Is Senior Life Insurance A Good Deal?
Many older people have questions about senior citizen life insurance. They may see TV advertisements or get post cards in the mail with offers. Some very large and well known companies, like AARP, make these offers. The thing that seniors want to know is if these types of senior life policies are a good deal for them.
Families may need cash when a loved one passes away. Funerals are expensive. Families also have other things to pay for at this time. Loved ones may need to take time off from their jobs, travel, and feed mourners. This can be a very stressful time for everybody. Nobody wants to add money problems to the stress.
However, older people will cost more to cover than younger people. While you can compare senior life insurance rates to find low cost alternatives, you have to decide if this is a good financial decision for your family.
Consider an example. Keep in mind that the numbers I use are from one example policy, and you need to compare quotes to find the exact rates and policies for yourself.
A typical premium for a $10,000 whole life policy for a 70 year old would be about $75 a month. In our example, the policy will be paid up at age 95. After 95, the policy is considered paid up.
If that same seventy year old does live until ninety-five, premiums wuold have been paid for twenty-five years. This means that they would have spent nine hundred dollars a year for the insurance. This would add up to $22,500 over twenty-five years!
Paying over twenty thousand dollars for a ten thousand dollar policy does not appear to make sense. If the insured person would have takent that same $75 a month, and saved it at a low 2 percent interest rate, they would have almost $30,000 after 25 years.
Of course, that is one example of how life insurance companies profit. They do have to pay out death benefits when people pass away, but they also have the opportunity to invest the premiums while their clients are still alive!
If the covered individual only lives for a year or two, he or she would only have had to pay about one or two thousand dollars for that ten thousand dollars that the family will get. The insurer would, in this case, probably lose money. The insurer will be taking some risk when they issue a policy.
Buying insurance is all about mitigating risk. There may be some alternatives that would make more sense at this point though.
Senior life insurance can have some advantages. If you cannot save money well, you will never have the opportunity to grow a savings account. Some families have an easier time paying a bill than setting aside money to save. It may just make more sense to buy a policy.
The example that I used was just one common policy. If you shop around, you may be able to find senior life policies that are cheaper with better policy terms. For example, you may find a policy that will be paid up after 10 years, instead of being paid up at age 95. Please compare rates and policies before you decide to make a purchase!
by: Marilyn Katz