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The value of life insurance to a young parent, homeowner or married couple is fairly clear. For healthy applicants, the cost is low and the choices are abundant. If you die unexpectedly, your family will be able to pay bills, send the kids to school or just manage the costs associated with your burial with less financial strain.
Things get more complex when you consider life insurance for older buyers. Many people in their 60s and 70s may no longer need life insurance. They may have already paid off the house, stopped working and sent the kids off to care for themselves.
Sometimes buying or maintaining a life insurance policy over age 60 makes sense. Whether you decide to double down or drop coverage, your retirement years are often a good time to reexamine your life insurance. Here are some of the options.
Keeping your life insurance
As you enter your 60s, you might find you need life insurance as much as ever. Maybe:
You’re still working. If you and your spouse depend on your income, it’s wise to back that income up with life insurance.
You have a high net worth. Financial advisors often recommend permanent life insurance for people with estates in excess of $11.7 million to minimize estate taxes.
Others depend on you financially. If you still support children or other family members, consider keeping coverage.
You intend to live off your cash value. Some people fund their retirement using withdrawals from the cash value of permanent life insurance.
Buying new life insurance
If you didn’t purchase life insurance in your 20s, 30s or 40s and are hoping to get a policy now in your 60s or 70s, you might find yourself in a tough position. Life insurance quotes increase as you age, and any health problems you’ve developed will make it more difficult to find an affordable policy.
For example, a $100,000 whole life insurance policy for a 60-year-old in excellent health costs about $257 per month, according to rates from Quotacy, a life insurance brokerage. The same whole life policy for 30-year-olds costs just $72 per month.
At 60, you might be better off just saving the $3,000 or so a year you would have paid to an insurer for a whole life policy. You’d have more control over your money and more direct access to the funds you save while you’re alive. The downside to this approach is that, if you die sooner rather than later, your heirs won’t get a life insurance death benefit, which might be much larger than the amount you've saved up in just a few years.
You also might be able to sign up for a term life insurance policy if you’re generally in good health. While whole life coverage lasts a lifetime and can increase in value, temporary term life coverage is usually much cheaper. A healthy 60-year-old can qualify for $100,000 of life insurance with a 20-year term for between $38 and $52 per month, according to Quotacy.
If you’re not in good health, you may have to consider guaranteed issue life insurance, which generally offers more expensive coverage but without the possibility of rejection. A $25,000 guaranteed issue policy would cost an average of $144 per month for a 60-year-old. However, if the policyholder dies within two years of buying the policy, the insurance company generally won't pay the full benefit and may refund the premiums paid only.
Extending or converting your policy
If you bought a whole life insurance policy years ago, you can continue with that coverage for the rest of your life. Whole life insurance is permanent coverage, which means you can keep it as long as you pay for it.
If you currently have a term policy, you have a few options for extending your coverage. You can:
Renew your term policy. Many term life insurance plans allow you to renew your policy, regardless of your health, at the end of the term. This can be a good option in your 60s or 70s if you want to keep your existing coverage because you won't need a life insurance medical exam to maintain the policy. Keep in mind that your premium will probably increase, and some companies don’t allow renewals after a certain age.
Convert your term policy to whole life insurance. Some term life policies offer the ability to convert to whole life insurance before the end of your term. Though you shouldn’t have to undergo another medical exam, you might have to convert the policy well before your term expires.
Dropping your life insurance
Some people reach their 70s relatively free of financial worries. If no one depends on your income, you’ve paid off all major debts and your children's educations are sorted out, you can probably do without a life insurance policy.
Have term life insurance? You could keep your policy until it expires, or you could call your agent or insurer and ask to cancel your coverage. You may also simply stop paying the premiums.
Getting out of permanent life insurance is a little trickier, and anyone considering it should talk to a financial advisor before canceling. If you’ve held the policy for decades, you may have built up significant cash value in your life insurance. Once you let your agent or your company know that you’d like to discontinue the policy, you should receive a check for the amount you’ve accumulated, minus any surrender fees.
The bottom line
You may no longer need life insurance once you’ve hit your 60s or 70s. If you’re living on a fixed income, cutting the expense could give your budget some breathing room. Make sure to discuss your needs with an insurance agent or a financial advisor before making any major moves. If you drop coverage and decide later that you’d like to sign up again, it’s often prohibitively expensive to get a new policy.