Reevaluating finances is a common practice once you start approaching retirement. Reevaluating life priorities is part of that process when you have life insurance over 60.
The first step is looking at your goals.
Why Some People Buy Life Insurance Over 60
Everything depends on your current situation. After that, it depends on your financial goals for the rest of your life.
Quick Tip: Use the INSTANT QUOTES form on this page to view the lowest rates from the leading life insurance companies.
Here are some common reasons we've come across while helping people look at their life insurance situation when they're approaching retirement.
You and Your Spouse Still Depend on Your Income
If you're still working and plan on working through your 60s, it might be smart to hang on to your life insurance. If you're working for fun, that's a separate thing.
When your spouse still relies on your income, suddenly getting cut off from that income can add unneeded stress on top of your grief.
You Want to Minimize Your Estate Taxes
This is for people with a high net worth. You can designate the beneficiary of your life insurance policy to be your trust or dynasty trust. That way you can skip those pesky estate taxes and leave substantially more to your heirs. Check with your estate planning attorney for guidance on what type of trust is best for your situation.
You Still Have Financial Dependents
Whether your children are still living at home or you have grandchildren you are financially responsible for, leaving them in the lurch can make things rocky for a while.
You Worry About Outliving Your Money
If outliving your money could potentially be a problem for you, there are a few advantages to having a permanent life insurance policy.
First, you have the cash accumulation portion of permanent life insurance policies which you can borrow from. Keep in mind these loans will detract from the face amount paid to your beneficiaries if you don't pay them back.
Second, you can still leave your kids something if your planning goes perfectly and you pass on as you spend your last dollar.
Making Charitable Donations
Not everyone can be Andrew Carnegie and have libraries built across the country as their charitable donations. But you can still have a larger impact by naming a charity as one of the beneficiaries on your life insurance policy.
If you stop and do the math for a second, the premiums you pay are less than the payout upon your death. So by paying the premiums to the insurance company, the charity you want to support will get a larger sum of money than if you donated that money spent on the premiums. The drawback is you don't get that fuzzy feeling of donating every month or the nice mailing address return labels.
You're Considering an Irrevocable Life Insurance Trust
This is along the lines of naming your dynasty trust as the beneficiary of your life insurance.
Setting up an Irrevocable Life Insurance Trust is one of the ways the wealthy avoid estate taxes and shelter their money from creditors.
Reasons Why Seniors Drop Their Life Insurance Policies
Sometimes you just don't need them anymore. So why pay for something that isn't doing its job?
While we take our mission of finding affordable life insurance for everyone who needs it seriously; not everyone needs it. We would rather see you spend money on something more useful or enjoyable if life insurance doesn't serve any purpose for you.
No Financial Dependents
If you have no spouse and your children are financially independent, then the primary reason for life insurance has vanished.
You may still decide that it's a good idea for other reasons, but the primary function is no longer adequate reason.
You Have the Liquid Assets to Cover Any Estate Taxes and Burial Expenses
If your money outlives you, then you've done a great job planning and investing.
Your estate, depending on its situation, can be subject to all sorts of taxes or debts. Oftentimes it can take a while to sort out. Having liquid assets available to pay any final expenses will prevent your heirs from having to sell off property or stocks in a downturn.
How to Save Money on Life Insurance Over 60
There are several ways to save money on life insurance. But some of them are not appropriate for all family situations. Make sure first and foremost that your policy does what you want it to do before you start looking at cost cutting measures.
Term is Cheaper, but Permanent Might be Smarter
Term is always lower cost than permanent. Thus when someone asks us to find them the lowest price possible, we recommend term life insurance.
That being said, when you start looking at the reasons why seniors buy life insurance, permanent is often more appropriate. So it's important to take a moment in order to check your reasons for buying life insurance in your 60s.
Independent Agents Give you Options
When searching for a new policy, talk with an independent agent. An independent agent is someone who works with multiple companies instead of only one.
Captive agents are contractually bound to only sell the products on the one company they represent. Sometimes these are great products and might be the perfect fit for you. Other times you will save yourself time (and money) by asking an independent agent to shop the market for you.
Whatever you end up with, talking with an independent agent can leave you with peace of mind that you got the best deal.
Use a Life Insurance Needs Calculator or Financial Planner
Knowing exactly how much life insurance you should buy will save you money. This is particularly true when finances get more complicated as you approach retirement.
You can use a tool like a Life Insurance Needs Calculator or talk to your financial planner. If you don't have a financial planner, it might be a good idea to make an appointment with a fee based financial planner. Just make sure you have all your ducks in a row.
Re-Qualify or Convert Your Current Policy
If you have a policy, it's almost always more expensive to switch to a new one. So unless your current policy is inadequate to your needs, look into re-qualifying or converting your term policy into a permanent policy.
This avoids problems like health issues that have cropped up since you last applied for life insurance. Also companies base life insurance rates on your age, which is now greater than when you bought your policy.
Rates for Affordable Life Insurance for Seniors
To see specific rates right now, you can use the Instant Quotes Tool on the left. It's free. There is no obligation to buy.
You can also use one of the links below to your specific age to see rate tables and information specific to your current age.
Life Insurance for a 60 Year Old (Rates & Advice)
Buying Affordable Life Insurance at Age 61
Great Life Insurance for a 62 Year Old at Stellar Pricing
How to Get the Best Life Insurance for a 63 Year Old
Permanent versus Term Life Insurance for Seniors
Earlier we touched on permanent life insurance as the more appropriate choice for most reasons people buy life insurance over 60.
Term life insurance is best for someone whose spouse still relies on their income. The same thing goes for a person who has children relying on their income, although a permanent policy could work well for them too. That all depends on their secondary goals of life insurance.
For things like estate planning and burial expenses, permanent might be a better choice. It guarantees that those things you want to happen when you pass on will have the funding to do so.
How to Convert a Term Life Insurance Policy
If you aren't sure if you can convert your term policy to a permanent one, then give your insurance agent a call.
Some life insurance companies have an automatic conversion rider on a term policy. After all, they want to keep you as a customer for as long as possible. Other companies want you to pay for the privilege because there is often no underwriting involved in a conversion.
All a policy conversion really entails is letting your insurance agent or company know that you would like to convert your policy over to a permanent policy. Then they will have you sign a couple documents. Then you're all set.
Keep in mind that the time frame to convert a policy is usually right at the end of a term. Sometimes you have a grace period.
It's a good idea to set a reminder for about 30 days before your term policy expires to explore the option of converting to a permanent policy.
How Life Insurance Taxes Work
Taxability is pretty straight forward, unless you look at the IRS website. Then they have lots of vague "sometimes" phrases. As always, your best source of tax advice is from a professional in that area.
Life insurance payouts directly to your beneficiaries are not taxable. Except if you choose to have the money paid out over time and it generates interest. Then your beneficiary must report the interest as earnings to the IRS.
The other notable exception is if your beneficiary is your estate. (Never name your estate as your beneficiary.) Then any proceeds are subject to estate taxes. Also any creditors could snatch up the money before it has a chance to be distributed to your heirs.
If you have any questions about life insurance over 60, please give us a call at 858-703-6178. Our independent agents are standing by to help.