Best Life Insurance for Seniors

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There’s no sugar-coating it — buying life insurance at 55 is more expensive than buying it when you’re 35. That’s because there’s a higher risk that the insurance company will actually have to pay out. It’s also really complicated. There are many policy options to choose from, and they’re all best for something. To help you navigate, I’ll walk through each type.

Even at 55, term life insurance is still a great option for most people — it’s a straightforward product and the premiums tend to be lower than with other options. The downside: You may outlive your policy. If you’re looking to cover your final expenses or minimize your estate taxes, whole life insurance might be the way to go, though the premiums are much higher. Guaranteed Universal Life (GUL) bridges the gap between the two — it’s cheaper than whole, a little more expensive than term, and your policy will definitely outlive you.

No matter what policy you choose, to find the best price, you’ll need to get multiple quotes from various insurers and compare the premiums.

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The Simple Dollar’s Best Life Insurance for Seniors

Once you determine what type of policy is best for you, the only way to find the best price is to request multiple quotes from several different providers. When evaluating insurance companies, look for top financial strength ratings. Any policy you’re considering should come from an insurance company with an A– or higher rating from A.M. Best and either AA– or higher from Standard and Poor’s, or Aa or higher from Moody’s. You want your life insurance provider to be able to pay a claim if you need it to, and in most states, only $300,000 of a policy’s death benefit is guaranteed if your insurer goes bankrupt.

To get you started, below is a list of our top picks for three popular life insurance products for seniors — all with high financial ratings.

  • Best Term Life Insurance: TIAA Life, New York Life, Amica Life, Transamerica, Lincoln Financial, and State Farm
  • Best Guaranteed Universal Life Insurance: North American Company for Life and Health Insurance, American National, and Mutual of Omaha
  • Best Whole Life Insurance: Guardian, MassMutual, Northwestern Mutual, and State Farm

It’s also important to consider the policy’s cost — make sure that you know what your monthly premiums will be and whether or not you can afford them. It sounds obvious, but according to the insurance research agency LIMRA, 4 percent of whole life insurance policies lapse each year, most of which are less than 5 years old. If your policy lapses (for any type of policy), you’ll not only face potential rate increases if you reapply, but you’ll also no longer be eligible to receive the death benefit, which is the whole goal of life insurance in the first place.

There are Six Life Insurance Policy Options for Seniors

If you’re 55 or older and looking for a new life insurance policy, you’ll face challenges that younger people don’t. The reason for this is simple: People are closer to death as they age — so the older you are, the higher the risk is for companies to insure you. That’s why it’s usually better to buy life insurance as soon as you identify a need for it and not postpone your purchase, because as the risk goes up, so do your premiums.

Term Life Insurance

Term life insurance is the best option for most people, including seniors, because it provides the most coverage at the lowest price — especially if you’re in good health. It offers coverage for a specific number of years (usually 10 to 30 years in five-year increments), and the premiums are the same every year. If you buy a 10-year term policy with a $100,000 death benefit, you will pay identical premiums every year for 10 years, and your beneficiaries will receive $100,000 if you die during that time. If you die after that, they’ll receive nothing. You just need to be OK with outliving your policy term should that (hopefully) happen.

Annually Renewable Term Life Insurance

Annually renewable term life policies are essentially the same as term life insurance, but the premiums increase each year. It can be less expensive if you need term life insurance for two to four years, which might be the case if you’re on the verge of retiring or paying off your mortgage. While there are probably few seniors who need such short-term coverage, annually renewable term could save you money over buying a regular five- or 10-year term policy and canceling it after the first few years.

In other words, with an annually renewable term policy, you’re only paying for your current risk; with a level term policy, you’re paying for both your current risk of dying and your risk of dying in 10 years, even in the policy’s first year. Michael Burton, a certified financial planner, life insurance broker, and life insurance counselor who founded Fiduciary Life, said most annually renewable term policies do not require you to requalify each year based on your health, and the premium amounts for most annually renewable policies are defined when you take out the policy. So while the premiums will increase substantially each year — and the older you are, the faster the premiums will go up — there won’t be any surprises.

Full-Size Image of ART vs. 10Y Comparison for Life Insurance for Seniors

(Click to enlarge) This illustration shows that an annually renewable term can be cheaper than a 10-year term policy with level premiums because the 10-year policy’s premiums factor in the increased likelihood of death in the later years. Source: Fiduciary Life.

Whole Life Insurance

Whole life insurance offers coverage for the rest of your life, and the premiums are guaranteed to be the same every year. In addition to having a death benefit, which guarantees a payout to your beneficiary after your passing, the policy accumulates cash value that you can borrow against. If you die with a loan outstanding, however, the policy’s death benefit will be reduced by the amount of the loan. Also, when you die, the insurance company keeps the policy’s cash value. Because whole life insurance policies are complicated and the premiums are high for the amount of death benefit you get, whole life insurance is only the best option for seniors in a few situations, such as when you want to minimize estate taxes for your heirs, or if you want to leave a specific amount of money to someone or a charity no matter how old you are when you die.

