Insurance Overview: Life, Auto, Long-Term Care Insurance and More
Life insurance is the best way for older adults to make sure their loved ones are taken care of after they're gone.
These plans can provide a generous financial payout to beneficiaries upon the policyholder's death, providing funds to pay for expenses such as medical bills, funeral costs and debts. In some cases, these policies may also provide the beneficiary with a nest egg, helping them to cover household expenses long after their loved one has passed away.
In addition to life insurance, it's important for older adults to consider purchasing other types of insurance, including car, extended health and long-term care insurance.
While car insurance policies may cover expenses related to car accidents, vandalism and theft, extended health and long-term care insurance provide the necessary coverage for preventative and emergency healthcare such as dental, health and vision services, as well as long-term care whether it's provided at home or in a facility.
In the guide that follows, we discuss the most important types of insurance that older adults should consider, as well as some tips for understanding how to manage these different types of insurance policies.
Senior Life Insurance
There are two types of principal life insurance: term life insurance and permanent, or whole life insurance. According to the American Council of Life Insurers, an estimated 60% of all life insurance policies purchased in the U.S. in 2019 were permanent life insurance policies.
Additionally, some older adults may wish to strictly purchase final expense insurance, which usually covers the cost of their funeral upon death and related expenses.
Term Life Insurance
Term life insurance is fairly straightforward and perhaps the simplest of the different types of senior life insurance. These policies are issued for a predetermined length of time — usually up to 30 years. If the policyholder dies during the time the policy is active, the beneficiary will receive a payout. Payout amounts vary depending on the insurance provider and the policy purchased.
Within term life insurance, there are two different types: level term and decreasing term.
In a level term life insurance policy, the total amount of the death benefit remains the same throughout the entire time the policy is active.
In a decreasing term life insurance policy, the total amount of the death benefit decreases over time. In most cases, it decreases by a preset dollar amount or percentage each year.
Whole Life/Permanent Life Insurance
Whole life, or permanent life insurance, pays a death benefit to the policyholder's beneficiary regardless of when they die or how long they live. Whole life insurance is considerably more complicated than term life insurance, as there are several subtypes, and within each of those, there are several variations.
Ordinary life insurance is the most basic type of whole life insurance. It includes a death benefit, as well as a savings account. The benefit and premium amounts for this type of policy generally don't change and in most cases, if a policyholder reaches 100 years of age, their policy is considered paid in full.
Universal/Adjustable life insurance provides policyholders with a little more flexibility than an ordinary life insurance policy. In most cases, the death benefit can be adjusted provided a medical examination can be passed, and premiums can be changed or even stopped once a balance has been accrued in the policyholder's savings account.
Variable life insurance policies are similar to ordinary life policies; however, the savings aspect of this type of policy can be invested in stocks, bonds and mutual funds. While a variable life insurance policy can pay off when the market is good, it can be risky if investments plummet.
It's important for those considering this type of senior life insurance to understand the terms before committing to this type of policy — while some insurance providers guarantee that the death benefit won't fall below a certain minimum, others don't include this clause in their policies.
Variable-universal life insurance policies are the most complicated — and sometimes the most profitable — type of life insurance. They offer policyholders the chance to make adjustments to their death benefit amount and premiums while taking advantage of investing their savings in stocks, bonds and mutual funds. This type of life insurance is the most flexible, allowing the policyholder to maintain total control over their insurance.
Final Expense Insurance
Final expense insurance isn't necessarily considered life insurance, but it does cover the costs that families face after a loved one passes on. This type of policy is designed to strictly pay for the cost of a funeral, burial and medical expenses related to the policyholder's death. According to SmartAsset, the dollar value of most final expense policies is less than $20,000.1
Which Life Insurance Is Best for Seniors?
For many older adults, choosing a life insurance policy can be challenging with so many options. There are countless insurance providers, each offering different policies at different rates with varying levels of coverage. That's why it's so important for seniors to do their due diligence not only when choosing a policy type, but also when choosing an insurance provider.
One of the most important things to understand about an insurance policy is the qualifying terms. Many insurance providers won't sell policies to older adults unless they're able to pass a medical examination2 so for those who are frail or living with medical conditions, it may be best to shop around until they can find a provider that doesn't require this examination.
Once a provider is found, seniors will need to choose between term, permanent and final expense insurance. The best choice depends on several factors, including the individual's current health and finances. While an individual who is still in relatively good health may want to consider whole life insurance, a person who is living with a limited budget may want to consider sticking with a final expense.
Why Purchase Life Insurance?
As a senior, life insurance policies can be beneficial for a variety of reasons.3 First and foremost life insurance helps individuals to make sure their beneficiary is taken care of in the event of their death. This is a particularly important thing to consider for older adults who are providing for dependents.
