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Is Senior Life Insurance A Good Deal?

By Marilyn Katz

Republish: EasyPublish™
Published: 23Sep2010
Word count: 535
Viewed: 229 time(s)

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If you are over 65, or if you are taking care of an elderly person, you may have gotten some offers for senior life insurance. There are a lot of big companies, like AARP, that market a variety of life policies for older people. A lot of older people wonder if they should buy a policy to help provide cash for their families when they pass away.

Families may need cash when a loved one passes away. Funerals are expensive. There may be other expenses too. 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 that, if the insured person survives, they will be covered without having to pay more premiums.

But if the 70 year old does survive until age 95, that means they would have made 25 years of premium payments. They would have paid $900 a year for their policy. 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!

Of course, if the insured person died after one year of coverage, they would have only paid $900 for $10,000 worth of coverage. In this case, the insurer would lose money and the family would come out ahead. So insurance companies do take a risk.

Buying insurance is all about mitigating risk. There may be some alternatives that would make more sense at this point though.

There are some advantages to purchasing senior life insurance. If you cannot save money well, you will never have the opportunity to grow a savings account. Some people are better about paying bills, like premium bills, than they are about saving money. 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. Before you decide to buy a senior life policy, it is a good idea to shop around!

Do seniors need life insurance? Find out some reasons why some older people do buy a policy! Learn more aboutsenior life insurance.

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