“Seniors should be careful of agents trying to earn a big commission by pitching a whole life insurance policy they don’t need,” Chris Huntley, president of Huntley Wealth & Insurance Services, said. “Whole life insurance offers low rates of return — most policies don’t even break even for seven to 10 years — and may cost up to 20 times as much as term life insurance.”

Guaranteed Universal Life Insurance

Guaranteed universal life insurance bridges the gap between term and whole life insurance policies. It can end at the age of your choosing, similar to term, or it can last until you die, similar to whole life. The premiums are the same each year, but guaranteed universal life policies do not have a cash value component. Not surprisingly, the premiums fall somewhere in between what you’d pay for term and whole life insurance. Guaranteed universal life insurance is a useful option for seniors in several scenarios, including leaving a legacy fund, avoiding estate taxes, paying final expenses, maximizing pension benefits, and repaying adult children who will provide care for you when you’re older.

Universal Life Insurance

Universal life insurance (also called non-guaranteed universal life insurance) lasts until you die and accumulates cash value, but the cash value is tied to investment performance. If the policy’s investments underperform, you must pay higher premiums — sometimes substantially higher premiums — to avoid losing your policy. Like whole life insurance, you can borrow against the policy’s cash value while you’re alive, but if you die with a loan outstanding, the policy’s death benefit will be reduced by the amount of the loan. When you die, the insurance company keeps the policy’s cash value. Most seniors should avoid this type of life insurance: The cash value component makes it expensive; the rates are not guaranteed; and the policies have expensive management fees, including an annual investment fee that is usually 3 percent or more, according to Cliff Pendell, managing partner and cofounder of JRC Insurance Group. The high premiums and fees outweigh the policy’s potential investment earnings (not to mention that the investment earnings are unpredictable).

Burial Insurance (Also Called Final Expense Insurance)

Burial insurance is a type of whole life insurance with a small death benefit, typically $5,000 to $25,000, specifically intended to cover your burial expenses. Because these policies are relatively small, they have minimal medical underwriting requirements. You may have to complete a health questionnaire, but you may not need to complete a medical exam. (All of the policy types listed above pay more attention to your current and past health; they typically require a medical exam and a thorough review of your medical records.) Burial insurance policies are relatively expensive for the amount of coverage they provide, but they can be a good option for seniors with serious health problems who don’t want their funeral costs to be a financial burden on those they leave behind.

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How to Determine What Policy is the Best Choice for You

Different policy types are better for seniors in different situations. And the type of policy you should buy largely depends on your purpose for carrying life insurance in the first place. I outlined a few of the popular reasons below and talked to experts for their advice on what policy works best for each.

You want enough money to pay off your debts.

A term policy that expires when you expect your debts to be fully paid is a good option. For example: If you have 10 years remaining on your mortgage, you might want to buy a 10-year term policy, so your beneficiary will still be able to pay off the mortgage if you die.

You’re working and someone still relies on your income.

A term policy or a guaranteed universal life policy makes sense as whole life insurance will likely be too expensive. Take note of when your policy expires, though — a term policy might expire before the policyholder passes, leaving your spouse financially exposed. Go with a guaranteed universal life policy instead.

Another reason to get a term or GUL policy would be if you provide for an elderly parent with limited financial resources, said Burton. In this case, you might take out a policy for the duration of their life expectancy.

You want to maximize a pension’s survivor benefit.

Using life insurance to maximize a pension survivor’s benefit is one retirement strategy that might work for you. With a pension, you can opt to take a single life benefit (which is a higher monthly payment, but payments cease after death), or a joint survivor benefit (which is a lower monthly payment split between both spouses and continues after a spouse passes). The strategy works like this: First, opt in to the single life payout option, and then use all or part of the payout difference to buy life insurance. Keep in mind that this only makes sense if the life insurance premium costs less than the reduction in your pension payout, making this a better strategy for someone who is in average or better health and closer to the age of 55.

If your spouse needs income for the remainder of their life, Pendell suggests choosing guaranteed universal life insurance, but if coverage is needed only for a set period of time, then term life insurance may be a better option, especially before age 75, as it tends to be less expensive. Whole life insurance isn’t recommended for this strategy because of its significantly higher cost.

You want to leave a large gift to your heirs or a charity.

In this scenario, a type of permanent policy that lasts the rest of your life and will pay out no matter how old you are when you die could make sense.

Whole life insurance is one option, but the experts I talked to said they prefer guaranteed universal life to age 90, 95, 100, or even 121 because the premiums are so much lower. Pendell said guaranteed universal life policies are available with death benefits of $50,000 to $10 million or more, making them ideal for paying for final expenses or for reducing or avoiding estate taxes.

