Life Insurance for Seniors

Planning for your future | Life Insurance

Seniors Life Insurance

Throughout our lives our life insurance needs change.  Life insurance after retirement is not a one-size-fits-all solution.  Senior life insurance can cover a number of needs in retirement. Life insurance can be used to leave a legacy to loved ones, protect against chronic illness and long-term care events, and cover final expenses such as burials.  This article will outline the various uses of life insurance after retirement, and what the best burial insurance companies for seniors are.

Life Insurance for Seniors

Do I need life insurance after retirement?

When do you no longer need life insurance? Many seniors think that after they retire, life insurance is no longer necessary.  In some cases, this may be true, but not always.  Evaluating life insurance for seniors is just like evaluating life insurance for any other age bracket.  If you have a life insurance need, then you should have coverage.

The rationale behind not needing life insurance after retirement is that life insurance is simply no longer needed.  However, what we see in our agency is the exact opposite.  It is not uncommon for seniors to want to want to carry some life insurance after retirement for various reasons.

The top reasons that we see seniors purchase life insurance after retirement are as follows:

  • To cover burial and final expenses
  • To protect against chronic illness or long-term care risk in retirement
  • To cover any remaining mortgage debts
  • To cover estate and inheritance taxes
  • To leave a legacy or inheritance to the next generation
  • To replace lost social security or pension income

Final expense insurance and burial insurance for seniors.

One of the top reasons that we see people purchase life insurance after retirement is final expense insurance and burial insurance.  Burial insurance policies are designed to cover an individual’s burial and final expenses after they pass away.  Burying a loved one can be costly for the people we leave behind.  By purchasing burial insurance coverage ahead of time, you ensure that your family doesn’t have to suddenly come up with thousands of dollars to pay for your funeral.

How much burial insurance do I need?

The amount of burial insurance that an individual needs can vary.  Oftentimes, we find that people overestimate the amount of burial insurance coverage that they need.  Today, the average burial and final expenses costs between $7,000 and $10,000.  That price range includes the funeral home, body preparation, cemetery plot and burial services. Direct cremations are less expensive and can reduce your overall final expense total.

Life insurance for Senior and Funeral expense

Estimated Breakdown of Expenses – $ 8,000

Funeral Home Services – $1,500

Embalming – $600

Cemetery Plot – $1,200

Casket  – Casket $2,100

Headstone – $1,500

Wake/Viewing – $500

Transportation – $600

Flowers – $500

 
 

As a result, we often will suggest people compare burial insurance coverage amounts between $5,000-$10,000.  Although, some higher priced markets may need larger amounts to cover 100% of the funeral cost.  If the budget allows, we can look at increasing your burial insurance coverage to cover higher funeral costs or leave additional funds as a legacy to your heirs.

Occasionally, the cost of the desired burial insurance death benefit amount will greater than what people can afford.  When this happens, we suggest that people don’t overextend their budgets.  Many seniors are living on fixed incomes.  If the burial insurance coverage premium doesn’t fit comfortably within their budget, we often see seniors struggle to pay their premiums when unexpected expenses come up.  The policy that stays inforce is the policy that will pay death benefits when the time comes.

While purchasing a burial insurance policy that only covers a portion of the funeral cost is not ideal, it still is a huge help.  Having to raise  20% of the burial cost and final expenses is much easier for a loved one than raising 100% of the cost.  We’ve never seen a family member upset that the policy didn’t cover the full amount of the burial or final expenses. On the contrary, the family member is usually thankful that their loved one thought of them at all.

How does burial insurance work?

Burial insurance for seniors is one of the easiest life insurances to qualify for.  There is no medical exam required to purchase burial insurance, only a few simple health questions.  It’s that easy!

Based on an individual’s health, the insurance company will offer you one of three plans, level death benefit, graded death benefit, or modified death benefit.  Each burial insurance company’s plan will affect the death benefit slightly differently, but this system ensures that everyone will be able to purchase burial insurance regardless of their health..

life insurance for Senior and types of death benefits

Types of Death Benefits

Level death benefits 

Full death benefit pays from day one.

