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Do you still need seniors life insurance even if you have enough investments or retirement savings? Are you financially prepared for any serious illness or financial setback when you’re over 65?
According to the Australian Bureau of Statistics (ABS)’s 2018-2020 data, the average life expectancy of Australians was 81 for males and 85 for females.
Regardless of your age, it is pertinent to evaluate life insurance policies according to your goals and your family’s needs to determine if you need coverage and the right policy for you.
Do you have a ‘nest egg’ to cover expenses and debts in the event you become disabled, severely ill or, sadly, pass away? Are you concerned about expensive life cover for seniors or exemptions for pre-existing conditions?
This guide provides valuable life insurance information for senior citizens, including features to look for in seniors life insurance, the benefits and drawbacks of seniors life insurance, and comparing life insurance quotes for seniors.
Jump straight to…
- Do you still need seniors life insurance even if you have enough investments or retirement savings? Are you financially prepared for any serious illness or financial setback when you’re over 65?
- Key Benefits of Seniors Life Insurance
- Drawbacks of Life Insurance for Seniors
- How Much Does Senior Life Insurance Typically Cost?
- Factors That Influence the Cost of Premiums
- What to Look For In a Seniors Life Insurance Policy
- How to Compare Seniors Life Insurance Quotes
- Finding Affordable Senior Life Insurance Plans: Are There Cheap Life Insurance for Seniors?
- References
Life Insurance for Seniors Explained
If you’re a senior or retiree with no income, you may not see the value in taking out life cover. Not everyone will need or want a policy but there are some reasons when it may be wise to consider life insurance policies as a senior or a retiree.
- If you still have unpaid debts or mortgages that need paying after your passing, life insurance can make sure that your family can still cover these if you were to pass away.
- If you are still financially providing for your spouse, elderly parents, children, or grandchildren, and you want them to avoid the worry of settling your affairs after your death, you may want to keep or purchase life insurance.
- If you want to leave a legacy and an inheritance for your children, grandchildren or loved ones, a life insurance pay out can go to this. You can also use life insurance to fairly distribute the assets in your estate.
Before deciding on securing life insurance as a senior, it’s worth reviewing your current financial situation.
- Do you have investments that will continue to generate income after your death?
- How much superannuation do you have?
- Do you have sufficient savings to cover all the costs you need?
- Do you have money set aside for your funeral expenses or will your life insurance need to cover this?
Are You Eligible for Seniors Life Insurance?
The maximum age that senior citizens can apply for life insurance depends upon the type of policy and the individual insurer.
Different insurers may have different requirements in terms of maximum entry age, which most frequently ranges from age 60 to 75.
You should also research the expiry age of the type of life insurance for which you’re applying to know how long you will remain covered for.
Does Seniors Life Insurance Cover Pre-Existing Medical Conditions?
Some life insurance companies don’t cover pre-existing medical conditions, particularly for seniors. Still, some companies do provide exceptions, so it’s worth comparing seniors life insurance policies.
If you have a pre-existing medical condition:
Some insurers provide cover with restrictions, such as partial benefits. Other insurers offer cover for an additional premium.
Should You Take Out Life Insurance When You’re Over 65?
While many people target to minimise their debts and financial obligations before retirement age, this isn’t always possible.
As you get older, it is normal to worry about end-of-life expenses like mortgages or debts to pay after your passing. It is also quite common for seniors to want to make settling their affairs easier following death, helping to secure the financial future of any dependants.
Having seniors life insurance also allows you to decide how you want your estate’s assets distributed among your dependants, including loved ones like your spouse, children, grandchildren, and elderly parents.
You can also spread your life insurance payouts and assets, like investment assets, your home and savings, to different beneficiaries.
Types of Life Insurance Offered to Seniors
The most common life insurance for seniors is term life insurance.
Term Life Insurance
A term life insurance policy guarantees the payment of a death benefit if the life insured passes away during a specific period.
Term life insurance policies generally expire at the age of 99 however every life insurance company and policy is different.
Term life insurance provides a lump sum payment to your nominated beneficiaries after you pass away. Your loved ones can still be financially secure even when you cannot provide for or take care of them.
Term life insurance is far more common and accessible than whole life insurance which is not commonly sold in Australia anymore.
The other types of life insurance could be options for seniors including:
- Trauma Insurance
- TPD Insurance
- Income Protection (if you are retired, income protection insurance will not be relevant to you)
- Funeral Insurance
However, some of these life insurance products expire after a certain age depending on your insurance provider.
Life insurance policies generally expire at:
- Term Life Insurance – expires at 99 years of age
- Total Permanent Disablement (TPD) Insurance – expires at 65 years of age
- Trauma Insurance – expires at 70 years of age
- Income Protection – expires at 70 years of age
These expiry ages are a guide only. It’s imperative to read your policy PDS to find out what age your cover expires.
