subject: Should Seniors Opt For Term Or Permanent Life Insurance? [print this page] Life insurance policy needs are usually different at different stages of an individuals life. When youre just starting out as a young, single adult, you may see little use in getting your life insured.
As you grow older, so do your responsibilities. You may have dependents who rely on your income to subsist and you need to ensure their financial security in case youre no longer around to care for them.
Then you reach a stage of greater financial stability where your kids have been through college, the house has been paid for, other consumer debts taken care of, and you probably have money put away for retirement.
At this time in your life, your need for life insurance could be significantly different and you could do well to revisit your policy. The question you, as a senior, must ask yourself is whether its term life or whole life insurance that you need now.
Term life insurance, as the name suggests, provides coverage only for a specific period of time. Term life insurance is usually recommended for young families that are starting out and have dependents, mortgages, and other financial commitments, but limited resources.
As its relatively inexpensive, it allows younger people to buy considerable insurance on their life at very low premiums. The purpose of term life insurance is pure coverage in the event of the insureds premature death and it has no investment component. The only way term life insurance can be cashed out is if the policy holder dies.
The biggest benefit of term life insurance is its affordability. However, the premium rates keep rising as you age. Therefore, if seniors were to purchase term life, they will lose out on its cost benefit as the rates offered to them would be considerably higher especially if they are not in the best of health.
They would also need significant amount of savings to live a comfortable life post retirement and meet any unexpected medical expenses associated with old age. Thats why whole life insurance policy is recommended for older people.
Whole life or permanent life insurance, unlike term life, offers coverage for your entire life as long as the premiums are current. In addition to providing coverage, whole life policy also builds cash value.
Because it provides continual protection and has a savings feature, whole life insurance policy is more expensive than term life. Even so, whole life insurance is believed to be a better bet for the retired or nearing retirement folk for several reasons.Term life insurance provides coverage until the age of 75, where permanent life insurance remains in force for your whole life.You need to have reached a certain financial ability to afford whole life insurance. Older people generally have lesser financial obligations and can afford higher premiums more easily than those who are starting out.You can cash the policy out for the accrued value in case of an unplanned medical emergency or even use it as collateral for loan. In short, whole life insurance acts like an asset that can be used at the time of need.Unlike renewable term life insurance premiums that generally increase with age, the premiums on most whole life insurance policies remain the same over the years.The insured can have the peace of mind that whenever their time comes, which is more of a concern as you get older, there will be guaranteed coverage for their partner.Most whole life insurance policies offer dividends that can be added to the cash value or death benefits.Proceeds from whole life insurance can be used to pay for the funeral and other final expenses when the insured passes on.Seniors can also buy a whole life insurance policy as an estate or legacy for their grandchildren.A smaller whole life insurance policy would generally not require you to go through a health examination, which works well in case of declining health.However, whole life insurance is a long term commitment that one should consider purchasing only if they are confident of keeping up with the payments. Letting your whole life insurance policy lapse because youre unable to pay the required premiums can spell disaster for your financial plans and should be avoided at this crucial juncture of your life!
by: Denise Mancini
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