Does life insurance for seniors make sense?
After I read this question myself, my immediate answer was “no way”.
I don’t think life insurance for seniors makes much sense.
Maybe that was narrow-minded and too blunt. So, I’m willing to listen.
I know for our financial situation, decades from now, I’m trying to avoid paying life insurance premiums.
This is because my wife and I hope we can self-insure at some point.
Today’s post will highlight why life insurance may make sense for some seniors.
I’d like you to be the judge whether these situations might apply to you or the people you care for, and create a dialogue about it via my comments section below. As always, I want to hear what you have to say.
My Take on Life Insurance
I like to think of life insurance this way: you are transferring the risk of a catastrophic financial loss to someone else, namely the insurance company. Life insurance is a risk management tool.
I see it as a hedge against an uncertain yet potentially disastrous financial mess. If an individual can self-insure, this is a good thing and maybe the best-case scenario. Such an individual would avoid paying premiums to the insurance carrier selling the insurance. This is what I’d like to do as I get older but there are no guarantees I will be in this financial position.
What I want (to do) versus what actually happens are two different things
My goal is to self-insure but if I can do this remains to be seen.
A good example for self-insurance is a retired couple or an individual with a dependable stream of income, probably a diverse income stream from a variety of sources (company pension plan, investment income and government benefits). This couple or individual senior would also carry little to no debt, have no major liabilities or no dependents. Their assets would be able to manage estate costs (tax liabilities) or left directly to a beneficiary to provide additional amounts to a particular person. That’s ideal.
What seniors are good candidates for life insurance?
Fans of this site LSM Insurance mentioned a few things – even if there will be no substantial financial loss or outstanding liabilities experienced upon death, some seniors may still want to leave a death benefit to their beneficiaries.
Life insurance can also be a good way to leave some money to a beloved charity. Besides, as a society we’re living longer. Insurance companies in recent years have adjusted for this need; many insurance companies will now issue coverage up to age 85.
Also, a senior running their business may have a higher net worth and may wish to offset the tax liabilities associated with their business using life insurance.
Here are other situations when life insurance for seniors could make sense:
- Couples or individuals who remain in their peak earning years, with no intention to retire in their 60s or 70s or beyond.
- Couples who will experience a catastrophic income loss if a spouse dies.
- Couples or individuals with very large estates.
As you have probably guessed by now, life insurance is not really for you, it’s for others.
That said, I’m not personally convinced many seniors need life insurance. Save your money, get out of debt and have assets to live from in retirement. Keep it simple seniors.
Do your homework and talk to a professional including any independent broker to understand your needs before diving into a life insurance product.
What’s your take on insurance for seniors?