Life Insurance Plans For Seniors
Quality, affordable life insurance plans for seniors don't have to cost an arm and a leg when you understand what to look for in a policy well ahead of time – well before you even begin searching online for quotes.
If you're a senior citizen who wants to take care of your loved ones long after you pass away, life insurance coverage is beneficial in several ways.
Knowing which benefits package will best fit your loved one's financial needs takes time to get right, but in the end, it's worth the effort.
Unfortunately, you may get confused about what affects the cost of life insurance plans for seniors or why comparable policies from different insurance carriers vary in price so much.
The good news is that seniors, just like you can, indeed, find affordable life insurance coverage. You only need a plan of action, a strategy, before starting!
The general idea is to find a way to compare life insurance costs and benefits side-by-side without the hassle of visiting several insurance websites one at a time. That's usually how people shop for life insurance online; they see an insurance website's product page and try to translate and unpack the jargon on their own.
Thankfully, there's an easier way to find the life insurance you can rely on when your loved ones need it the most.
You deserve the peace of mind that comes with carrying quality life insurance coverage, so here are the basic concepts to know before you jump online and scour the internet for accurate, reliable information.
What are the basic concepts of life insurance plans for seniors?
Overall, the basic concepts about life insurance aren't difficult to understand; they're simply easy to confuse if you get bombarded with terminology right away.
First, you have to know the difference between term life insurance and whole life insurance, the two essential varieties available today.
Let's take a look at each type and what makes them distinct from one another.
Understanding term life insurance
This type of life insurance works best if you feel like you'll only need to carry the coverage for a specific amount of time. Typically, insurance companies offer term life plans in 5, 10, 20, or even 30-year allotments.
If you fail to keep up with premiums, the coverage will expire and will no longer pay out any death benefits until you re-instate the policy and bring it in good standing.
What might cause you the trouble is that term life insurance itself comes in a few flavors: level term life and decreasing term life.
Here's a quick breakdown of each one to clarify the difference.
What is level term life insurance?
The vast majority of term life insurance sold in the U.S. provides an even level of death benefits, meaning that the policy's payout doesn't go down as you age or develop chronic health problems later in life.
These insurance policies will always pay out the same amount to your beneficiaries regardless of when you pass away and whether or not you die immediately after getting the coverage or two decades from now.
The general rule of thumb is that a level benefits package offers your loved ones the most financial security as they can count on the death benefits for financial support for years on end.
The challenge is deciding precisely what that amount should be, which is why you need to already have an idea of what you want before beginning your search.
Other than level term life insurance, decreasing term life insurance is another, yet less popular, option.
What is decreasing term life insurance?
A decreasing term life policy doesn't pay out the exact amount after several years. To lower the policy's cost over time, the death benefits specified for these types of life insurance plans for seniors go down likewise, usually after every year.
The idea is to have an affordable insurance policy today and pay out a "fair" amount to your beneficiaries in the future. You get to decide whether or not that amount is, in fact, fair and sufficient for your loved ones to maintain their current lifestyle.
Often, people choose to decrease term life coverage to account for a specific debt like a mortgage or a lengthy auto loan. But you could choose a decreasing policy to cover business loans or college loans, too, if needed.
At the end of the day, it doesn't make sense financially to continue to pay for an insurance policy with an expensive price tag if your beneficiaries won't necessarily need the death benefits to pay off your debts once you die.
Overall, the main benefit of decreasing term coverage is that you can easily renew the policy once the term is complete, giving you a chance to change the policy if you so choose, which many seniors do.
Does term life insurance come with any additional benefits?
You may not be aware that term life policies come with an additional perk: the return of premiums.
A return of premium is just what it sounds like. Your insurance carrier returns the premiums you paid over the policy's term.
The catch is that premiums for these policies are higher than comparable term life insurance. Also, if you let the insurance lapse, neglecting to pay the monthly premium, you may forfeit the return of premiums if you're not careful.
Understanding whole life insurance
The other main variety of life insurance is whole life insurance, the opposite of term life, which only covers a specific period.
