Thanks to medical and technological advances, life expectancy in the US is on the rise. As result, the demand for life insurance for seniors is also on the rise, and insurance companies are stepping up to meet those demands.
So the mere fact that you’re a senior over the age of 60, 70 or possibly even 80 doesn’t rule out your chances of getting life insurance coverage. Which is good news, since life insurance plays an essential role in your overall retirement and estate plan.
Finding Life Insurance Is a Challenge For Seniors
Finding the best life insurance for seniors can be tricky, however. Since premium costs are based on age and health, the older you are, the more you pay. So if you’re over 60 and don’t have life insurance, it’s urgent that you begin your search now… making sure you give your loved ones the best protection possible in the event of your demise.
Now maybe you’re concerned you won’t qualify, given your chronic medical condition. Or that you won’t be able to get the kind of coverage you need, since you have some unique estate planning issues that need to be considered in your overall plan.
No matter where you are right now, don’t count yourself out. There are a number of very good life insurance options available for seniors just like yourself. That said, you are wise to do a bit of brushing up before buying. Otherwise you could find yourself suffering some costly mistakes in the process.
To help you avoid getting into trouble, we’ve listed three of the most common mistakes seniors make when purchasing life insurance, and what you can do to ensure you get the coverage that is right for you.
Mistake #1: Seniors Buy the Wrong Kind of Life Insurance
Needless to say, life insurance, especially for seniors, is not a “one size fits all” plan. One of the most common – and costly – mistakes seniors make when purchasing life insurance is buying coverage that doesn’t match up well with their personal profile and unique situation.
For example, “life insurance with no medical exam,” or “guaranteed issue life insurance” sound like great options. But they are not for everyone. Guaranteed issue plans are specifically designed for people who cannot qualify for a regular policy due to a serious health problem. And for that reason, of course, the premiums are higher.
So let’s begin by answering a few questions:
- Does someone depend on your income for their standard of living? If so, will that income continue in the event of your passing? If not, then you need to consider life insurance coverage to ease the financial strain on your family once you, and your income, are no longer around.
- Do you have any debt? Though certain financial obligations diminish as you grow older, you may still have some remaining debt. And here’s something else to consider: what happens if you get blindsided by unexpected medical bills? Would your health insurance cover most – or all – of the cost? The right kind of life insurance can provide your loved ones with the peace of mind that unpaid medical bills, funeral costs and other final expenses will all be paid by the insurance company.
- How healthy are you? The amount of life insurance coverage you can buy, and how much it will cost, depends on both your age and whether or not you’re in good health. Either way, your chances of decent coverage are still good. Even with a less-than-perfect bill of health it is still possible to qualify for certain kinds of life insurance.
Now let’s look at the second mistake seniors make when purchasing life insurance…
Mistake #2: When Seniors Buy on Price Alone—Without Consideration for Policy Features, Terms, and Conditions
Premium cost is, of course, an important factor. But it may not be the most important factor. Many life insurance policies also come with options to add Riders onto your policy, allowing you to multiply the benefits of your coverage for a reduced rate.
Take a critical illness rider, for example. Instead of paying out only on death, life insurance policies with a critical illness rider or “living benefit” pay if the insured is diagnosed with certain critical illnesses such as cancer or stroke.
Better yet, the proceeds are paid directly to the insured, so he/she can use the funds for anything they choose. And if extra funds aren’t needed ahead of time, the client can choose to leave them untouched for their beneficiaries as a traditional death benefit.
In addition to riders, there’s the matter of a rate lock. Unsuspecting and uneducated buyers may be swayed by ads that offer life insurance at a much lower premium cost than what you may be paying. More often than not, these policies do not include a rate lock. In other words, every few years the premiums go up. What often happens, of course, is that at some point the policy becomes unaffordable, and these buyers lapse their coverage because they can’t pay the higher premium.
A word to the wise – consider adding riders to your policy, make sure your policy includes a rate lock, and familiarize yourself with the fine print in order to get the most out of your life insurance policy.
Which brings me to the last – and maybe the most important – mistake to avoid when purchasing life insurance…
Mistake #3: Choosing the Wrong Kind of Life Insurance Agent or Agency
It goes without saying that you want to work with an agent who is knowledgeable, caring and trustworthy.
But there’s a lot more to choosing a professional to represent your insurance needs. And the best way to understand what I mean here is by defining some terms that can be rather confusing: Agent and Broker. Let’s start with Agent.
There are two main types of insurance agents:
- Captive life insurance agent – an agent that represents just one company and can only sell policies offered through that company.
- Independent life insurance agent – an agent that represents a number of different insurance companies, allowing them to compare different insurance plans and shop for the best policies and rates for their clients.
Then there’s the insurance broker. A broker is like an “ultra-agent.” Brokers offer the widest range of insurance products. They are required to have a broker’s license, which means they will likely be more educated and experienced compared to an agent.
So which life insurance representative is best for seniors?
In almost every case, to get the coverage that’s right for you at the best rates, and with the best customer service, you’ll want to work with at least an independent agent… if not a broker. That way, you’ll have peace of mind knowing you are getting strong offers for the most coverage and best policy riders from companies with the highest financial ratings.