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Should seniors buy whole life insurance?

For seniors looking for a backup cash option, whole life insurance may be worth pursuing. PhotoAlto/Frederic Cirou

Life insurance is a crucial component of your financial plan, protecting your loved ones from potentially devastating financial losses they could experience if you pass away. Your beneficiaries can use your policy's death benefit to cover living expenses and pay off debts and final expenses.

Older Americans can benefit from senior life insurance with a term or whole life policy. A term life insurance policy provides inexpensive coverage for a specific period, usually between 10 and 30 years, and pays out a benefit upon your death. Seniors can also benefit from a whole life insurance policy, which is a type of permanent policy with a cash component you can access while alive to pay off debt, cover an expensive medical bill or any other purpose.

If you're in the market for life insurance then start by getting a free price estimate so you know exactly what it will cost.

Why seniors should buy whole life insurance

Whole life insurance is the most popular form of permanent insurance. It can help seniors in numerous ways. Here's how:

  • Never expires: As a type of permanent insurance, whole life insurance covers you for the rest of your life as long as you make your monthly payments.
  • Fixed premiums: With some types of permanent life insurance, premiums can adjust over time. But whole life insurance policies come with predictable, fixed premiums that remain the same.
  • Cash value: Whole life insurance nearly always includes "cash value," which operates like a savings account. A portion of your monthly premium goes into your cash value account, which grows tax-deferred over time.
  • Can borrow from cash value: Generally, borrowing amounts vary by lender, but you can usually borrow up to 90% of your policy's value. Keep in mind, any amount you borrow from your whole life insurance policy is deducted from your death benefit if you do not repay the outstanding balance.

The benefits of a whole life insurance policy do come with a price. Whole life insurance tends to come with higher premiums than term life insurance because it lasts for the rest of your life and includes a cash value account that can accumulate tax-deferred.

Get a free price quote online now and find out how much a life insurance policy would cost you.

How much should seniors pay for whole life insurance?

The amount you can expect to pay for whole life insurance, regardless of age, depends on your age, gender, health, coverage limits and other factors. Typically, senior women tend to pay less than their male counterparts and premium quotes are usually higher the older you get.

As a general reference, here is what a $250,000 policy might cost a non-smoking person in good health living in California, according to their age and sex.

  • 50-year-old non-smoking female in good health: $215 to $260 per month
  • 50-year-old non-smoking male in good health: $260 to $300 per month
  • 60-year-old non-smoking female in good health: $333 to $415 per month
  • 60-year-old non-smoking male in good health: $415 to $490 per month

As with any life insurance product, it's smart practice to compare multiple life insurance providers to find the lowest premiums. But consider choosing a provider based on more than price alone. You'll want to find a policy with the best balance of premium, coverage amounts and the guaranteed growth rate in the cash value account, which typically ranges from 1% to 2%. You can use the table below to start comparing some top providers on the market.

Why seniors may want to choose term life insurance instead

While the cash value benefit of a whole life insurance policy is attractive to many seniors, it may not make sense for everyone. Here are some scenarios where you might consider getting a term life insurance policy instead:

  • You want a lower premium. Term life insurance is likely your most affordable option, especially for seniors. Premiums for term life insurance policies are typically five to 15 times cheaper than whole life insurance. Low premiums can be particularly valuable for seniors on a fixed income.
  • You only need short-term coverage. Term life insurance may make sense if you plan on paying off your mortgage and other debts within the next several years, and you only need life insurance until then.
  • You want simplicity and flexibility. Term life insurance doesn't come with cash value benefits. It gives you a straightforward policy with a death benefit. You can choose the length of the term to suit your needs. You also have the choice to renew your policy or convert it to a whole life policy if your needs change.

Get a term life insurance price estimate here now to see if it's best for you.

The bottom line

If you're looking for permanent insurance that lasts your lifetime, whole life insurance may be a viable option. The most significant benefit of whole life insurance is its cash value component, which grows tax-deferred. But if you simply need affordable life insurance for a specific period or coverage amount, consider getting a term life insurance policy, instead. Ultimately, your best option will depend on how well each policy helps you achieve your personal and financial goals.

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