Graded death benefits 

Accidental deaths pay the full death benefits in all years

In years 1 and 2, an increasing portion of the death pays for medical deaths

In year 3, the full death benefits pays for medical deaths

 
 

Modified death benefits 

Accidental deaths pay the full death benefits in all years

In years 1 and 2, the insurance company returns premiums paid + interest for medical deaths

In year 3, the full death benefits pays for medical deaths

The healthiest applicants will qualify for level burial insurance coverage.  This policy will pay the full death benefit from day one and has the most affordable premiums.  For people with more serious health concerns, the insurance companies will issue either a graded or modified death benefit, which costs more and has a limited death benefit in the early years of the contract.  Modified death benefits are most commonly found in guaranteed issue life insurance.

Guaranteed issue life insurance are designed for people with serious medical conditions who are not insurable otherwise.  These policies ask no medical or health questions and are the easiest type of life insurance to purchase. However, there typically have a two-year waiting period until the full death benefits are available for medical deaths so our agency always tries to qualify people for a level death benefit first and views guaranteed issue life insurance as a last resort.

Burial insurance is usually a simplified whole life policy, which is what you want to cover your final expenses.  Burial insurance whole life policies have guaranteed death benefits and guaranteed monthly premiums for the rest of your life.  You don’t want to have your premiums to increase as you get older or potentially outlive your coverage if you experience longevity.  You want to be sure that when the time comes, that your burial policy will be there.  Also, the cash value can be useful in a pinch if you run into a financial emergency.

How much does burial insurance cost?

Burial insurance for seniors does not cost a lot.  Various factors will affect the cost of coverage, such as your age, health, and lifestyle.  However, the average monthly premiums typically are between $40-$50/dollars per month.  That is usually enough to cover all or a large majority of a person’s final expenses.

Below are some examples of rates that a healthy non-smoker can expect to pay for burial insurance..

MALE

FEMALE

Age $5,000 $7.500 $10,000
55
$31.57
$45.76
$59.94
60
$38.96
$56.77
$74.63
$65
$49.04
$71.96
$94.87
70
$61.50
$90.65
$119.79
75
$86.64
$128.36
$170.08
80
$128.69
$191.44
$254.18
Age $5,000 $7.500 $10,000
55
$24.79
$35.58
$46.37
60
$28.35
$40.92
$53.49
$65
$34.13
$49.60
$65.06
70
$44.48
$65.12
$85.75
75
64.95
$95.82
$126.69
80
$93.54
$138.71
$183.87

*Please note that these are non-smoker rates for level coverage only.

 What is the best burial insurance for seniors?

There are a ton of great burial insurance companies for seniors available today.  Each company has their own strengths and weaknesses, but we have compiled a short list of the top companies that we believe stand out.  We are extremely selected on what companies we choose to work with.  These below are core companies that we use in our own brokerage due to their chart-topping low rates, customer service and respective underwriting niches..

Mutual of Omaha – A.M. Best Rating A+ (Superior)

The Mutual of Omaha offers some of the best priced burial insurance for seniors out there!  Establish in 1909, the Mutual of Omaha is a household name when it comes to quality affordable burial insurance for seniors.

Their chart-topping rates are consistently among the lowest in the industry.  Mutual of Omaha’s burial insurance is available in every state except New York, which not many burial insurance companies can claim.  They also have an optional accidental death rider that will pay out an additional death benefit for deaths caused from accidental bodily injuries.

Mutual of Omaha’s burial insurance underwriting is fair, but thorough.  They don’t have many standout underwriting niches, but Mutual of Omaha is a great option for otherwise healthy people with minor or no health conditions.  People with more complicated health histories should look elsewhere for their burial insurance.

Mutual of Omaha does require a random phone interview for some applicants, but if you are over the age of 60, the interview is mandatory.  The phone interview is an extra step that can add length to the process. The interview can delay people’s coverage, but it needs to be completed.  If the phone interview is not completed in a timely manner, Mutual of Omaha will cancel your application.

Most burial insurance companies have eliminated this step as technology has advanced, and we were told that at some point in the future, Mutual of Omaha will follow suit.  As for now, the interview is a part of the process and will have to be completed.  Should this change, we will update you as soon as we have confirmation.

