Do Senior Citizens Need Life Insurance?
Life insurance is driven by crunching numbers and analyzing data. Or, statistics specifically. It is the job of life insurance actuaries to protect life insurance companies from paying out death benefits against the company’s financial interests. For example, actuaries compile data about how long human beings live, lifespan probability for smokers, people with poor diets or lifestyles, people who engage in dangerous sports activities, and so on. Senior citizens and anyone else who doesn’t fit into any of these demographics, might wonder, “Do I really even need life insurance?”
Senior Citizens and Life Insurance
Young, healthy people who do not engage in risky lifestyle activities are more likely to live a long time. And, pay life insurance premiums for decades. Even if the life insurance company pays for death benefits, they have collected premiums for decades, so they are likely to break even on costs. That is why life insurance premiums are so cheap for younger people.
The average life insurance policy is worth $200,000 to $250,000. A 20-year old could pay tens of dollars to under $50 a month, based on the company and policy conditions. Conversely, life insurance companies charge middle-aged people, and especially senior citizens, inflated premium rates. Someone in their 50s, 60s, 70s, 80s, and 90s are statically closer to death than a 20-year-old.
Life Insurance companies do offer coverage to senior citizens but on their own terms. If you are a senior citizen dealing with numerous standards of living costs, paying inflated life insurance premiums may be an unnecessary expense.
Crunching the Numbers
Remember, life insurance applicants are judged by statistics and data. Statistically speaking, women tend to live longer than men. So, even though life insurance is more expensive for senior citizens, it is still relatively cheaper for women. For a 65-year old male non-smoker, an average $250,000 policy may cost about $108 a month. Or, about $66 for a 65-year old female.
A 75-year old male may pay $300 a month while a female might pay $160 a month. These are just average estimates as every life insurance company has signature age-scale rates.
The Wages of Old Age
Many senior citizens and retirees live on fixed incomes. The average income of working and semi-retired senior citizens between the ages of 65 and 74 is about $19,000, more or less. The annual standard of living costs of senior citizens is about $44,000 a year. The average cost to cover all medical expenses throughout retirement is about $280,000 for a retired couple. Retirement living on a fixed income is all about making incomes and savings last throughout retirement. Or, prioritizing what bills you should pay over others.
Considering Whether Life Insurance Makes Sense for You
The accrued value of a life insurance policy can be used to leverage a loan. Or, it can be used to initiate income substitution in the form of self-payments. Still, you could be paying a $100, $200, or $300 monthly premium for this privilege. So, if you are living on a fixed income, or closely assessing your retirement expenditures, you should ask yourself if you need to keep paying for life insurance.
Do you have enough money saved to pay your expenses for the rest of your life? Are your children able to financially care for themselves? Can you pay for your own funeral expenses? Do you have a diversified portfolio of significant investments acquired over a lifetime? Then, you may not need to be paying life insurance premiums in your old age.
Do You Need Life Insurance?
This advice is not a catch-all solution for everyone. Whether or not you need life insurance depends on a variety of personal and financial factors. A lot of senior citizens on fixed incomes worry about their funeral expenses. If you don’t want to burden a loved one or your children with your eventual funeral expenses, then you should certainly have life insurance. If it fits into your budget, it can also be converted into personal income substitution later on in life.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.