settlement is an arrangement where you sell a whole life insurance policy that you’ve had for quite a few years to a third party who buys it as an investment. They make money by paying you a portion of the cash value accumulated in the policy in return for receiving the policy's full death benefit when you die.
Life settlements shouldn’t be confused with viatical settlements, which are similar to life settlements, except the insured individual must have a life expectancy of two years or less.
Another alternative to life insurance for an older adult is a single-premium annuity. An annuity is also a financial product sold by life insurance companies. It is designed to have a lump sum of money deposited into it and have interest credited and grow tax-deferred.
The individual who funded and owns the annuity, also known as an “annuitant,” can withdraw all or part of the money when they like, but they will pay taxes on some of their withdrawal. They can also leave the funds in the annuity to a beneficiary when they die.
Tips for Buying Life Insurance as an Older Adult
Before buying a life insurance policy, older adults should:
- Shop around and compare monthly premiums and death benefits to make sure you’re getting the right policy that fits your budget.
- Work with an independent life insurance agent who is knowledgeable about the senior market. An independent agent can get you quotes from multiple life insurance companies and not push a policy on you from the only company they represent.
- Read the fine print carefully. It’s essential to know what the policy covers and what it doesn’t cover, like any causes of death that aren’t covered, and what your options are if you can no longer pay your premiums.
Dropping Your Life Insurance
If you’re in your 70s, you may be tempted to drop your life insurance. It can make sense if you’ve paid off all of your debts and you have a healthy savings account. But think it over carefully, and talk with your agent about any cash value that might be coming your way when you surrender your policy.