Foresters Financial – A.M. Best Rating A (Excellent)

Foresters Financial is another top burial insurance company.  Their rates are super competitive and their customer service is exceptional.  Established in 1874, this Canadian company is structured as a fraternal organization.

That means you are not only getting quality affordable burial insurance, but you receive generous member benefits at no additional cost to your policy!  Outside of Forester’s fantastic rates, there are two areas that Foresters’s burial insurance stands out, their customer service and their underwriting.

Their burial insurance underwriting is very competitive for healthy people, but they also will offer level coverage to individuals with more complex health histories.  We have seen approvals at level coverage for type-2 diabetics who are insulin dependent and for people with histories of mood disorders like bipolar disorder or schizophrenia.

Foresters’s burial insurance also comes with an optional accidental death rider that adds additional death benefit for deaths resulting from accidental bodily injury or complications from an accident up to 180 days later!  The rider is inexpensive and offers a ton of value to seniors.

In addition, Foresters’s customer service is fantastic.  Their application process has been streamlined to an instant-decision phone interview.  Foresters’s will initiate a three-way call with you and your agent and will provide you an instant decision on the spot without any paperwork required!

Once you are approved for your burial insurance and pay your first month’s premium, you are covered.  Foresters will then mail you out a policy to your address within 10 business days.  It’s that easy!  The only disadvantage is that the instant-decision phone approval is only available in a limited amount of states.

AMERICO – A.M. Best Rating A (Excellent)

AMERICO is another top burial insurance company that has earned a spot on this short list.  AMERICO is a company that has joined the centenarian club of being in business for over 100 years and for good reason!  AMERICO has created some of the best burial insurance policies in the marketplace today.

AMERICO has two burial insurance policies, the Ultra Protector series and the Eagle Premier series, and both are great.  AMERICO’s Ultra Protector series has competitively priced rates, but the pricing comes at a cost of more stringent underwriting.  Outside of COPD, there is not much to brag about regarding the Ultra Protector series’s underwriting and the policy doesn’t have the ease of an instant decision phone application or e-application.

The Eagle Premier series is the more robust offering of the two burial insurance policies.  The Eagle Premier burial insurance policy offers competitive low-cost rates for people with heart conditions, type-2 diabetes, and mood disorders like schizophrenia or bipolar disorder.

In addition, the Eagle Premier series is one of the most lenient plans for smokers allowing non-smoker rates for non-cigarette tobacco users, such as cigar smokers.  The Eagle Premier series also offers a “quit smoking advantage” program that will offer non-smoker rates for the first three years of the policy while an applicant quits.  If the applicant can demonstrate they quit tobacco use, then the non-tobacco rates will remain.  Otherwise, the policy will have to be either rerated or the death benefit adjusted downward to maintain a level premium.

AMERICO’s Eagle Premier series also offers an instant decision e-application or instant decision phone application. Seniors can apply for burial insurance either through their email or over the phone and get an approval immediately.  Buying burial insurance coverage does not get any easier than instant, and there are not many burial insurance companies that can compete with AMERICO’s low-cost premium rates.

Liberty Bankers Life – A.M. Best B++ (Good)

Liberty Bankers Life is another core carrier of ours and for good reason.  Their burial insurance underwriting allows level coverage with no waiting period for certain medical conditions where other companies won’t at affordable premiums.

Liberty Bankers’s burial insurance coverage will offer level coverage with no waiting period for conditions like COPD or Cirrhosis of the liver.  This is EXTREMELY rare.  Most burial insurance companies would impose a partial of full two-year waiting period for this conditions.

In addition, their rates are very competitive and their customer service is exceptional.  They will offer a burial insurance policy for ages as young as 18 and they have a voice signature phone application that offers instant decisions on applications.  You will know by the end of the phone call whether you are approved for burial insurance and your actual rate.

Liberty Bankers Life has been in business from 1958 and they offer policies in all states except CT, MA, MN, NH, and RI.  They do offer optional accidental death riders as well as children and grandchildren term riders with their policies.  While their A.M. Best rating is not an “A” their B++ rating is right on the cusp of “A status” and their outlook has been reaffirmed as secure and stable by the rating agency.

