Here's What Happens When Seniors Don't Get Life Insurance
If you don't have life insurance, your surviving loved ones might suffer financially in your absence. Read on to learn more.
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If you have people in your life who depend on you financially, then getting life insurance is a good idea. But what if you're nearing or at retirement age and you don't have a policy in place?
You might assume that you don't need life insurance if you're older because at that point, you and your spouse will be privy to other types of income. But not having life insurance could leave your loved ones in the lurch to some degree.
The benefit of having life insurance as a senior
There are different types of income you and your spouse may have access to during your senior years, such as Social Security benefits or withdrawals from savings you've built over the years. But Social Security only pays a limited benefit. The average recipient today gets just $1,907 a month.
The rules of Social Security survivors benefits dictate that if you pass away, your surviving spouse is entitled to receive the complete monthly benefit you were collecting while you were alive. That benefit may be enough to cover day-to-day expenses. But what about larger ones?
Let's say you don't have much retirement savings and your survivors benefits from Social Security aren't enough for your spouse to cover your funeral costs. If you were to leave your spouse with a life insurance payout, that sum might cover your funeral costs and other large expenses that have the potential to arise, like home or car repairs. Plus, the money from a life insurance benefit might just plain give your surviving spouse more breathing room.
Let's say you pass away but your spouse outlives you for years, all the while having to cover the cost of maintaining your home and paying off the mortgage. If you leave your spouse with a lump sum of money, that could become less of a financial burden.
Also consider the fact that life insurance benefits are generally tax free. Your surviving spouse may not have access to any other tax-free income.
Social Security benefits have the potential to be tax free, but they're often taxed if the recipient is also privy to additional income -- even a small amount. And traditional IRA or 401(k) withdrawals are subject to taxes as well. So this way, your spouse might be left with some income the IRS can't touch.
Also, while much of this discussion has centered around a surviving spouse, it may be that you have other people in your life you support or want to financially, like grown kids or grandchildren. Let's say it's important to you to be able to help fund your grandchildren's college education. If you leave behind a life insurance payout, that might allow you to fulfill that goal even if you aren't around.
Can seniors even get life insurance?
The quick answer is yes, they can. However, the cost is likely to be higher than it is for younger applicants.
Let's say a 30-year-old and a 70-year-old apply for life insurance with a 10-year term. The likelihood of the insurer having to pay out a death benefit is higher with the 70-year-old, so because of that, the premiums for that policy will likely be higher. It's a good idea to shop around for life insurance as an older applicant to compare rates and, ideally, eke out some savings.
Progressive also says that seniors may be limited in the type of coverage they can obtain. For example, a 30-year term life policy may not be available for an older applicant.
But all told, it is possible to get life insurance when you're older. So think about the benefits it could provide to your loved ones before writing off the idea.
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