Times are changing in the insurance industry. People live longer, and stay in better health on average, than they used to. Naturally insurance companies recognize this and have adjusted their life insurance offerings accordingly. Maybe you find yourself without coverage after paying into a term life policy for 20-30 years, or maybe you just never thought too much about insurance when you were younger. The good news is that because of changing demographics, if you are over 50 there are still affordable life insurance options for you. Finding the right policy will be a little more complicated in middle age, and in this short insurance guide I’ll list a few things of which you want to be aware when shopping around for an over 50 life insurance quote.
It used to be that after the age of 50 or so, you had really no alternative to a whole life policy. Whole life guarantees a payout upon your death or when you reach an advanced age of 90 or 100, but it is expensive, and you have to pay your premium each month or risk losing your coverage. Term rates are much lower than whole life rates, because if one outlives their policy term there is no payout at all. Older people are less likely to outlive their policies; insurance companies love to sell term policies to younger people because the vast majority of them will outlive their coverage. As people live longer it becomes a slightly more attractive proposition to sell term insurance to healthy middle-aged people, and if you look around you will find term policies for older people, even into their 60s. Now, having said that, term life insurance for over 50s will still be more expensive than it is for younger people (for similar payout amounts), and you might not find too great a difference in monthly premium payments between the two.
Something to keep in mind is that if you do get a 20-30 year term policy in your 50s, you may still find yourself in your 70s or 80s, right back in the same position as you were in your 50s, ie with no life insurance and no payout to be paid to your beneficiaries upon your demise. It’s another pro-whole-life point. Now, there are policy provisions that you can buy that allow you to extend the life of the policy, or to convert your term policy to a whole life policy at its conclusion, or even return-of-premium term policies that repay your premiums as a tax-free lump sum when the term is up: you have many options to examine.
As you weight the pros and cons of term vs whole life in your 50s, also take into account your ability to pay the higher whole life premiums during your years of declining income. Also, and this is a big one, one of the attractive features of most whole life policies is that they often have a cash value amount that you can borrow against tax-free, or even choose to take as a lump sum if you want to terminate the policy early. Many whole life policies sold to people over 50 do not have this cash value amount, and this makes them incrementally less attractive. Score two points for term life.
It is very easy to find whole life insurance for older people with no medial exam required, but you will pay more for this feature, and if you are in good health it might be smart to find a policy that actually requires a medical exam if you can, as it most likely will save you money, all else being equal.
Remember that while you can opt for a policy that pays a tax-free cash lump sum upon your death, the payout may still be subject to inheritance taxes.
With life insurance for over 50, there often is no payout, or a reduced payout, if you die within one or two years of taking out the policy.
There is always the possibility that you might pay out more in premiums over the life of the policy than your heirs receive upon your death. This is a standard disclaimer, and it should have you asking yourself if you’d be better off diligently putting money into conservative investments rather than paying it out in premiums every month. Whole life especially is notorious for having hidden fees, charges and commissions. Any unbiased expert would tell you that you are paying a lot to have this defined, though guaranteed, death benefit amount paid to your heirs.
Be aware that the fixed lump sum that your beneficiaries receive to pay your funeral expenses might not necessarily be enough to cover all your burial expenses.
A final point: similar to other forms of life insurance, with over 50 life insurance sometimes you will save money by paying a once-yearly premium payment. Read the fine print. And do shop around.