Many seniors choose to get diluted coverage because of the premium expense, or forego life insurance completely instead of purchasing this asset, which might be extremely worthwhile for their families. The cost of providing for their loved ones is just too high to bear during retirement years.
Are there any alternatives? The answer is, unequivocally, YES! A specific new life insurance for seniors product has evolved over the past few years and it is called Premium Financing. It is not a new life insurance concept, but one that has come to the forefront recently.
Premium financing is where, typically, an independent institutional funder decides to pay the premium for the insured. Financing is done for a period of years, or even for life. Financing rates vary, but are typically related to the U.S. prime rate or LIBOR.
Why would the funder do this? The funder believes that they will get a better return, overall, than investing in traditional financial vehicles. They fund an enormous basket of these transactions, and know through the law of averages, that overall, their returns should yield a few hundred basis points higher than bonds. The institutional funders include Hedge Funds, Large U.S. and International Banks, Pension Funds, College Endowments, and even Insurance Companies themselves.
Why would a senior do this? The senior typically has no out of pocket expenses, or, at most, minimal cash outlay. Imagine getting millions of dollars of coverage with no cash outlay or a few thousand dollars one time total investment.
If the senior dies while the note is in force, premiums and reasonable interest are recouped by the institutional funder, and the balance is paid to the heirs. These new senior life insurance programs are set up so that the proceeds pass to the heirs both income tax free (standard with life insurance), and estate tax free. This is an awesome advantage, once only utilized by the very sophisticated and wealthy.
In some cases, depending upon the initial structure, seniors may even choose to offer the policy for sale into the burgeoning secondary market called life settlements at the end of the note term, continue financing, or even buy the policy outright if their health status has changed.
There are even revolutionary life insurance products, like immediate annuities, which can, in many cases, provide seniors an income for life with no out of pocket expense.
Today's financial markets offer a plethora of options for Seniors to obtain the Life Insurance they may dearly need.
Seniors who have yet to put insurance into their retirement plan may find that a small amount of whole life is the best option for protecting a spouse or providing final expenses after they are gone. While many people may have already purchased some form of term policy for the protection of a spouse or children much earlier in life, some may find that have little or no protection that will continue until they are older and provide a benefit for their spouse long after a term policy would have terminated. Considering how long people are living today, it is imperative that seniors with limited resources have something in place before they become uninsurable.
Unfortunately many people think about the need for life insurance well after it is too late and they have already been diagnosed with a medical condition. So, for a senior couple it is important to lock in a permanent life insurance policy that will be there for your entire life before your health deteriorates. Term is inexpensive but it is designed to last only for a specific period in your life.
Why Whole Life over Inexpensive Term
Term insurance typically offers a lower premium in comparison to a whole life policy, these policies are usually purchased during the earlier years of an insured individuals' life. These term type of policies have a specific time frame or term period as the name implies. These policies will usually include renewal opportunities with premiums that can increase substantially as an insured grows older. Often times these types of policies will include a clause requiring new evidence of insurability. So, if you were ill, it might be impossible to get insurance after you develop a health condition or the policy may become unaffordable at a time when you might need it most. On the other hand a whole life policies remains in force, as the policy's name implies, for your whole life as long as you continue to pay the premiums or the cash value remains in force. Term life insurance is usually only renewable to age 75 and terminates at policy end date if not renewed.
Insurance Protection for Older Families
Whole Life plans have several benefits to seniors: Most policies can be written on an insured until the age 85 years of age and can maintain in force until death. Typically when applying for small amounts of whole life coverage you will not have to take a medical exam or have any blood work examined. As you can see, these plans also have greater flexibility to meet age and health history requirements.
Purpose of Whole Life for Seniors
?Funeral expenses
?Provide income for senior spouse or child beneficiary's after your death
?To insure coverage to age 100 or guaranteed death benefit to beneficiary
?To build cash value and create a supplemental income stream for retirement
?Children purchase whole life for parents to insure security of other parent
?Insurance for seniors who may have been declined for coverage previously
?To leave an estate or college fund for grandchildren
In Addition to a death benefit that is payable to your beneficiary, a whole life policy can also builds up what is referred to as "cash value," or liquid reserve that essentially is a growing tax deferred savings feature that you can withdraw or borrow against. If the policy is purchased early enough or funded heavily in the beginning it can provide a nice retirement resource that can be drawn from at retirement since little can be expected from social security. Many have found this to be a valuable feature if they need additional sources of retirement income to meet daily living expenses. The additional cash value can also fulfill a need for unplanned long term care which is not completely covered by Medicare.
For those married seniors on a fixed budget small amounts of whole life are essential to providing final expense coverage and protecting the remaining loved one for their remaining life at a time they may be unable to go back to work and provide financial support to provide for their own well being. Whole Life was designed to be a simple, fast, and affordable way to secure life insurance for seniors.
Both Jon Thomas & Christopher Beard are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Jon Thomas has sinced written about articles on various topics from Life Insurance Annuity, Personal Finance and Finances. Jon Thomas has been involved in finance and insurance since 1979. He continues to write articles to help with and. Jon Thomas's top article generates over 6600 views. to your Favourites.
Christopher Beard has sinced written about articles on various topics from Personal Desktop, Insurance Quotes and Health Insurance. Christopher Beard is a virtual agent who uses automation to simplify the consumer buying experience. He is the president of Trinity 1 Financial Group and works with clients planning mortgages, insurance and annuity wealth building strategies. Visit his si. Christopher Beard's top article generates over 1900 views. to your Favourites.