For those who don't have beneficiaries to consider, there are still some benefits to owning a life insurance policy. This includes purchasing life insurance as part of a comprehensive investment strategy, as well as the requirement that many mortgage and line of credit lenders have in place, requiring debtors to own life insurance policies before credit can be extended.
How Older Adults Can Get Better Life Insurance Rates
Purchasing a life insurance policy as an older adult, particularly if you're over 70 years of age, can be expensive. Premiums are often higher and in some cases, death benefits decrease with a higher enrollment age. The best way for seniors to obtain life insurance at the best rate is to work with a broker they trust who can shop around and negotiate terms and premiums on their behalf.
Car Insurance for Older Adults
It's crucial for older adults to have car insurance if they choose to continue driving. Just as with senior life insurance, rates can sometimes increase with the policyholder's age, so it's important for older adults to read between the lines and find a policy that's affordable while providing them with comprehensive coverage against accidents, theft and other incidents that may occur.
According to the National Institute on Aging, many senior drivers face challenges such as stiff joints, slower reaction times and difficulty seeing or hearing while driving.4 As such, it's vital that older drivers continue to visit their doctor for regular check-ups and are cognizant of any changes to their health, vision or hearing. These issues can put older adults and other drivers in danger and may drastically increase insurance premiums. In some cases, having medical conditions that affect driving can disqualify an older adult from purchasing car insurance altogether.
How Much Does Car Insurance Cost for Seniors?
The price of car insurance varies drastically depending on several factors. This includes the driver's age and driving history, as well as the vehicle they drive and the city and state in which they live. Additionally, there are several types of car insurance policies, all of which vary in price and coverage5. This includes:
- Bodily injury liability
- Personal injury protection
- Property damage liability
- Uninsured/underinsured motorist
It's important for older adults to look into each type of policy that their broker or insurance provider offers and consider which may be best suited to their needs.
Do Seniors Get a Discount on Auto Insurance?
Many insurance providers across the U.S. offer mature driver discounts for drivers who are aged 55 and older, provided they meet specific requirements. In most states, this means that the driver must complete an approved mature driver safety course and have a clean driving record.6
Dental, Vision and Hearing Insurance for Older Adults
There are several options available to older adults who require dental, vision and hearing insurance. While Medicare Parts A and B don't include coverage for these services, some Medicare Advantage, or Medicare Part C, plans do include coverage for dental, vision and hearing check-ups.7 These plans range in cost depending on the participant's income and for some seniors, may be free of charge. To qualify for Medicare Part C, enrollees must be enrolled in Original Medicare and live within a Medicare Advantage service area.
For some seniors who have low income, typically those who receive Supplemental Security Income, Medicaid waiver programs may be available to cover the cost of dental, vision and hearing services. Medicaid waivers vary depending on the state, income requirements and coverage inclusions.8
Long-Term Care Insurance
Long-term care9 is the broad term that's used to describe services such as assisted living and nursing home care. While the cost of long-term care varies exceptionally from state to state, as well as for different care types, it's almost always expensive. Many older adults struggle to pay the cost of long-term care insurance on their own, which is why long-term care insurance policies exist.
These policies can typically be purchased by any older adult who meets the requirements set forth by the insurance provider. This often means that the person applying for the policy must be in good overall health and not already receiving long-term care services.
A long-term care insurance policy10 reimburses the policyholder for a predetermined daily dollar amount if they begin to require regular assistance with activities of daily living. Each plan varies in the exact services it covers but in most cases, long-term care policies are comprehensive enough to make assisted living or nursing home care affordable for older adults. The cost of premiums also varies greatly depending on the plan and insurance provider, as well as the policyholder's age.
Individuals who are considered low-income may also be able to acquire assistance with the cost of long-term care services via Medicaid. While each state offers different Medicaid11 programs and waivers, most have some level of coverage for older adults who require nursing care or assisted living. The income threshold and other requirements for this coverage vary depending on the state and the program.
Coordinating Employer Health Insurance with Medicare
Many older adults choose to buy into a Medicare plan to ensure they have access to the healthcare services they need at an affordable price. In some cases, individuals who enroll in Medicare may also have coverage under an employer's health insurance plan. While coordination of these benefits can be tricky and confusing, there is plenty of help available. Older adults may want to contact their local State Health Insurance Assistance Program (SHIP)12, which provides free, unbiased Medicare counseling and benefits coordination assistance.
There are several alternatives to SHIP that provide insurance counseling for Medicare beneficiaries and older adults who need assistance with understanding or coordinating their benefits. These services can typically be found in senior centers around the country, as well as at local Area Agencies on Aging.13