How Much Life Insurance Should a Senior Purchase?
Those of advanced age may think they can't even afford or buy life insurance. The common misconception should be dispelled, because many life insurance companies do offer decent policies to those 55 and older.
A senior should first consult their agent to see what options exist for their age bracket. A typical life insurance policy for those 55 above would include:
- No health exams
- Fixed cost premiums for the life of the policy
- Guaranteed cash value
- A payout benefit equal to the amount paid into the policy for the first few years.
With these four criteria met, a senior individual could afford to purchase life insurance.
Why Should Seniors Purchase a Life Insurance Policy? The payout benefit could be used to pay for the cost of their funeral as well as offset estate tax costs. This would enable children and others to realize the full extent of an inheritance rather than have most of the estate used to pay taxes.
Since life insurance can be purchased at a late stage, many find these policies to be truly helpful. As long as the insured does not die within two years, the policy pays out the full benefits. This can change from state to state, but this is usually the norm. A policy usually pays out if death occurs within the first two years as a result of an accident. Other deaths, like due to complications of illness, pay out a fixed amount typically close to what was paid into the policy.
The amount of life insurance a senior should purchase can be calculated based on many factors. The policy should have built in money for funeral costs as well as estate costs. If a spouse will be left behind, their day to day expenses should be accounted for, like mortgage, health, car, and utility costs. The goal does not have to be to create wealth upon death, but rather to provide comfort in what will be a time of grief. The money you leave behind should meet their needs just as your income met their needs. The insurance money will likely replace your income. Make sure it meets their needs.
If a dependent spouse would be left behind, then a simple formula could prove to be useful. To determine how much life insurance a senior should purchase, simply plug in the estimated income of the deceased multiplied by twenty. The value of the result should be enough income to draw five percent interest and over time keep the spouse in good financial standing. The income generated from the interest should keep the spouse with enough money in the bank.
When looking for senior life insurance, be sure to check the payout benefit for the first few years, whether they require a health exam, the cash value, and the cost of the premium. What's the term of the insurance policy? Can it be renewed at the same price at the end of the term? With answers to these questions, you should be able to make an informed decision regarding life insurance coverage.
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