AIG Guaranteed Issue Life Insurance – A.M. Best A (Excellent)

AIG is one of the largest life insurance companies in the United States and has one of the best guaranteed issue burial insurance policies in the industry.  AIG was founded in 1919 has been making good on it’s promises for over 100 years!  Even during the financial crisis of 2008, AIG’s life insurance division was a crown jewel of financial strength.

AIG serves a very special purpose in our agency.  Our agency is constantly scanning the marketplace for companies that will insure people with no waiting period.  However, sometimes a burial insurance policy with a waiting period is just unavoidable.  Once we have eliminated level coverage as an option due to health, AIG is our go-to burial insurance for seniors.

AIG’s burial insurance policy is a guaranteed issue policy.  There are 0 health questions asked, AIG does not care what medications you are taking, and they don’t care if you smoke.  Simply put, you cannot be denied coverage due to your health with AIG’s guaranteed issue burial insurance policy.

Since AIG is not underwriting you based on your health, they issue the burial insurance policy with a modified death benefit.  The burial insurance policy will pay the full death benefit for an accidental death from day on, but will only return premiums plus 10% interest for medically related deaths in the first 24 months of the policy.  In the 25th month, the full death benefit will pay for both accidental and medical deaths.

Assurity Life Insurance Company- A.M. Best A- (Excellent)

Assurity is a historic life insurance company tracing their business back to 1890.  Assurity offers it’s burial insurance in 49 states excluding New York, and has some unique underwriting advantages that make  Assurity’s burial insurance standout.

Assurity’s tobacco rates (especially for smokers under age 50) and non-tobacco rates are competitive, but their underwriting can be strict. For example, we’ve seen applicants declined by Assurity for “uncontrolled” type-2 diabetes who were easily approved by other burial insurance companies. That being said, we’ve also have had some success stories with congestive heart failure (CHF) and COPD.

Assurity is lenient on COPD offering burial insurance with no waiting period for qualified applicants.  They will want to see that you are no longer smoking and the condition is stable and under control.  If the disease has progressed to the point where you need oxygen equipment that will also knock you out of level coverage.

Assurity also has a unique underwriting niche with congestive heart failure.  Assurity is one of the only burial insurance companies that offers a graded partial death benefit in the first two years to someone with congestive heart failure.  The partial death benefit is not level coverage, but it offers greater protection and more affordable rates then most other policies with a two-year waiting period.

Assurity’s customer service is good, but their underwriting can be thorough.  They are one of the few companies that still issues a random phone interview in order to get approved for their burial insurance policies.  If you are over the age of 60, the phone interview is mandatory.  We would like to see Assurity move towards an instant decision product, but we are unaware of any plans to do this in the near future.

How do I use life insurance in retirement planning?

Life insurance in retirement planning can be a versatile tool.  Outside of burial insurance, life insurance can be used in a number of ways to reinforce an individual’s retirement.  As people transition from the workforce to the later stages of their life, their life insurance needs will change.  Seniors are less worried about a premature death, but seniors are more concerned about the effects of living too long; for example, chronic illness.

How do I protect against chronic illness and long-term care?

Traditional long-term care insurance and life insurance can both be used as a planning tool for seniors looking to protect their nesteggs against the threat of long-term care and chronic illness.  There are pros and cons to each type of insurance that we will discuss below.

Traditional long-term care insurance

Traditional long-term care insurance historically has offered the greatest coverage for seniors looking to protect against long-term care.  Long-term care insurance usually includes some form of inflation protection that will increase the coverage benefit over time, and has certain tax and estate planning advantages included in the state partnership plans and tax code.  These features make long-term care coverage a very attractive tool in retirement and estate planning.

Another attractive feature of long-term care planning is shared benefits and couples discounts.  Two spouses applying for coverage together can share a benefit pool.  This is helps keep costs down while ensuring that if one spouse has an exceptionally long chronic illness that the healthy spouse can contribute some of their benefit to maintain care for their loved one.

However, long-term care insurance does has some disadvantages.  Long-term care insurance typically is a use-it-or-lose-it insurance.  There is not a guarantee that you will ever have a long-term care event.  Therefore, some seniors question if the benefit is worth the cost.

