Why is life insurance beneficial for seniors?

Even if you’re retired or planning to retire soon, it's smart to start thinking about the assets you plan to pass on to your beneficiaries and heirs. But you may leave behind debts, too, including a credit card tab, medical care bills, and funeral, burial, and final expenses.

While your savings, investments, holdings, and overall estate may cover these expenses and provide a nice financial future for your beneficiaries, there's always the risk that your survivors may have to shoulder a bigger financial burden than you anticipate after you pass away.

That's why many experts recommend a life insurance policy for seniors.

"Life insurance isn't always needed after you retire, especially if you can care for yourself and your family's needs without financial assistance. However, it's good to have in place just in case something should happen to you," says Peyton Leonard, a life insurance expert with LifeInsurancePost.com. "Life insurance should be considered by seniors, especially if they have a family that is still dependent on them. The policy could be used to pay off bills and debts while also providing a steady flow of income."

What kind of life insurance policy is best for seniors?

There are many types of life insurance for seniors worth considering. Which one is best for you depends on what you want from a life insurance policy.

Here are five types of life policies:

Term life insurance

These policies are only for a period, such as 10 or 20 years. If you outlive a term life policy, your beneficiaries don’t receive a death benefit.

Term life policies offer a higher death benefit than other types, but the premiums may increase with each new term depending on the policy type -- often every five years with many carriers.

However, term life offers no cash value accumulation, it usually isn't offered or expires after age 80, and it may be difficult to qualify for a term policy if you have severe health issues.

Whole life insurance

This policy type is a kind of permanent life insurance. Whole life accumulates cash value that can be used to pay for premiums in the future or borrowed in case of emergency.

A whole life policy’s premiums don’t increase, and the life coverage never expires or decreases, as long as you pay premiums.

"But whole life insurance is more expensive than term life insurance because it is permanent protection that will last a lifetime," explains Randy VanderVaate, president/owner of Funeral Funds of America.

Guaranteed universal life insurance

This type of permanent life policy provides lifelong affordable life insurance with guaranteed death amounts plus a possible return on your premiums.

On the downside, you'll earn little to no cash value accumulation, depending on the policy, and because your returns are tied with the stock market, there’s a higher risk of your investment failing.

Final expense insurance

These policies are usually guaranteed, which means you don’t have to have a medical exam or answer health questions.

"This policy is designed for seniors to pay their end-of-life expenses like burial, cremation, medical, or estate expenses. Your premium stays the same, and the policy does not expire," VanderVaate says.

However, final expense life insurance is more expensive than term life insurance, and it will only cover final expenses, not provide income replacement for your beneficiaries.

No medical exam life insurance

This option also called guaranteed issue life insurance, is recommended for seniors with pre-existing health problems because no medical exam is required to get a policy (although the insurance company will review your medical and prescription records). The drawback is that the coverage/payout is more limited than other types of insurance policies - often maxing out at $25,000.

"For seniors most concerned about covering their final expenses, final expense life insurance is the most cost-effective option," says Brian Martucci, the Minneapolis-based finance editor for Money Crashers. "A no medical exam policy is ideal for seniors with known health conditions that could result in denial of coverage, although it's likely to be more expensive than a medically underwritten policy. By contrast, whole life insurance policies and higher-coverage term life insurance policies can be prohibitively expensive for older people and often aren't available to them at all."

Best life insurance companies for seniors

Company Service offered
Mutual of Omaha

Its whole life insurance policies don't require medical exams, and you can get term life insurance even after 85 years of age; they stop insuring seniors by age 95, however, and have limited riders, according to Leonard.

A popular Mutual of Omaha plan is Living Promise Level whole life insurance, available in every state except New York to those aged 45 to 85 years, with coverage amounts ranging from $2,000 to $40,000.

"This plan comes with day one coverage upon acceptance," says Jake Irving, owner of Willamette Life Insurance. "The underwriting standards for this policy are pretty high, which is why the price is so competitive. Seniors who apply should be in good to excellent health. This policy is considered by many in the industry to be a top option for final expense life insurance."

