During our lifetime, we normally purchase life insurance to protect our family against a premature death. To do that, most people purchase term insurance because of its relatively low cost. This makes perfect sense because the need is great, but mostly temporary. As children grow and other assets may grow as well, the need for large amounts of coverage may become unnecessary.
Tip #1: Convert Now
If you currently have a term policy and you’re over 70, the first thing you should do is check with your current life insurance company to see if that policy is still convertible into “permanent” coverage. If your policy is still convertible (some carriers allow conversion up to 75) then it makes sense to compare the conversion policy premium to the cost of a new policy.
Converting a policy requires no medical underwriting. Whatever health rating you were given when your term policy was put in force will be the health rating you get on a conversion policy. This is a great deal in many cases, especially if your health has deteriorated since the term policy was put in force.
However, before you decide to convert, make sure that a new policy is not a better value. You might even consider hiring an insurance consultant. Some carriers will allow conversion into a lesser quality policy only, with fewer guarantees.
Tip #2: Lower Permanent Coverage
Currently it is possible for a 77-year-old female to purchase a 15-year term policy which will carry them to age 92. However, should the insured live past the end of the policy, there will be no alternatives for new coverage. A permanent policy for the same 77-year-old will currently be about 25% higher in cost, but of course the death benefit will be paid whenever the insured dies. Obviously, there is a tradeoff here so keep in mind your objective. It may be that the coverage is only necessary for temporary protection in which case a term policy can make sense. If not, perhaps a lower amount of coverage that is permanent will suffice.
Tip #3: Avoid Term Coverage
A 77-year-old male will also be able to purchase a 15-year term policy assuming his health qualifies him for coverage. The major difference here is that the term policy at this age and a permanent policy at this age are almost the same cost. Don’t make a mistake and purchase term coverage in this situation from any insurance agent.
Tip #4: Secure Small Limits
Most people over 70 no longer own life insurance and the need for coverage is generally small in relation to younger ages. For small amounts of life insurance, generally up to $25,000 the easiest type of life insurance to obtain is known as “final expense” life insurance. It is used primarily to pay funeral expenses and other small debts. These policies are also known as “simplified issue” whole life policies because they do not require a paramedical exam. If the applicant can answer all questions appropriately and accurately, then a policy is issued. However, these insurance companies all ask slightly different questions which can mean the difference between acceptance and denial. If you are considering such a policy, make sure that you disclose all health issues to your agent to make sure you purchase the appropriate plan.
Other questions will inevitably come up, especially if your health history includes any serious health issues. That’s another good reason for using an independent agent with access to many high quality carriers.
About the Author
Lenny Robbins has spent his entire business career in financial services. He was a VP of Oppenheimer & Co., Inc. prior to starting his own securities broker/dealer. In 1991 he founded LifeNet Insurance Solutions which specializes in life insurance for seniors over 70 (https://www.lifenetinsurance.com/) and baby boomers.
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