Funeral Insurance
Funeral Insurance can help cover the costs of a funeral. Keep in mind that you can use a life insurance policy’s benefits for non-funeral final expenses.
Financial and insurance advisers can provide services like reviewing a life insurance product’s Target Market Determination (TMD).
A TMD explains who will likely benefit from a particular insurance policy. This information is vital in helping you to decide if a particular policy is suitable for your specific insurance needs.
For your protection, you should also only purchase insurance with a financial adviser holding an Australian Financial Services Licence (AFSL).
Don’t forget to read the terms and conditions (T&Cs) of the policy when buying life insurance. This document contains essential information such as a policy’s inclusions, exclusions, and any waiting periods that may apply.
A policy’s inclusions detail what it covers, and the exclusions explain what it doesn’t cover. The waiting period (waiting time) tells you how long you must wait until part or all coverage applies.
An insurance company may also provide frequently asked questions (FAQs) on their website about their insurance products. FAQs can answer common questions about an insurance company’s products as well as about the life insurance payout.
The critical insurance-related documents mentioned above can help you find the best life insurance company and policy for your personal circumstances.
Book A CallKey Benefits of Seniors Life Insurance
Some people may think that once they get into their twilight years, their financial obligations decrease, and the need for life insurance is reduced. However, seniors often have greater needs as they grow older.
Outlined below are some benefits that can be derived from a seniors life insurance policy:
1. Flexible coverage amount: You can select the benefit amount you or your family receives if you pass away or become terminally ill.
2. Easy application process: The process may be as simple as answering some questions about your medical history with no need for a medical exam. The insurer may then supply a call-back to provide the status of your application.
4. Immediate cover: You can often be covered immediately for death, illness, or injury after your seniors life insurance is set up.
5. Advance payout: Insurers may offer an advanced payment for funeral costs or other immediate expenses. The average cost of funerals in Australia ranges from $4,000 to $15,000.
6. Level premiums option: Insurance policies with this feature don’t base premiums on age. Level premiums may initially be higher than age-based stepped premiums.
7. Guaranteed acceptance: Some insurers offer guaranteed approval of life insurance applications. These policies don’t require a medical exam, health questions, or reviews of medical or prescription records up to a set maximum age.
8. Accidental death cover: An accidental death can cause last-minute expenses for your family, such as funeral expenses. Accidental death cover can provide sufficient financial support. Your policy may provide a higher claims payout to your family in such situations. It may be two or three times higher than a standard death benefit.
9. Terminal illness cover: Many death cover insurance policies also payout in the event you are diagnosed with a terminal illness so you can receive the lump sum payment before you pass away to spend with your family and on any other expenses you need.
Drawbacks of Life Insurance for Seniors
Seniors life insurance also has some disadvantages that are worth considering as part of your research. These include:
1. Higher cost: The life insurance premiums for senior citizens tend to be relatively high compared to other age groups. The high cost can be a significant expense if you’re on a fixed income or are worried about your retirement savings.
2. Short policy expiry date: Various factors impact the expiry date for life cover. Your policy’s expiration may be soon, depending on your age, so review the life insurance cover’s expiry.
3. Pre-existing medical conditions exclusion: Insured people may have health conditions that doctors diagnosed during past medical exams. Some insurers exclude them, attach higher premiums, or implement heavy restrictions – especially for seniors.
How Much Does Senior Life Insurance Typically Cost?
The cost of life insurance tends to increase as you enter your later years. This means that your seniors life insurance cost could be higher than you expected, or more expensive than you may have paid for your life insurance in previous years.
If you are seeking a high life insurance benefit (ie. payout), your premiums may be costly also.
A 60-year-old male may pay around $96 in monthly premiums for $500,000 of life insurance cover. Meanwhile, a 60-year-old female may pay approximately $61 for the same amount of cover. Keep in mind that the monthly premiums can be subject to change with age.
A life insurance calculator can help determine your insurance costs. It factors the cover you need and the expenses your insurer will cover if you die.
This can help provide for your insurance needs and meet financial obligations if you pass away.
Book A CallFactors That Influence the Cost of Premiums
Insurers calculate life insurance premiums based on various risk factors to which a person is exposed. Here are some criteria an insurer may use to determine the premium payable:
1. Age: Usually, the older you are, the greater your premiums will be.
2. Gender: Men typically pay higher premiums than women. Life insurance statistics show that men generally have a lower life expectancy than women.
According to an Australian Institute of Health and Welfare (AIHW) report, the average Australian women’s life expectancy was around four years higher than that of men from 2017 to 2019.
3. Smoking: Smokers often pay higher premiums than non-smokers. To qualify for a non-smoking status, you must have ceased smoking for at least 12 months.
4. Medical history: If you’re generally in good health, you may qualify for lower premiums. However, premiums cost higher if you have pre-existing health conditions, especially if you have been diagnosed with a terminal illness.
