Life Insurance Policies for People Over 50
Are you over the age of 50 and looking to find the best life insurance policy? Read on for some information on how people over the age of 50 can find the best rates.
Research conducted by AARP a few years ago revealed that more than 108 million US residents are over 50, with an estimated 19 million to be added over the next decade since the report was published.
What does this all mean? Aside from the obvious bump in the total elderly population who will require long term care, expect to see an increase in people over 50 who will sign up for life insurance policies.
A 2014 Nielsen insurance study showed that the rationale behind why people over 65 buy life insurance is changing. While it used to be that the elderly would purchase insurance to protect accumulated wealth and assets, recent trends reveal that a significant number of them purchase it for final expenses.
All these, of course, highlight one statistic that will remain true over the next few years:
More and more people over 50 will need life insurance.
And this article aims to provide insight into the types of life insurance policies you can choose from, with a couple of tips and recommendations for people 50 years old and above.
Getting a Policy at Age 50 and Above Versus at a Younger Age
It’s a well-known belief that when it comes to getting life insurance—the earlier, the better.
The logic behind it is simple: A policy becomes more expensive as your risk factors increase with age. To lessen the overall expense of life insurance policies (and also to get protection at an earlier age), some people get it while they’re younger with those identified being between the ages of 25 and 35.
However, even though some claim that the optimal age of getting life insurance is 35, in reality, few people in that age group are able to afford the premiums. Out of the total number of Americans who have life insurance policies, more than 50% are 45 years old and above.
Which Type of Life Insurance Policy Should You Get at 50?
Each type of life insurance policy has its own pros and cons. It’s crucial that you know about their differences and compare your options so you can make a sound decision. Let’s take a quick look at your choices.
Term Life Insurance
Also known as “pure life insurance”, it provides coverage for a specific number of years and guarantees a death benefit to beneficiaries if the policyholder passes away within the duration of the contract. It’s the cheapest form of life insurance available, making it a popular choice across all age groups.
- Most affordable form of life insurance
- Simple, easy to understand
- Premiums can be locked in for the entire term
- Can usually be converted to whole life later
- “Use it or you lose it” type of insurance—-you get nothing back if you live past the policy
- Gets more expensive the older you get (when you renew)
Permanent Life Insurance
This type of life insurance lasts for the policyholder’s entire lifetime. It combines a death benefit with cash value, allowing you to save and grow a portion of your premiums.
- Great for anyone looking for life insurance coverage that lasts for a lifetime
- Cash value allows you to invest a portion of premiums (earnings are tax-deferred)
- Great option for real-estate planning
- More expensive compared to term insurance
- Growth of cash value varies and is considered slower versus other types of investments (stocks, bonds, etc.,)
- More complex, not as straightforward as term life when it comes to the various elements involved
And here are the different types of permanent life insurance to choose from:
Whole Life Insurance
The most “traditional” form of permanent life insurance. It allows policyholders to get lifetime protection as long as premiums are paid. You can lock in your premium rate for as long as the policy is in force.
Universal Life Insurance
This variation of permanent life insurance features more flexibility as you can adjust both the premiums you’ll pay and the death benefit you’ll receive.
Indexed Universal Life Insurance
IUL is actually a subcategory of universal life insurance. The main difference being on the type of investment (IUL invests in Indexes like the S&P 500 or NASDAQ100) chosen by the insurer to invest the cash value portion of your premiums.
Variable Universal Life Insurance
Another variant of universal life that works the same way in principle but differs in terms of how the cash value portion is being invested (VUL invests in mutual fund sub-accounts) and allows the policyholder to make investment decisions for their cash value. Note that VUL is different from Variable Life Insurance (VIL) as the latter doesn’t let you adjust or change the death benefit.
Guaranteed Acceptance Life Insurance
Also known as final expense life insurance as the typical death benefit amounts are low and are mainly for the purpose of spending for things like burial and funeral expenses.
No Medical Exam Life Insurance
It works exactly like how it sounds. This is also commonly referred to as simplified issue life insurance. Unlike other policies, this one doesn’t require that you answer health questions or take a physical examination to get approved.
Compared to Guaranteed Acceptance, no medical exam policies typically offer greater death benefit but costs more when compared to traditional insurance. Our review of Haven Life’s No Exam insurance can give you more insight into the types of benefits and rates for this type of policy.
With so many options to choose from, the question now is, which policy is the best for people 50 years old and over?
Before we answer that, however, understand that there’s no one-size-fits-all solution when it comes to life insurance. It means that both term and permanent life insurance policy may work for someone over age 50—-it all boils down to that person’s needs and preferences.
With that in mind, let’s focus first on the things that can affect the type of life insurance you can get at 50 and above and the rate at which you’ll be quoted.
Top 10 Factors that Affect Life Insurance Rates
Risk factors and mortality rate increase as we grow older, making insurance more expensive the older you are.
