Life insurance can help us provide for loved ones after we are gone. Many people buy it when they are younger and have children in the household. But certain types of life insurance can also make sense for folks in their golden years.
That brings us to a recent question from a Money Talks Newsletter subscriber.
Candy M. asks Money Talks News:
“I am 70 and need to buy life insurance. My sons are adults and I have no grandchildren, so I just need money for burial expenses. I thought that about $30K or so would pay for it. What is the best place to get it? … I do have some money in a 401(k), about $40,000 that I hope to leave to my sons. But when I am gone, they will not be able to access it immediately, so that’s why I wanted to have the life insurance.”
Life insurance options for retirees
Money Talks News founder Stacy Johnson is a certified public accountant who has earned various financial licenses, including in life insurance. He’s also Candy’s age.
He says that for most folks their age, life insurance can be “hard to come by.” With one possible exception that we’ll get to in a minute, Candy will likely be limited to choosing between only two types of life insurance:
- Simplified issue. Those who are in good health qualify for this type of policy simply by answering a few questions. A physical exam is not required.
- Guaranteed issue. Those who have serious health issues or who are very old are guaranteed to be accepted for this type of policy without having to undergo a medical exam or answer questions about their health. Stacy says this is the type of policy you often see advertised on late-night TV.
On the surface, guaranteed issue might look like the better option. However, the premiums are much higher than they are for a simplified-issue policy, Stacy says.
Also, with a guaranteed-issue policy, you often have to wait for two to three years before you can get your full death benefit. If you die within the first few years of the policy, the insurer may simply refund your premiums, and possibly pay some interest on the premiums you paid.
To find a company that sells one of these types of policies, Stacy recommends doing a web search for life insurance that includes the term “simplified issue” or “guaranteed issue.”
Many big insurance companies in the U.S. offer these types of policies, he says, noting that Colonial Penn — a staple of TV advertisements — is one such firm.
That’s not an endorsement, though.
“Shop around,” Stacy says in his video response to Candy. “Make sure you get the best deal you can possibly get.”
However, before you begin shopping for either simplified-issue or guaranteed-issue coverage, he offers the following advice:
“If you can qualify for regular insurance — if you’re healthy or maybe if you’re younger — that’s always going to be much cheaper. Term insurance is always going to be much cheaper.”
For Stacy’s take on term life insurance — and another type of coverage, whole life insurance — check out “Which Is Better: Term or Whole Life Insurance?.”
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