Life Insurance at 60-plus
Should you buy life insurance or additional life insurance at age 60 or older?
By Deborah Jeanne Sergeant
Should you buy life insurance or additional life insurance at age 60 or older?
Although this seems like a simple question, many factors play into the answer, including your health. The applicant’s health determines in part the cost of the policy.
“Your premiums will be higher,” said Robert A. Rolfe, financial adviser with Harmony Financial Services in Oswego. “You’re not as insurable as you were at 45.”
According to valuepenguin.com, “the average life insurance quote only increases by 6% between ages 25 and 30, but it jumps much higher between ages 60 and 65 — an average increase of 86%, or $275 per month.”
This is because the likelihood of a payout is much higher the older a policyholder becomes.
Rolfe advises clients to purchase a policy earlier in life. Typically, companies use metrics such as the applicant’s age, weight, tobacco use status, and employment. These all affect the applicant’s risk of death. While the cost of the premiums may outweigh the merits of holding a policy, “it’s situational,” Rolfe said. “A lot of times, it’s dictated by a few circumstances.”
The reason for buying a policy varies among clients. Rolfe said that some want to leave a legacy for their surviving family members. Others want to ensure sufficient funds for their burial. Still others want to leave a charitable legacy.
“Since COVID, I’ve seen renewed interest in folks adding life insurance because they feel closer to mortality and that inspired a lot of thinking for family legacies or charitable or both,” Rolfe said.
Most people 60-plus no longer have young dependents living at home. For parents with young children, losing a household wage earner would make financial viability difficult. Retirees typically have Social Security income as a revenue stream, which makes life insurance less important.
Randy L. Zeigler, certified financial adviser and private wealth adviser with Ameriprise Financial Services, LLC in Oswego, said that policyholders can use life insurance “as a smart income tax planning strategy. There can be capital transfer of assets to the beneficiaries as a tax-free benefit. It can be hybrid life insurance with long-term care policies. They have an ability to leave assets to their heirs but use the death benefit early to pay for long-term care costs.”
Many people view purchasing a life insurance policy at 60 as a means to safeguard their loved ones against final expenses. Burial and a funeral cost an average of $7,360, according to the National Funeral Directors Association. Investing the funds instead of paying premiums is a better route for most people.
Pre-paying burial and funeral expenses can also ensure that the family feels no financial burden and it also safeguards against inflation. These require payment up front.
As with any financial matter, individual scenarios vary widely, so he encourages people to sit down with a trusted financial adviser to look at the options and make educated decisions.
Zeigler warns against the life insurance policies advertised on television, which often sound too good to be true.
“There’s never, ever a free lunch,” he said. “Figure out your goal. Do we have a death benefit or estate need or long-term care needs? What instrument can help you target those goals?”