You need to pay for your final expenses.

Anthony Martin, a life insurance agent and CEO of Choice Mutual, specializes in a type of whole life insurance called burial insurance, or final expense insurance. He recommends a whole life policy if a senior is looking for coverage specifically to make sure their final expenses are taken care of — because a term policy will likely expire before they die. Pendell concurred, saying that he would only recommend whole life for seniors looking for $25,000 or less to cover burial costs. For larger amounts of coverage, a guaranteed universal life policy would be a better value.

Other Policy Options to Consider

Get long-term care or living benefit riders

Adding a long-term care rider (or a living benefit rider) to your policy gives you access to a portion of your death benefit while you’re still alive, and can help cover you in the event you need long-term care in the future. Keep in mind, though, that the amount will be deducted from the total benefit amount, so your beneficiaries will receive less.

Many top-rated carriers offer these riders, including Guardian, MassMutual, New York Life, Northwestern Mutual, Ohio National, Prudential, and Western and Southern. Sometimes these riders come standard with the policy, and sometimes you have to add them. The policy type may vary too — depending on the insurer, these riders may only be available to add to term or whole life insurance policies.

Consider a convertible term policy, too.

If you think you might only need life insurance for another decade or so, but you aren’t sure, a term policy that gives you the option to convert to a permanent policy without having to submit to a medical exam later is a good option. Some top-rated companies that offer this option include Amica, Guardian, Lincoln Financial, MassMutual, New York Life, Northwestern Mutual, Prudential, and State Farm.

How Health and Age Affect Seniors’ Life Insurance

Health and age affect everyone’s life insurance options, but seniors face some additional limitations: Mainly, the older you get, the shorter the term policies available to you, and the more expensive the premiums are for any type of life insurance. Most life insurance policies require medical underwriting to determine whether you’ll be approved and what your premiums will be. You’ll have to complete a health questionnaire, submit to a medical exam, and authorize the insurance company to obtain your medical records. There’s no way around it.

Your options for life insurance become more limited the older you get.

Many companies stop offering 30-year term policies at age 50 or 55, said Huntley, and most stop offering 20-year term policies at age 60 or 65. In your 70s, you’ll be limited to 10- or 15-year term policies. For every year you wait to buy coverage, your available options decrease and your premiums increase.

Age
Monthly Premium
Policy Term
29
$43
30-year
39
$62
30-year
49
$151
30-year
59
$194
20-year
69
$300
10-year

This chart shows the monthly premiums for a $500,000 term policy for a nonsmoking male. After age 59, he’ll no longer be eligible for a 30-year term, and after age 69, he’ll be eligible for a 10-year policy only. Source: Huntley Wealth & Insurance Services

Your health will affect your premiums, too.

Your health affects the rate class insurers will assign you to, which affects your premiums. For example, if you are more than 10 to 15 pounds overweight, you will not qualify for the best and least expensive rate class, called preferred plus nontobacco. If you have a medical condition that is moderate, but not life-threatening, such as type 1 diabetes or multiple sclerosis, you might fall into the substandard nontobacco group, which is the most expensive rate class for nontobacco users.

Huntley said his clients who are 55 and older are rarely in perfect health: “I would say 90 percent of them are at least taking medications for blood pressure or cholesterol, and many of them have diabetes, are a bit overweight, or have some other conditions.”

You shouldn’t assume that your health will prevent you from getting a medically underwritten policy from any insurance company, however, because each life insurance company has its own standards for what medical conditions it accepts and what rate class it puts them in. And, again, it’s always a good idea to get quotes from multiple companies to make sure you’re getting the best policy at the best price.

Should you get a no-exam policy?

If you’re over the age of 55, you will likely have had no-exam life insurance pitched to you — in the mail, on television, or even in person. The general concept is that you can get a life insurance policy while answering few, if any questions about your current health. It might sound like a great idea if you have any sort of health problems, of course, but beware: Most of these policies don’t pay a full death benefit until a two-year waiting period has elapsed, and most increase their rates every five years. According to Pendell, “After 15 to 20 years, you can expect your rates to be four times what you were originally paying.” For most of his clients on a fixed income, he says, “these life insurance policies become unaffordable when they need it most.” These policies typically expire at age 80, too. Pendell never recommends buying this type of policy unless you are in poor health or a smoker. Everyone pays the same rates on no-exam policies, regardless of their health or lifestyle, so if you’re a nonsmoker in average or better health, you’ll pay too much.

The Bottom Line

There is no single best type of life insurance for seniors. Rather, which type of life insurance is best for you, whether you’re older than 55 or not, depends on why you need life insurance to begin with, as well as your current financial and health circumstances. It also depends on which company offers you the best rates for a given amount of coverage, so always make sure to get multiple quotes from different providers before committing to a life insurance policy.

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