Uses of Life Insurance for Seniors
Uses of Life Insurance for Seniors
Many people find it surprising that life insurance can or even should be purchased by people in their 60’s or even 70’s. It is true that the reasons for purchasing life insurance at an older age may be different from those purchasing insurance who are younger; nonetheless, life insurance can be a powerful planning tool for seniors when used as a spousal or income replacement plan or as a legacy planning tool. The key is to purchase the right kind of insurance for the right reasons at the right time.
The biggest error made by those purchasing life insurance is buying the wrong type. Unless covering a debt or similar need, term life insurance is generally not a good choice for most people to purchase in later years, as the insurance will typically lapse before the insured does. Whole life insurance is truly permanent, but because it is a tool used for both a death benefit and savings strategy, the premium payment can be substantial. Universal life or flexible premium insurance may look good on an illustration; however, because the death benefit is not guaranteed, if the insurance policy’s account value does not perform as illustrated, the policy can and many times does lapse during the lifetime of the insured, leaving the policy owner with no cash value or death benefit to show for all of the premium payments made.
The answer to these potential problems is purchasing a different type of insurance—guaranteed universal or no-lapse universal life insurance. This type of life insurance is generally the best way to leave a surviving benefit to a spouse or a legacy benefit to other heirs, while guaranteeing to the policy owner that (1) premium payments will remain as agreed upon at the purchase of the policy; and that (2) the policy will not lapse before the passing of the insured. Guaranteed universal or no-lapse universal life is a great way to leave a guaranteed and tax advantaged benefit to beneficiaries, regardless of how long the insured may live.