All About Senior Life Insurance
The Golden Years are supposed to be a period of relief and relaxation. But, the truth is that retirement can also come with a hefty price tag. As you age, it becomes increasingly difficult to earn enough money working part-time jobs to cover all your expenses — but it's even harder if you aren't able to work at all.
That's why senior life insurance is such an important thing to discuss with your family members now- before you retire. This type of policy guarantees that regardless of what happens, there will always be income coming in for basics like food and shelter.
How does senior life insurance work?
Life insurance provides your loved ones with a death benefit when you pass away, but senior life insurance policies are designed differently. Although the policies offer protection in the event of death, they also provide guaranteed income for the rest of your life.
There are two different types of senior life insurance: traditional and annuity. While they both offer income and peace-of-mind, they work in different ways.
Traditional senior life insurance: The most common type of senior-life is a regular whole or term policy that includes a death benefit, known as a cash value component. Most payable-on-death (POD) accounts also fall into this category.
The most common type of senior-life is a regular whole or term policy that includes a death benefit, known as a cash value component. Most payable-on-death (POD) accounts also fall into this category. Annuity senior life insurance: An annuity is a contract between you and an insurance company that guarantees payments for the rest of your life. Typically, these policies are long-term — in some cases lasting as long as thirty years — and they offer interest rates that grow. At the end of the term, however, the money will run out unless you've paid into the policy with premiums or added more funds along the way.
Is senior life insurance right for you?
There is no way to determine if senior life insurance is the right choice for you without performing an analysis. The first thing that you must do before investing in any type of policy is to assess your current financial situation and determine how much coverage you need.
While it's impossible to predict the future, we can get a pretty good idea of what might happen by looking at past events. For example, let's say that you're currently healthy and are 65 years old — for all intents and purposes, your life expectancy is another 20 years.
Based on this information, you'd need to set aside $150,000 to cover your expected expenses. But what if you had a history of serious health issues and were expected to die in five years? You might not need as much coverage.
Be honest with yourself when figuring out how much coverage is right for you. Assessing your current situation will also prove helpful when deciding how much income you want from the policy. This is important because the amount that seniors can collect differs based on their age and financial status. In general, the older you are, the higher your income limits can be. If you're in poor health or have less savings than usual, there is a good chance that your income limits will be low.
This is because insurance companies typically adjust your policy for the loss of your income, thereby lowering the amount of coverage you'll receive. This means that you could end up paying more in premiums than if you were younger and in better health.
Also, consider whether or not the policy you choose now is right for your needs in five years. Again, there's no way to know what will happen — but looking at statistics can give a pretty good indication. For example, nearly 75 percent of all senior life insurance claims are based on age-related illnesses. So, if you're already sick, your chances of needing coverage are much greater.
If you are still in good health, then it's possible that you won't need to pay higher premiums because of the policy. However, no one can guarantee the future. In any event, it's always better to be safe than sorry. Get a senior life policy now — even if it's small — and work on increasing it as your income increases and your health improves over time.
The bottom line: The purpose of senior life insurance is to provide your family with some money after you die — but that doesn't mean it can only be used for the end of life. By getting a life policy now, you'll give your family peace-of-mind and a safety net that can also help you save for your retirement.
Source: CNN Money. "Health care costs on the rise as retirees age." Reviewed October 4, 2006. Available from: http://money.cnn.com/magazines/fortune/fortune_archive/2006/09/12/4261377/index.htm [accessed November 29 2016]
Link: http://money.cnn.com/2011/08/20/pf_career_live2_senior_life/.
Do you know how to get a guaranteed income?
This is the kind of retirement income that you can count on when you start to need it. These policies pay a fixed amount every month for the rest of your life, and they're guaranteed by federal law. You won't have to pay any premiums, so there are no delays in getting your money when you need it. Private senior-life insurance companies typically offer these kinds of products, as well as annuities that guarantee payments for life based on the growth of an investment portfolio or real estate portfolios. Some plans also include cash surrender; these terms allow coverage owners to receive money back without having to take out a new policy.
Annuities are insurance contracts between you and an insurance company. Upon your death, the money still owed to you is paid out to whoever you choose — and that amount can be adjusted. Private annuities typically don't include an insurance component, but annuities purchased through a retirement plan at work may have options that include the protection of life coverage.
How do I find the right senior life insurance plan?
The two main types of senior-life policies are traditional and annuity policies, but there are also several other factors to consider when it comes to choosing the right product for your situation.
Conclusion: Get a senior life policy now — even if it's small. You'll save money in the long run, and you'll also give your family peace of mind when it matters most.