Life Insurance Over 50: What is the best life insurance for people over 50 years old?
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Life insurance is critically important for people with young families who rely on their income for support. But as people age, that typically becomes less of an issue. Still, people have financial obligations that continue long after children grow up. And no matter when you die, there will always be final expenses — medical and funeral costs that need to be covered. For individuals over 50, life insurance can provide cost-effective coverage to help manage these obligations.
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While life insurance coverage typically costs more as you age, you can still apply for a policy later in life to help protect loved ones from having to pay your obligations. A life insurance policy can also serve other estate planning and business protection purposes. Here are some things to consider if you're looking for coverage over the age of 50:
What are the two main types of life insurance, and how do they work?
If you're shopping for life insurance over 50, it's important to understand how each type of life insurance protection works. That's the key to getting the amount of protection you need at an cost-effective price.
Term life insurance provides coverage for a specific period of time or term - typically between 10 and 30 years. After that term, your insurance coverage is gone, and there's no value or payout. That's why it's sometimes called "pure life insurance," meaning it provides life insurance and nothing more. Term life insurance quotes are generally less expensive than permanent life insurance, which can build cash value (below).1
You can apply for a new term life insurance policy after the old one expires, but your rates will typically be higher. There may also be an age limit that prohibits you from applying for new coverage. However, many term life insurance policies (including those from Guardian) can be converted to a whole life insurance policy before the term expires — without getting a new medical exam. While the premiums will rise, that may be an option for continuing coverage in later years.
Permanent life insurance is designed to provide coverage that will last your entire life.2 Unlike term life insurance, it's not a "pure" insurance product because it includes a wealth-building component — the policy's cash value — which helps make coverage last indefinitely while providing other advantages. A portion of your premium dollars are invested, and your cash value grows tax-deferred over time.3 Cash value is money you can borrow against, use to help pay your premiums or even surrender for cash to supplement your retirement income.4
Because it lasts your entire life, a permanent life insurance policy can also be used as a tax-advantaged estate-planning tool. For these reasons, permanent insurance is more expensive than term for a given death benefit. There are two primary types of permanent coverage:
Whole life insurance provides guaranteed death benefit protection for as long as you live while earning cash value. A whole life insurance policy doesn't expire as long as regular premiums are paid. The cash value grows, tax-deferred, at a guaranteed rate, and the premiums never increase. Whole life insurance offers fixed premiums and lifelong coverage, ensuring continuous protection and predictable costs as long as premiums are paid. Policies from a mutual life insurance company (such as Guardian) may also provide dividends, which can help cash value grow faster.5
Universal life insurance also provides permanent protection and can earn additional cash value. However, unlike whole life insurance, a universal life policy can give you added flexibility: you can adjust your monthly payments within a specific range to help better deal with changing work circumstances. That variability also means that cash value growth and the death benefit can fluctuate with universal life insurance — or even lapse if cash value and premiums drop below a certain level due to withdrawals or policy loans.6,7
Factors that affects the cost of life insurance
The older you are, the higher the cost of life insurance coverage. That's why life insurance professionals often encourage people to take out policies in their twenties and thirties. However, if you are in your 50s, there may still be time to get coverage. You just need to be prepared to pay more for coverage and understand that some types of policies may no longer be available to you. Here are some of the main factors that contribute to policy cost:
Your age: Life expectancy has an understandable impact on how much life insurance costs, which is why premiums can go up significantly for applicants over age 50. Life insurance companies have a greater risk of payout as you age; conversely, when you buy at a younger age, even permanent life insurance policies — with a guaranteed payout — cost less because you have a longer time to pay into the policy.
Your health: Younger people, in general, are healthier. As people age, health tends to deteriorate, which puts the life insurance company more at risk of having to pay out on your policy. Smoking and other risky behaviors also impact the cost of life insurance.
Policy length: Term life insurance, which provides temporary coverage, typically costs less than a permanent policy. And shorter-term policies are typically less expensive than longer-term life insurance policies - but you can count on a premium cost increase at renewal. In any case, when you are over age 50, a 30-year term life insurance policy will generally cost more than a 10-year term policy.
Why you may need life insurance after age 50?
Life insurance is designed to help protect those who your death will financially impact, and different types of policies can protect them in different ways. Depending on your situation and needs, there are many reasons to consider getting life insurance above age 50.