In addition, long-term care insurance has become expensive in the past few decades.  Many seniors have seen their premiums increase as a result of poor financial projections from the insurance companies.  As a result, many working-class seniors have been priced out of the coverage if they are even eligible for long-term care coverage at all.

Finally, many life insurance companies have pulled out of the long-term care market entirely.  This has resulted in a select few companies still offering traditional policies.  Also, the remaining policies are geared towards a reimbursement model.  This creates additional work on the claim side for the beneficiary to manage receipts and determine what is an eligible and ineligible expense.  The claims process can be overwhelming for some seniors who are already struggling with a difficult situation to begin with.

Pros of long-term care insurance

  • Inflation protection
  • Potential state partnership program eligibility
  • Potential tax deduction of premiums
  • Shared benefit pool for spouses

Cons of long-term care insurance

  • Premiums have risen significantly in the past decades
  • No benefit paid unless you have a long-term care event
  • Claims are usually paid on a reimbursement basis

Life insurance with chronic illness or long-term care riders

As the long-term care marketplace has faced pricing pressures in recent years, the life insurance companies have begun to innovate life insurance contracts to address senior’s long-term care concerns.

These life insurance contracts have chronic illness or long-term care riders that allow the owner of the policy to accelerate the death benefits while they are still alive if they have a chronic illness or long-term care event.  If they don’t ever use the acceleration options, then the life insurance contract pays the death benefits upon death.

This method of coverage is attractive to seniors for a number of reasons.  Including a death benefit  solves the use-it-or-lose-it dilema by ensuring that the insurance company will pay a benefit even if the client never becomes chronically ill or suffers a long-term care event.  Also, many, but not all, life insurance with chronic illness or long-term care riders pay cash benefits for the condition.  This reduces the claim-filing burden significantly and offers maximum flexibility to the client since the money can be used for anything.

Additionally, these contracts often come with cash value.  The cash value will be returned if the client cancels the policy or can be accessed in the case of a financial emergency.  This allows the client greater flexibility if they change their mind later or no longer need the coverage.

One of the drawbacks of a life insurance policy with a long-term care or chronic illness rider is that the policies typically do not include any form of inflation protection.  These policies most likely would not qualify for the state partnership programs like traditional long-term care insurance does.

Pros of life insurance with a long-term care or chronic illness rider

  • Usually an indemnity cash benefit paid monthly (no reimbursement)
  • Flexible cash value
  • Death benefit paid upon death if no long-term care or chronic illness event occurs
  • Level premiums

Cons of life insurance with a long-term care or chronic illness rider

  • Benefits rarely have an inflation option
  • Usually no shared pool for couples
  • Typically no premium tax deduction
  • Usually not eligible for the state partnership program

Life insurance in retirement and estate planning

In addition to final expenses and long-term care, life insurance can also provide valuable liquidity options to seniors at a time when they need it the most.  The death benefit proceeds can be used to supplement lost income from a spouse, pay off outstanding debts or estate taxes, or leave a legacy for the next generation.

Estate Taxes

If you live in a state that has estate or inheritance taxes, your heirs can face hefty tax bill upon your passing.  If your estate is mostly illiquid assets, such as real estate, coming up with the cash to pay the taxes can be tricky.  Your heirs may be forced to sell an asset in a downmarket in order to create liquidity to pay the state or federal government their fair share of taxes.

Hard assets like real estate are not the only potential pitfalls.  If all your assets are tied up in qualified accounts, such as a 401K, your heirs may be forced to draw down from their inherited tax-deferred accounts earlier than they anticipated.  Any withdrawals from tax-deferred accounts requires that your heirs pay taxes at their current income tax rate, which may be higher than usual due to the withdrawal.  Buy leaving life insurance to your heirs to cover any estate or inheritance taxes owed, you protect your heirs from being forced to make an ill-timed financial decision to cover any remaining estate or inheritance taxes.

Estate Distribution

Another advantage of life insurance in estate planning is its ability to ensure that each child is treated fairly in your will.  Some families decide that one child may have greater need than another and thus they require a larger inheritance and other families decide that regardless of the need all their assets are distributed fairly among their children.  This is a personal choice that has no right or wrong answer in concept, but can be complex in practice.