When you purchase a whole life insurance plan – also known as permanent life insurance – you'll have the same premium no matter how old or sick you become later in life.
That's the entire point of whole life coverage; indeed, it covers your entire life span from the time you buy the policy.
Some whole life policies allow you to pay for the entire package upfront in one single payment, but this situation is rare since not many people can afford such an expense right away.
Whole life coverage comes with fixed premiums, yet these policies often include several riders or add-ons to convert the policy to cash value if you want to do so after a few years.
Essentially, when you pick a whole life plan, the premiums you've paid over the years can start to earn you interest if you use the insurance policy as an investment vehicle.
The trick is to talk to a financial adviser and thoroughly discuss whether a cash value policy is right for you before making a final choice.
Now, let's get into more specifics about how a cash-value policy works.
How does a cash-value whole life policy work?
You may not know precisely why some life insurance plans are potential investment vehicles, so here's how it works in the real world.
Insurance companies don't hold on to your premiums like a bank, paying out death benefits when you pass away dollar-for-dollar. Instead, they'll invest your premiums and stipulate in writing how much interest they'll owe you.
From this point, the ball is in your court as to whether or not you want to withdraw or use the funds.
Your options for using a cash-value policy include:
- Withdrawing the basis earned
- Paying future premiums
- Borrowing against the policy's cash value
- Converting it into an annuity
Without getting too deep into the weeds, here's what you should know about each option.
Withdrawing the basis earned
First, a basis is a precise amount that you've already paid in premiums. You may not know that you have the option to withdraw that basis tax-free up to the amount you paid into the policy. You could remove more than your basis, but that would trigger more tax liabilities and lower the number of death benefits overall.
Paying future premiums
A cash-value life insurance policy can benefit you by using your basis to pay future premiums. Once you carry a life insurance policy for many years, the interest you'll accumulate could suffice to pay premiums down the line, effectively eliminating out-of-pocket costs for premiums.
Borrowing against the policy's cash value
Next, you have the option to borrow against a life insurance policy's cash value. The loan works because the insurance company considers your policy the collateral. The catch is that if you don't finish paying off the loan before you die, the insurance carrier will deduct the remaining principal from the policy's death benefits.
Converting it into an annuity
This option is by far the most complex, so you shouldn't go around converting your life insurance into any sort of investment without careful financial planning. When you transform your life plan to an annuity via a 1035 Exchange, you won't need to pay capital gains, but you will, indeed, be on the hook for future taxes with each payment you earn.
That said, converting your life plan into an annuity makes the most sense if you want to give up your death benefits altogether, choosing to invest while you're still alive instead.
That's what you need to know about how cash value policies work, but what about other perks like accelerated death benefits?
What are accelerated death benefits?
Accelerated death benefits are payouts that your insurance carrier gives your beneficiaries before your passing.
Typically, term life policies come with provisions for accelerated death benefits but not always. Whole life coverage can come with accelerated death benefits too.
This unique feature is an excellent way to help pay for your end-of-life medical care if paying out-of-pocket isn't an option.
Will burial insurance count as an accelerated death benefit?
Technically, burial insurance is a specific type of whole life insurance. That's where the confusion comes into the equation: term life policies may or may not offer burial insurance.
The benefit of burial coverage – also known as funeral insurance – is that the monthly premiums will be less expensive than an actual term life policy.
As you can see, with so many options at your fingertips, how can you reliably find information online to find the best deals?
Where can you go to compare rates on life insurance?
Finding life insurance doesn't have to take several days if you use LifePlans.com to shop around.
The bottom line is this: it's way too hard to find accurate, trustworthy information online without a platform at your disposal to see rates side-by-side.
Otherwise, the alternative is searching manually for life insurance policies one at a time but not when you choose LifePlans.com.
LifePlans.com is an easy-to-understand, easy-to-use website that gives you all of the most important details of an insurance plan in one place. It's a much simpler way to shop around for life coverage without difficulty.
All you need to do is fill out a short questionnaire and basic contact information to start comparing life insurance quotes.
Click or call above to find life insurance for seniors today!