Women live longer than men according to studies, their longer life expectancy results in a lower premium in general.
Coverage Term and Benefit
The greater death benefit, the more expensive premiums. Same goes if you opt for 30-year term insurance versus a 10-year policy, for example.
Perhaps the biggest factor considered when it comes to life insurance. If you have health issues, like heart problems or other specific types of diseases, for example, you simply have a higher risk factor.
Remember, insurance companies earn by taking risks against policies. Which means the riskier (health-wise) the person is, the more they are asked to pay in premiums to “balance” that risk.
Height and Weight
Both are used to determine if you are within a healthy “Body Mass Index”, (BMI) ratio. The result of which is used for identifying your overall health status.
The state you live in is considered in determining your premium rates. Different locations have different standards of living, which means some areas might be cheaper than others or vice versa.
Whether you smoke or not
Due to the increased risk of lung cancer (and other diseases that may stem from nicotine use), smokers generally pay more. In fact, they even have a separate category in health class tables.
On the life insurance questionnaire you’ll be asked to complete, it will have questions pertaining to the type of lifestyle you currently have. Individuals who have extreme hobbies or pastimes, for example, are generally considered to have a higher risk factor. Or if you travel often to exotic locations or areas that can be considered dangerous, it can affect your risk assessment.
Riders are optional features you can add to a policy. An Accelerated Death Benefit rider, for example, allows the policyholder to access a portion of their death benefit if they acquire a critical illness or life-threatening disease (terms will vary per insurer). The more riders you add, the more expensive your premiums will be.
Over the last few years, more and more insurance companies have started to consider an applicant’s driving history as an indicator of risk. If you have a pristine driving record, that’s definitely a plus.
Top Life Insurance Companies to Check out for People Over 50
As we’ve mentioned earlier, choosing the type of life insurance and which company to get it from is no easy recommendation as there are plenty of factors to consider. However, we can help you narrow down your list by taking a look at some of the companies that were rated highly based on popular benchmarks in the financial industry.
Why is this important? For starters, an insurance company’s financial strength serves as one indicator of its capacity to pay the beneficiaries of its policyholders. Since you’re essentially paying money now to get something in return in a few years or a couple of decades later, you would definitely want to go with a stable company that has a good track record.
Other ratings like customer satisfaction and feedback also help in gauging an insurance company’s performance. Overall, these ratings can help you decide which company to go with based on a few quantifiable metrics.
Just keep in mind that these should not be your sole reference and guide in choosing your insurer. While it helps, checking out many options and getting quotes from many companies will give you a better chance of landing the perfect policy for your needs.
- A.M. Best: Financial rating agency that measures a company’s financial strength and grades them from a scale of A++ (highest) to D (lowest)
- J.D. Power: They rate a company’s level of customer satisfaction, product quality, and consumer behavior. They use a scale of 5 (best) to 2 (everything else).
- Better Business Bureau (BBB): This agency measures a company’s overall customer service rating based on feedback from its customers
And here’s a shortlist of companies that were rated highly by each rating agency:
Top Life Insurance Companies with Excellent A.M Best Ratings
|New York Life||A++|
Life Insurance Companies Ranked By J.D. Power Ratings
|Mutual of Omaha||792|
|New York Life||791|
The following companies have been given a BBB rating of A+:
AXA Financial, Banner Life, Guardian Life, John Hancock, Lincoln Financial, Minnesota Life (Securian), Mutual of Omaha, Nationwide, New York Life, Northwestern Mutual, Pacific Life, Primerica, Principal Financial, Protective, SBLI.
Tips for Choosing a Life Insurance Policy for People Over the Age 50
Deciding which policy to get as well as from whom (and how much) can be a pretty daunting process. There are just so many options available. Here are 3 quick tips that will help you get started and make a decision.
Determine How Much Coverage You Need
The first step is to assess your current and future situation to determine how much coverage you’ll need and how much you can pay for it.
After deciding on the type of life insurance, the next step is to make a shortlist of insurance companies you feel are worth checking out (check our lists above if you don’t know where to start).
Shop Around and Check What’s Available
Once you have a shortlist, it’s time to check each company’s website to see what they currently offer. Some companies are known for a specific product, so if you’re keen on a particular policy, it’s best to search and compare the most popular ones in that category. Genworth, for example, is known for their Long Term Care policies.
AARP’s life insurance is underwritten by New York Life and is popular among seniors along with Mutual of Omaha. AIG Life has a ton of options available, while Haven Life consistently ranks high on reviews online due to its easy application process and competitive rates. The key here is to shop around and compare rates and features among companies you think are the best.
Consult With an Independent Advisor
When in doubt (or find the whole process too complex and wide-ranging), you can always get the services of an independent advisor. They can assess your situation and needs and provide you with a recommendation based on your preferences.
They have the experience and expert knowledge when it comes to life insurance, allowing you to bypass the whole research part and still come up with a sound decision on the best policy to get. Get a free quote today!