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Is life insurance for parents over 70 still affordable? Yes, and I have good news for you! Even if you are over age 70, you can still find a policy which could easily support your funeral and burial expenses.
However, with that being said, life insurance will be expensive at this point in your life. You should not put this decision off for much longer because the “cost of waiting” makes buying a policy even more expensive.
In this article we will cover:
- The most common needs for life insurance over age 70
- Whole Life Insurance
- Universal Life Insurance
- Final Expense Insurance
Why is Life Insurance Important Over age 70?
For elderly parents over age 70, most typically buy term insurance to cover their short term needs. Term insurance will give you the largest amount of coverage for the lowest cost. However, qualifying or buying a term policy at this age will not be easy if you have serious health issues.
Some term options still available to parents in their 70’s are 10 and 15 year term life insurance, permanent insurance such as, whole life or universal life and final expense insurance.
I find people who are looking for life insurance at this age, need a policy for either:
A) Estate Planning
B) Final Expenses
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Estate Planning
I’m not going to go into great detail about estate planning in this article because estate planning can be a very complicated topic. You should also seek legal or tax advice if you think you need help with your estate plan. If your assets, such as your home, your investments, savings accounts, etc. total over $5.2 million, there is a good chance you need estate planning advice.
You will not be able to pass your estate to your heirs without the Government – IRS – taking their share of taxes you will owe. Federal estate taxes start at 50% and go up from there depending on how large your estate might be. Don’t forget there are state estate taxes too, which depending on the state you live in, could be another 20% or more.
Many people who are in this situation, do not want half of their wealth going to the Government. They want their money to go to their children or grandchildren.
Life insurance helps to solve estate planning problems by providing liquidity (death benefit) to pay estate taxes due upon the death of the parents.
The life insurance policy is owned by an irrevocable trust and the face amount is calculated to pay for most of the taxes that will be due. Term insurance has no place for this type of planning because it is temporary insurance and eventually the coverage ends.
Permanent insurance such as whole life or guaranteed universal life is best suited for this type of planning because these products provide coverage almost indefinitely.
Whole Life Insurance
Whole life insurance is designed to provide permanent or lifetime coverage. As long as your premiums are paid coverage will not end no matter how long you live. Whole life also includes an investment component call cash value. Your premiums go towards insurance protection (death benefit) and excess premiums are deposited in a cash or savings account.
There are many advantages to this savings account but probably the biggest benefit is that you have access to this money anytime you need it. You can withdraw your money for any purpose or borrow from your account.
Any withdrawals will reduce your death benefit and should be paid back if the death benefit is important to you. The trade-off for this type of coverage is that whole life is more expensive than term insurance. About 5 to 10 times more expensive. But an insurance policy that you cannot outlive is essential in any estate planning situation.
So what type of person is the best fit for permanent insurance? People that are wealthy, or are close to retirement might be in a financial situation that makes permanent insurance a good choice.
Universal Life insurance
Universal life insurance is very similar to whole life in the respect that it is also permanent insurance that you cannot outlive. Universal life also has a savings component where excess premiums are deposited. It provides lifetime guaranteed coverage with provisions to withdraw cash values.
Unlike whole life insurance, universal life allows premium flexibility and allows you to choose a lower premium that will still guarantee coverage to age 100.
The flexible premium feature allows you to design an insurance program for the number of years that you choose. For example, you may want to pay the required number of premiums for 10 or 15 years to guarantee lifetime coverage. This type of coverage is also suitable for estate planning because the coverage will last your lifetime.
Final Expense Insurance
For many parents over age 70, they do not want to be a financial burden for their family or the people they care about. A final expense policy is an insurance policy designed to pay for funeral and burial costs. The death benefit can also be used to pay off any final debts.
Final Expense policies are available with coverage amounts from $5,000 up to $35,000. These policies are ideal for people in their 70’s and 80’s because they do not require a medical exam. They are guarantee issued with a short health background application. Even folks with high health risks can qualify for a final expense policy.
Final Expense insurance is less expensive than term life insurance. For people in their 70’s this type of policy is most likely more affordable. Term or whole life insurance can be much costlier especially for individuals with health problems.
For more information about your life insurance options over age 70, feel free to call us directly at: 914-633-1717
