Life Insurance at 60-plus

Should you buy life insurance or additional life insurance at age 60 or older?

By Deborah Jeanne Sergeant

Considering buying 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.

“Buying a new life insurance policy at age 60 or older can be a lot more expensive than buying it at a younger age,” said Diana Apostolova, investment consultant with Rochester Investments.

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.

“Some people may not be able to qualify for a plan for a medical reason. So, considering a new life insurance policy should involve a review of all other finances to determine the best plan of action.”

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, “life insurance can be a good idea for people that aren’t able to selfinsure,” Apostolova said.

For most people, the reason for obtaining life insurance is no longer present.

Jeff Feldman, Ph.D. and certified financial planner with Rochester Financial Services in Pittsford, views life insurance as protection for the policyholder’s income.

“Depending on what your income is, if you’re retired, it doesn’t make sense to have it because you have assets and you don’t have an earned income stream,” he said.

Most people 60-plus no longer have young dependents living at home. People who still support children would have a difficult time staying financially viable if the other wage earner in the home dies.

Feldman also pointed out that since most people in retirement have Social Security income as one of their income streams, life insurance is not as important.

“It used to be life insurance would protect against estate taxes,” Feldman said. “Now it’s at $12 million per person and $24 million per couple, life insurance isn’t a concern for many people,” he added, referring to the maximum allowed estate or gift exempt from tax.

In regard to whole life policies, Feldman looks at the rate of return. For term policies with a locked-in rate, “it usually makes sense to keep paying it,” he said.

Covering funeral expenses

Many people view purchasing a life insurance policy at 60 as a means to safeguard their loved ones against final expenses. Burial and funeral cost an average of $7,360, according to the National Funeral Directors Association. Phillip Provenzano, insurance agent and financial adviser with The Financial Guys Insurance Agency in Rochester, would rather see clients who are 60-plus invest in funds instead of buy life insurance for that reason, especially considering the cost of premiums.

“Oftentimes, an adviser will convince the senior that they need this,” he said. “The adviser is the only one who benefits, as the adviser gets a commission. In five years, they’ll outpay what they’ll get in death benefits. They’d be better off putting the money into an IRA and make money on it.”

Pre-paying burial and funeral expenses can also ensure that the family feels no financial burden and it also safeguards against inflation. 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.

“With a proper plan, a person can determine if life insurance is something that they need,” Provenzano said. “Now a person may not need life insurance but may want it. The rationale for this could be passing on a legacy to a family member or members, estate planning purposes, and so on. There are numerous reasons why people do and do not need life insurance. A proper financial plan can help determine that.”

He warns against the life insurance policies advertised on television as he said that these often have hidden provisions such as reduced benefits for the family if the policyholder dies within two years.

“It’s a matter of starting the planning sooner than later, ” Provenzano said. “You need to plan no matter what. If you don’t have much money, you still need to plan as I can help you qualify for benefits you may not be aware of. Whether you have assets or don’t have assets, planning is always a good thing to do as there’s always something to learn. Just go to someone.”