The average amount of recommended life insurance for young people, especially those that have just purchased a home and are raising a young family, ranges in the $250,000. There are several reasons why the benefit level is so high, but they mostly deal with paying off the home and any other outstanding debts, funeral service, and setting up the children for entry into college.
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However, life insurance for people over 70 is a different matter. The type of expenses faced by seniors over seventy years is different compared to young people.
How Much Life Insurance Do Seniors Need?
There is no single answer to that questions because seniors have different needs depending on their responsibilities. What can be stated is that seniors over 70 will need life insurance that is substantially higher than their annual earnings to pay for the following needs;
- Funeral Expenses
- Coverage of Spouse
- Legacy for Children
There may be other expenses as well, but for many seniors over 70 who have paid off their mortgages, the costs should be lower compared to a typical 35 or 40-year-old.
Limitations of Life Insurance
While the average 70-year-old senior may have significantly less to cover compared to a typical 35-year-old, they may wind up paying nearly as much for fewer benefits because of their age. Life insurance premiums are based on risk and insurance companies charge seniors a significantly higher rate compared to younger people because their risk is higher.
Therefore, a 70-year-old will pay between 25% to 50% or more for the same level of benefits compared to a 35-year-old for a term coverage. Therefore, seniors will need to look carefully at their finances to see their coverage needs and purchase the right plan.
Recommended Benefit Levels
For less expensive life insurance over 70, a policy that grants $25,000 to $50,000 in benefits may work well for many seniors. However, to calculate the right benefit levels which will dictate how much you will pay in premiums, you will need to look over the following expenses;
Funeral Costs: A typical funeral today is roughly $9,000 and can go up to $15,000 or more depending on the type of funeral you choose. Your life insurance benefit level should be more than enough to cover that so your family will not have to bear the burden of the expense.
Debt: If you have paid off your home, enjoy a good credit rating, and spend cash for most of your expenditures your debt level may be minuscule. If not, you will need your life insurance to cover that so your spouse or family will not wind up with that burden.
Loss of Income: Seniors who pass away will automatically have their Social Security, and retirement benefits cut off. This loss of income should be considered so that the life insurance can help make up for at least part of it during the first year. The surviving spouse will need less to live on, but there should be some monetary bonus to get them through this tough time a few months after your passing.
You will need to calculate the benefit amount and take the best plan to meet those expectations. That way, your family will not have to be financially burdened by your passing.