Family protection: People are starting families later, and many 50-year-olds still have children at home. Life insurance can help provide for lost income, help protect your family from losing your home, help pay your children's way through college, and allow your spouse to take time away from work to care for your family's needs. Life insurance also provides essential financial support for your dependents. At age 50 or older, term life will generally be the most cost-effective option for getting the death benefit needed to help ensure your family is provided for.
Coverage for final expenses: These policies are designed specifically to cover funeral and death-related costs, but nothing more. They have a low benefit amount can be cost-effective, even for those in their 60s and 70s, and they typically don't ask health questions or require a medical exam. Funeral costs often run over $10,000, and there may also be final medical and/or hospice costs after you are gone. In addition to funeral expenses, these policies can help cover medical bills, medical expenses, and other final expenses that may arise. A final expense policy can help take these financial burdens off your family — but they won't help replace income for your financial dependents.
Business protection: If you own or are a partner in a business, having a business continuity plan in place can be critical to ensure that the business is taken care of. Whole life insurance can help provide the capital needed to buy a deceased owner's interests and protect the business against the loss of a key person's services, expertise, and skills. Life insurance can help address four major areas of business planning:
The funding of buy-sell agreements and stock redemption plans
The funding of supplemental retirement programs
Key person indemnification
Payment of loans and mortgages
Pension replacement: If your pension stops when you die, getting life insurance coverage can help cover your spouse's ongoing financial needs. However, term life insurance should typically not be used for this purpose because if you outlive the policy term, there is no protection for your spouse.
Estate planning: By planning for the orderly transfer of property after your death, you can help minimize taxes and provide for heirs in a way that reflects your desires. Permanent life (whole or universal) can play a key role by offering:
Liquidity to help pay inheritance and estate taxes
Assets to help provide income for a surviving spouse and children
Estate equalization among heirs
Funding for special needs children
Estate tax liabilities can erode a decedent's assets. If there is no plan in place to pay these taxes (for example, by using life insurance proceeds), survivors could end up selling off other assets such as retirement investments or even precious family heirlooms to come up with the money. And unfortunately, when such assets are sold in this manner, it is often far below market value.
A charitable remainder trust: If you've built a successful business or investment portfolio, there can be enormous capital gains taxes when those are sold for retirement income. At the same time, you may want to support charitable causes that reflect your interests. Whole life insurance can help do this. With a charitable remainder trust, these two diverse needs can come together in a strategy that helps provide:
Lifetime income
A charity bequest
Potential avoidance of capital gains tax
Potential income tax deductions
This can help make it possible to achieve your charitable goals while maintaining a significant legacy for your heirs.
Saving for Retirement: As mentioned, permanent life policies build cash value with tax advantages, which can help pay for retirement. For someone close to retirement, adding permanent life to supplement your retirement can be a way to diversify your portfolio. Some policies also offer living benefits, allowing you to access a portion of your death benefit if you are diagnosed with a terminal, chronic, or critical illness.
How to choose the right policy for your life insurance needs?
As you can see from the examples above, there is no single policy that is right for everyone. People have different coverage needs, different budgets, different health statuses, and different goals, so it’s important to consider your unique situation when determining which policy to choose. There are specialized forms of coverage available, and in some situations, it may even make sense to get two policies:
If you still have children at home, you probably want a high level of protection but not high life insurance rates. So you may want to consider getting two policies — a smaller permanent policy to cover your spouse's needs for the rest of your life, plus a less-expensive term life insurance policy to provide extra coverage until your children finish school.
If your children are grown and out of your house, you may not need as much coverage, and you may not even be sure how long you need it. So consider getting a smaller term policy with a conversion rider that lets you convert to permanent coverage (if desired) until the end of the policy term. That can help you save compared to the cost of getting permanent coverage when you are older because, with conversion, there are no medical exams or health questions - you pay rates based on your health status when you first took out the policy.
If you have health issues, there are still ways to get coverage. "Simplified issue" policies don't require a medical exam but may ask health questions. "Guaranteed issue" policies don't require a medical exam or health information. Just keep in mind that you will pay more for the same amount of coverage than "medically underwritten" coverage that requires a medical exam.
People who apply for life insurance after age 50 tend to have unique — and sometimes complex — needs. There are a variety of life insurance products available for people over 50, including both term and permanent options, to suit different coverage durations and financial goals. It's a good idea to talk things over with someone who can help you decide what to do. A financial professional can help you determine if term life insurance or permanent coverage is best for your situation and how a policy can be tailored to your needs. If you need help finding such a person, Guardian can connect you to a financial professional who can help.