Understanding Life Insurance Over 50

As you age, insurance changes dramatically. In this piece we dive deep into how people over 50 can save money and get the most valuable insurance for their money. We cover what money factors are involved and which money hacks insurance agents use for their own coverage.

Understanding Life insurance over 50

Life Insurance Vision / Via LifeInsurancevision.com

As we grow older the reasons for life insurance can and do change. Many people will find that term insurance still makes sense for them as the cost is lower than permanent coverage. Remember that term insurance covers you for a specific number of years, while permanent coverage will pay a death benefit no matter what age the insured is when they die.

At age 50 it is still possible to purchase a term policy with level premiums for a 30-year period which will cover you to age 80, while a permanent policy will be approximate twice the premium. If you are still alive at 80, any new coverage will be very expensive, if possible at all. Also, it’s very unusual to have applicants in their 70’s and 80’s without health issues. These health issues will make a new policy even more expensive or may make you potentially uninsurable.

Perhaps the most important question you should be asking before applying for coverage is “how long do I need coverage to last?” Once this is clear to you, but before you apply you will want to make sure that your health rating is as good as it will be in the future. For example, do you smoke? Do you have any health issues that will improve from an underwriting perspective? These can include but are not limited to cancer, heart disease or other issues that have not yet stabilized.

For example, if you’ve recently had surgery for cancer or heart disease, your health rating will improve the further away from the event you are. In the case of cancer, the original pathology report will give a good indication of when to apply and what to expect. With cigarettes or other nicotine products, carriers are willing to consider cigarette cessation after 1-5 years depending on insurer. However, there are currently 2 companies that will consider rating non-cigarette nicotine use (cigar, chew, patch, etc.) with non-tobacco pricing. Non-smoker rates are generally much less expensive than smoker rates.

While these are the most obvious health issues, there are many additional illnesses that improve with time so it’s always a good idea to discuss your personal issue with an agent prior to applying.

Even if your rating will potentially improve after time, you should still get coverage now. However, you should consider purchasing a 10 year term policy instead of a longer time period. This way, the rates are lower (because it is guaranteed for a shorter time) and you are protected even if your health doesn’t improve or even gets worse. You have a policy that you can convert into a permanent policy should you become uninsurable. Then, when you have waited the necessary time to get a better rating, you apply for a new policy for the full amount of time you wanted, and you get a better rating.

The most important “take away” here is that because premiums increase as the guarantee period increases, it’s best to stay with a shorter-term policy until you can qualify at a lower health rating. Once your health issue is resolved then apply for the longest period affordable. Even though you may be a few years older, in most cases the health rating will make a larger difference in the premium than age.

Let’s look at an example. Suppose that a 50-year-old male has a spouse and 2 boys in high school. The insurance is to protect his wife and educate his sons through college. He needs this coverage now, but has coronary heart disease and recently had a stent implanted in an artery. The best advice here is to purchase affordable coverage for a short-term covering college expenses as well as providing for his spouse. Then, assuming no negative change in his health, the insured can look at lowering his health category in a few years at which point a final determination on amount can be made. In the event his health deteriorates a conversion to permanent coverage will be available.

This last point about conversion is important and not usually mentioned or understood when applying for coverage. Briefly, it means that during “the conversion period” the owner of the policy has the right to convert a term policy into a permanent policy without qualifying for it medically. This can literally be a “life saver” for the insured if his or her health deteriorates (in this case the insured had a heart attack after his term policy was issued).

The bottom line. Before you apply for life insurance figure out what amount you need now, and how that will change in the future. (There are many online calculators available if you need help, although your agent will have more companies available to quote). This should give you and your agent a start. More importantly, it will help you to easily plan your coverage. A good agent will also be able to suggest the possible purchase of more than one policy if that makes greater financial sense. While you don’t have to be an expert at life insurance, it’s a savvy consumer that understands the uses of life insurance and how best to purchase it.