What to Know About Life Insurance for Older People

Medically Reviewed by Mahammad Juber, MD on June 30, 2022
5 min read

If you are starting to reach your later years, it is a good time to evaluate your life insurance. You may need to make some changes. When you are young, you usually have a family, and perhaps a mortgage, but you now may be an empty nester with changed circumstances altogether. Even at 65, you may not have any insurance at all, so you may be trying to research life insurance for older people.

When you are younger, life insurance can be used as income replacement. It may have been part of your work benefits package and chosen because of family circumstances, mortgages, college funds, or other expenses that needed to be paid if you are not around. Insurance is available to be used now, though, for other purposes. Otherwise, the cost of life insurance at age 65 is still affordable for some types of life insurance. 

Life insurance is not a one size fits all deal. There are several different types, and what you needed during your career may be different than what you need after retirement. Here are the insurance basics:

Whole Life Insurance: This covers you during the time you are alive. The premium should remain the same as long as you live. This type of policy has a cash value and loan value. If the premium is not paid, the policy can be continued for a limited period at the same value, or it can continue until the preplanned maturity date at a reduced face amount. Usually, you can borrow against the cash value of the policy with a loan or relinquish the policy for cash. 

Term Life Insurance: This will cover you for a certain amount of time, hence the word term. It will pay death benefits if you pass during that time. Term insurance most often pays the highest death benefits per premium, and most can be renewed at the end of the term. Since you will be older, the premium will go up when you renew.

Endowment Insurance: This insurance will pay an amount of income if you make it to a certain age. If you pass before reaching that age, the policy will pay a benefit to your beneficiary after your death. 

Variable Life Insurance: With this type of insurance, the death benefit and cash value are dependent upon the action of the investment accounts you have selected for premium allocation. It has a cash value and a loan value. If the payments stop or are too low, coverage will still continue if the cash value can cover monthly account deductions.

Universal Life Insurance: This insurance will deduct expense charges from a premium you pay and deposit the funds into an interest-earning account. This policy develops cash and loan value. If the premiums are not paid, or if they are too low, the coverage will be active as long as the cash value is enough to cover the monthly deduction out of the account. You can borrow against it as a loan or policy surrender for cash.    

Life insurance and the ability to get it can be as easy as calling an agent. Some may think that older people over the age of 65 cannot get new life insurance coverage because of age and pre-existing health conditions. This is not true, though. Life insurance at the age of 65 is attainable and affordable if you know where to look. If you are new to a job or facing retirement, it can be as easy as speaking to your human resource representative.

If you are covered by a group policy through your job and you are close to retiring, ask if it can be converted to an individual policy. Also, you can determine if you need less coverage. Questions you should ask yourself when close to retirement in regards to changing your life insurance policy include:

  • Do you own your home free and clear of a mortgage or lien?
  • Is your spouse still living?
  • Are your children adults and financially independent?
  • Besides life insurance, what other financial assets do you have?
  • Do you have a lot of debt?
  • Do you have high estate taxes that would cause a burden for your surviving family?

If your policy has cash value, you may want to see if some of the money that bears equity within the policy can be used for long-term care insurance premiums, if needed. 

When you are 59.5 years old, you can begin to withdraw the money from your IRA or 401K. You may then consider purchasing an annuity. An annuity is a contract with insurance companies that promise to pay a term of income payments regularly in return for premiums you have already paid. There are several types of annuities: 

  • Single premium
  • Multiple premiums
  • Variable
  • Fixed 
  • Deferred

There is a chance you can raise cash by selling your current life insurance policy for its current value. This is known as a life settlement option. It is typically available to people aged 70 years or more. The funds are taxable. They can be used for any reason, and that includes long-term care.  

Older people should examine if an annuity is right for them based on age and income needs. If you need cash and are considering selling your life insurance policy to a third party, consider the impact it may have on your beneficiaries. Also, check the legitimacy of the business you are selling your policy to by contacting your state insurance department. 

Another consideration is a final expense policy. With this, you have a small whole-life policy usually worth less than $10,000 and sold to older people up to the age of 85. Usually, the full benefit is not paid in the first few years of the policy term, and it comes with steep charges since it is a guaranteed issue. 

An accelerated death benefit policy offers tax-free cash advances while you are still alive. The funds are subtracted from the amount your beneficiaries are set to receive after you pass. Examples of the reason you would get this policy are if you need long-term care, live in a nursing home, or have a terminal illness.