We see this most commonly when someone names multiple owners of a property or business in their will.  For example, one child may want to rent the property or sell it and the other child may want it for personal use. Sometimes these disagreements can escalate into grudges that last for years.

We suggest families discuss what will happen to the shared assets or family business while they are still alive.  If you find that your children or heirs cannot agree on the use of the asset, then you can leave the asset to one child or heir outright and indemnify the other children or heirs with life insurance.  This ensures that everyone is in agreement with the estate plan and is treated fairly when the time comes.

Mortgage Protection

Retirement can be a life-changing period of transition for seniors.  It is not unusual for seniors to reevaluate their living arrangements during this time.  Now that the kids are grown and living on their own, seniors often have little practical use for the big house that they bought when their children were young and decide to downsize.

Rather than tie up all that cash in the new property, many seniors opt to carry a smaller mortgage and live off the proceeds of their former residence.  By carrying a mortgage, retirees not only increase their liquid capital, but also maintain all the tax advantages that come with having a mortgage.

If you take out a life insurance policy to cover the mortgage balance, you ensure that your surviving spouse has the resources to eliminate one of their largest bills should anything happen to you.  If they decide to keep their mortgage, no problem!  They now have have additional funds to sustain their retirement well into their twilight years.

Income Replacement

The social security rules regarding income for a surviving spouse can be confusing to some retirees.  One of the rules that surprises a lot of seniors is how your social security income changes when your spouse passes away.  The government will only allow you to keep the larger of the two benefits.  This can reduce a senior’s household income by up to 50%!

In addition to social security, some retirees have additional guaranteed income streams, such as a pension or annuity payment.  These income streams may be reduced upon your death or may even be eliminated entirely!  If your pension is the primary source of your income and you predecease your spouse, your death can be financially catastrophic.

Life insurance can ensure that if you were to predecease your spouse, that there would be money available for them to supplement their lost income.  Your spouse can either invest the proceeds privately, or purchase a new guaranteed income stream in order to maintain a modest standard of living.

What type of life insurance do I need in retirement?

When people purchase their first life insurance policy, it is usually a term policy.  Term life insurance is a cost-effective way of achieving a high death benefit for a temporary duration of time.  This makes it an effective tool for income replacement, covering mortgage debts, and college costs for children during a person’s working career.

As people transition from their careers into retirement, their life insurance needs change.  Most don’t need the high levels of death benefits that they once had, but still want to maintain coverage.  These remaining needs tend to be more permanent in nature and for that reason lifetime life insurance coverage is generally a better fit.  Therefore, whole life insurance, index universal life insurance, and guaranteed universal life insurance could make more sense for senior life insurance needs.

Whole life insurance is an excellent tool for final expenses and burial insurance for seniors. However, its cost can make it restrictive once you look at higher death benefits.  Universal life insurance offers greater flexibility and affordability at higher death benefit levels. The affordability and flexibility of universal life make it a valuable tool for life insurance planning in retirement.

Universal life insurance can be structured a number or ways to serve the needs of seniors.  There are policies that have chronic illness or long-term care riders that offer valuable protection against chronic health concerns in retirement.  Client’s can purchase universal life insurance policies that have lifetime guarantees or can purchase limited guarantees past life expectancy; for example, to age 90 at a reduced monthly premium.

Universal life insurance offers cash value as well.  The most popular cash value building life insurance policy currently in the marketplace is indexed universal life insurance.  Indexed universal life insurance credits interest to the cash value based on the performance of an underlying stock index, such as the Standard and Poor’s 500.  However, the cash value within the policy is not directly invested in the stock market, which protects the cash value from losing money from investment loss.

The Bottom Line

Life insurance for seniors is a valuable component of any retirement solution. Seniors face a number of life insurance needs ranging from burial insurance to chronic illness and long-term care insurance.  While each senior’s life insurance needs will be different, there is a policy out there for just about everyone.

If you haven’t sat down and discussed your life insurance needs in retirement, there is no time to waste.  Our veteran agents have helped many seniors just like you secure affordable life insurance coverage in retirement.  Request a quote or call one of our veteran agents today!.

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