Pros and Cons of Life Insurance for Seniors
In spite of the advantages, there are also times when it’s not possible or advisable for seniors to purchase life insurance. Here are some considerations to keep in mind.
PRO/CON: It may be harder to qualify for a policy… but there are alternatives.
People in their 60’s, 70’s and 80’s are often not as healthy as they were in their younger years. If this is true for you, especially if you have had serious or chronic illnesses in the last ten years, you might be declined. Your policy could also be “rated” due to health issues and your premium could be very high.
If your health is not good, here are some options to consider.
Can you take a policy on a healthy relative? If you want to utilize the savings portion of the policy and intend to leave an inheritance to a spouse, child, or grandchild, you may be able to insure them. You would be the owner and typically beneficiary of the policy. The cash value and dividends would benefit you. You could also transfer ownership to them at some point, which has some advantages. (Many people insure spouses and children even when they have their own policy.)
What about a guaranteed acceptance policy? You could take a modest policy for final expenses and/or a small inheritance through a “guaranteed issue” policy. The pricing will not be advantageous, and we encourage people to apply for “regular” whole life first if there is a chance they may be approved. However, a guaranteed issue policy could serve a purpose if you are concerned that you would otherwise be leaving loved ones in a bad situation.
Can you improve your health first, then qualify?
Proper nutrition and exercise and self-care can make a big difference in your health and your ability to qualify. Of course, non-smokers and people at a healthy weight qualify more easily. Even people who have had cancer or other health concerns in the past are surprised to learn they can obtain life insurance if they have been healthy for the past ten or so years. And sometimes we can also help to steer an applicant to a particular company or type of policy that may increase their chances of qualifying.
PRO/CON: You can borrow against the cash value to finance major purchases. But should you?
One reason people obtain whole life insurance and fund it with maximum paid-up additions is to have an asset they can easily borrow against as needed for emergencies or opportunities. This allows savings to keep growing and compounding in a tax-advantaged environment without having to liquidate it when a need arises.
If you wish to use a policy in this way, there are two things you should know. First, be prepared to fund it for a few years to build the cash value before you start borrowing. It takes time for cash value to build up. Think of life insurance as your long-term savings vehicle, not a short-term financing solution.
Second, if you wish to borrow money for a purchase or expense, always look for the best way to borrow. For example, if you can finance a new car for 2.9% through a credit union, that’s a better choice than using a policy loan that may charge around 6% interest. However, if you need equipment for your business, an equipment lease may equate to 20% interest or more! In that case, you’d be far ahead using a policy loan. You may also be able to borrow from a bank using your policy as collateral for even less.
PRO/CON: Premiums are more expensive, but there is a silver lining—more cash value!
Life insurance is more expensive the older you are. When you are younger, you have longer to live and the life insurance company has more years to invest your premiums to try to cover the death benefit they will pay one day. The base premium for a $100k policy may be ten times more expensive for a 60-year old man than a ten-year old boy. While this demonstrates an advantage to obtaining life insurance on younger generations—premiums are affordable and will never rise with a whole life policy—cash value builds up much faster when premiums are higher. It’s difficult to build meaningful cash value on a child, much easier on an older adult!
Cash value accumulates at any age. In later years, the internal rate of return will be a bit lower than a policy on a younger person, but you’ll typically still be beating bank rates over the long-term, while putting additional protection in place.
The important thing here is to make sure you can afford the policy. If you don’t have cash flow to fund the premium (base premium plus paid-up additions, if you want to build cash value faster), life insurance may not be a good fit for you.
If you need more income now from your current assets, we would recommend a different strategy. Download our complimentary Prosperity Accelerator Pack and read Financial Planning Has Failed, the ebook you’ll receive along with other resources. You’ll learn the strategies we recommend to increase your income now!
Whole Life Insurance Past 60, 65, 70, even 80!
If you are not yet 85, you’re NOT too old for life insurance. The decision and ability to get it is less about age and more about your health and your financial situation.
At almost any age, life insurance is the best possible asset for passing wealth and for long-term saving (10+ years). A whole life policy gives you great flexibility to replenish, replace, or preserve assets.
For twenty years, Partners for Prosperity has specialized in whole life insurance and alternative investment strategies. We are here to help you make informed choices about life insurance and appropriate investments.
Get a Life Insurance Quote
You’re probably not too old for life insurance. Request an appointment to discuss your unique situation today. We can run illustrations to show you how a certain type of policy might perform. There’s no sales pitch or long presentations. We’ll advise you of your options and help you move forward only if you are interested.
Get a Life Insurance Quote
You’re probably not too old for life insurance. Request an appointment to discuss your unique situation today. I use three top-rated mutual life insurance companies. I can run illustrations to show you how a certain type of policy might perform. There’s no sales pitch or long presentations. We’ll evaluate your options and help you move forward only if you are interested.
Next week, I will share Part Two why People Purchase Life Insurance after Sixty.
Charlie Nunez, RICP
Retirement Income Certified Professional
To schedule an appointment by Zoom or phone, click here.