5. Family medical history: You may be asked about the medical conditions of your immediate family members.
6. Pastimes: Engaging in extreme sports like skydiving and mixed martial arts may increase the likelihood of a claim and increase your insurance costs.
7. Occupation: The nature of your job may result in higher premiums. Your monthly payments can increase if your occupation is higher-risk than other occupations.
What to Look For In a Seniors Life Insurance Policy
The best life insurance for seniors will differ for different individuals, with each person having specific needs. However, the following features are worth considering when searching for the right insurance products and company:
- High death benefit: When searching for the right life insurance policy, consider how much you want your lump sum payment to be. This lump sum benefit can cover living expenses for your family, debts, funeral expenses and overall financial support for your loved ones.
- Premium freeze: You pay the same premium as that of the previous year. The sum insured or level of cover reduces each year to make up for your increase in risk as you get older.
- CPI indexation: A policy’s sum insured automatically increases yearly by the CPI in accordance with the rate of inflation. That said, it is important to note that this feature also may increase your premiums.
- Guaranteed future insurability: This type of insurance increases your policy’s level of cover without undergoing another round of medical underwriting which can be appealing to seniors.
- Interim cover: This provides temporary life cover while an insurer assesses a person’s application.
- Funeral advancement benefit: An insurer makes an advance payment to a nominated beneficiary to help cover funeral costs.
- Financial planning benefit: The insured receives an advance payment to help cover legal or estate planning costs. A financial adviser can help you choose between different life insurance products to select the right now for you.
How to Compare Seniors Life Insurance Quotes
When shopping around for a life insurance option, the options may seem endless. Keeping some criteria in mind can help narrow down the top choices.
Consider the following when reviewing your options:
- Expiry age
- Policy prices and premium structures
- The ease in applying for policies and the claim process
- Guaranteed renewable feature. Regardless of health changes, your life insurer cannot downgrade or cancel your policy if you keep paying premiums.
- Life insurers with an outstanding financial rating
- Options for additional funeral insurance cover
- Ease in reaching out to speak to a person to make changes in the policy
- Customisable policies (an example is to add a “trauma rider” to cover critical illnesses or terminal illnesses)
- Premium freeze option
You should also only purchase insurance policies from companies with an Australian Business Number (ABN).
Finding Affordable Senior Life Insurance Plans: Are There Cheap Life Insurance for Seniors?
Seniors life insurance can be expensive, so it’s practical to shop around and compare quotes from Australian life insurance companies.
However, it’s possible for pensioners to find a good-value senior life insurance policy. Factors to consider include your budget, financial commitments, and unique requirements.
These steps may help you find more affordable, cost-effective or cheaper life insurance for seniors:
- Shop around. Collect several quotes from different insurance companies. Be certain to compare “apples to apples” or similar policies.
- Consider level premiums. Insurance companies offer level premiums up to a maximum age. These premiums don’t increase as you grow older, unlike stepped premiums. Alternatively, stepped premiums often increase each year due to a higher risk of severe health issues. Meanwhile, level premiums are traditionally higher than stepped premiums at the beginning, although you can generally save some money in the long-term.
- Remove consumer price index (CPI) increases. Inform your insurance company that you don’t want your policy to increase with inflation rates. While CPI increases can add value to your insurance policy, they may also increase your monthly premiums.
- Use an insurance consultant. They can help you find the cheapest policy options.
- Consider your financial situation. Research the most suitable policy for your personal needs, family needs and living expenses.
- Live healthily. Quitting smoking can also considerably reduce your monthly premium by potentially more than 50%. A healthy diet and regular exercise can also lower your risk of cancer, heart disease, and stroke.
- Calculate a sufficient level of cover. The amount should be based on your current financial obligations. Also, consider your future needs.
- Adjust your premium’s structure and payment. This step can help lower the overall monthly costs.
- Explore insurance through your superannuation. If you have life insurance in existing super funds, consolidate the funds to avoid multiple fees. Explore life insurance options through your superannuation to potentially save money.
- Search for special offers and discounts. Life insurance policies with such features may reduce your premium price. An example is short-term free insurance used commonly when buying multiple policies.
Do your research to determine the right life cover that provides the protection you need at an affordable price. Remember that you need to cover potential costs like disability or debts.
Still not sure where to start, or want help securing the right insurance faster?
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1. Life tables
https://www.abs.gov.au/statistics/people/population/life-tables/latest-release
2. How life insurance works
https://moneysmart.gov.au/how-life-insurance-works
3. Sum-insured
https://www.insuranceopedia.com/definition/520/sum-insured
4. Underwriting
https://www.investopedia.com/terms/u/underwriting.asp
5. Term-life insurance
https://www.investopedia.com/terms/t/termlife.asp
