You might not think life insurance policies and seniors go in the same sentence, right? Seniors don’t need life insurance.
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But what if they do?
Many seniors find themselves unable to cover their final expenses, such as their funeral, medical bills, or other final arrangement expenses. Whether you outlived your savings or didn’t plan right, not having money for these necessary expenses can be stressful.
Fortunately, there are life insurance policies meant for seniors.
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Final Expense Insurance
As the name suggests, final expense insurance strictly offers a payout to cover your final expenses. Don’t expect a large payout since most policies cap out at $25,000, but that should be enough for the average person’s final arrangements.
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Most final expense insurance policies are guaranteed issue. This means insurance companies don’t need a medical exam. You may not even have to answer any medical questions.
You’ll have a waiting period to offset the risk of an immediate payout. It could be as long as 2 years. This means if you die within 2 years of buying the policy, your beneficiaries won’t receive a full payout. Instead, they’ll receive only the premiums you paid plus a small percentage, usually around 10%.
This policy strictly covers things like your funeral, final medical expenses, or other final expenses you incur.
Simplified Issue Life Insurance
Simplified issue life insurance is a policy that might provide you with more coverage – up to $100,000 but still without a medical exam.
Most simplified issue life insurance companies ask you a handful of questions which they use to determine if you qualify. This insurance doesn’t have a waiting period because you must answer these questions without showing the risk of any major health issues or crises.
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You are covered immediately if approved, and you can buy coverage usually up to $100,000, which means you can leave your loved ones with money to support themselves upon your passing.
Guaranteed Issue Life Insurance
Guaranteed issue life insurance is like final expense insurance. Sometimes they are interchangeable, but final expense insurance sometimes excludes younger seniors depending on the insurance company.
However, guaranteed issue life insurance works the same way as final expense insurance. You don’t have to undergo a medical exam or answer any medical questions. To make up for this, you don’t have coverage for the first 2 years.
This is risky if you have a terminal illness and aren’t expected to live over 2 years, so keep that in mind. If that’s the case, you’re better off investing the premiums you would have paid yourself and leaving the earnings to your beneficiaries.
There are life insurance options meant for seniors and it’s usually easy to get. The tradeoff is, though, that the premiums are much higher.
Life insurance companies take a risk writing life insurance policies. They are ‘gambling’ because you won’t die within the next few years. Most insurance companies break even after you have a policy for 5 years. If you live that long, they make out on the deal, and your beneficiaries get a full payout.
But since there are no guarantees in life and anyone could die at any time, they charge higher premiums to compensate for the risk of a faster payout.