AIG

This insurer offers a guaranteed issue whole life insurance policy in every state (minus New York) for 50- to 80-year-olds that pays out up to $25,000.

"Seniors in poor health will be accepted by this guaranteed issue plan. While most seniors are eligible, this coverage provides a great option for those who cannot qualify for other plans," Irving says. "AIG has some of the lowest prices available for this type of policy. But there is also a two-year waiting period, which is standard for coverage with no underwriting."

Aetna/CVS

Its Accendo level whole life insurance plan is offered nationwide (except in New York) to those aged 40 to 89 and provides coverage amounts up to $50,000, depending on age.

"There are two tiers of coverage with the Accendo level policy: preferred and standard. Both plans offer immediate coverage. But standard policies are easier to qualify for although they have slightly higher prices; standard policies also accept conditions like COPD, Parkinson's disease, lupus, and multiple sclerosis," notes Irving.

MassMutual Life

Leonard recommends this carrier's whole life policy because it allows you to borrow against the value of the policy.

"They also give guaranteed death benefits and the policy won't run out at the end of its term. But MassMutual is best for healthier seniors because their policies require medical exams," he says.

Guaranteed Trust Life

This carrier offers a guaranteed universal life insurance policy that is popular with seniors suffering from moderate to severe health conditions.

"They also offer a superior graded death benefit that eliminates the need for guaranteed life insurance with a two-year waiting period for most seniors," says VanderVaate.

TransamericaThe company offers final expense level premium whole life insurance policy options, available to policyholders up to age 85 in every state, with face amounts varying from $1,000 to $50,000 plus a guaranteed death benefit.
Banner Life InsuranceThis is likely your best option for term life insurance. The life insurance company offers double pricing for its policies. Also, they insure seniors starting at 75 years of age, explains Leonard.
Gerber LifeThis insurer offers a variety of senior life insurance options, including affordable term, guaranteed life, and whole life policies.
John HancockIt provides permanent life insurance options up to 90 years old, "an age not every carrier will ensure up to," says Eric Estevez, owner of HLC Insurance Broker. "While no cases are the same, this is commonly used for the unpleasant cost of funeral expenses incurred."

How much does senior citizens' life insurance cost?

Life insurance costs can vary based on the policy type, the carrier, your age, and your preferred death benefit.

"On average, if you are going for whole life insurance, a healthy male senior should expect it to cost around $1,000 to $2,000 annually for a $250,000 policy, while a healthy female senior can expect to pay around $900 to $1,800 for a similar policy," says Brad Cummins, owner and principal agent of Insurance Geek.

Term life insurance is more affordable but rates increase as you age. Term life policies either increase as you age or stay level depending on the policy.

"Life insurance companies factor your age and health in determining the premium, because the older you get, the more health impairments you tend to have. Age and health impairments affect life expectancy and the cost of your life insurance," VanderVaate adds. "That's why the average premium cost for most seniors will be between $30 and $100 per month."

How much does senior term life insurance cost?

Here are the average annual costs for 10-year and 15-year level term life insurance policies for nonsmokers who are classified as regular health for up to age 75:

10-year term15-year term
65-year-old male$1,378$1,811
65-year-old female$976$1,363
70-year-old male$2,277$2,995
70-year-old female$1,613$2,225
75-year-old male$3,734$5,601
75-year-old female$2,569$4,502

Source: CompuLife, August 2021

What is the cheapest life insurance for seniors?

The most inexpensive life insurance option or policy type will depend on your age, need, and death benefit.

"For instance, if you are age 65 or younger, in good health, and have a minimal death benefit need, you stand a good chance at getting a competitive premium cost," advises Estevez.

A low-benefit final expense policy that requires medical underwriting is often the most affordable option for seniors who don't currently have life insurance.

"The cheapest life insurance option for seniors is first-day coverage final expense life insurance or burial insurance. The healthier you are, the better your rates will be," VanderVaate suggests.

A term life insurance policy can also be considerably cheaper but may be difficult to qualify for based on age and health condition.