Choosing life insurance can be a confusing task, especially after the age of 50 when you are more conscious of the need to protect your family. But the process doesn’t have to be daunting, and you don’t have to try to figure it all out yourself.
Use this guide to better understand your options and find the coverage that’s right for you.
Quick Article Guide
1. Assessing Your Needs for Life Insurance
2. For If You Die: Term Life Insurance and Rates
3. For When You Die: “Lifetime” or Guaranteed Universal Life Insurance (GUL) and Rates
4. For a Small Amount of Coverage: Final Expense Policy
5. For Decreasing Debt: Laddering
6. How Much Will Life Insurance Cost Over 50?
7. Where to Start
Before you begin shopping for life insurance, it’s best to have a general idea of how much coverage you need and how long you would like your coverage to last. What is your budget? Do you need a policy to cover you until retirement or one that will last your entire life? What debts are you protecting? These are all questions to consider, but let us boil them down into one question:
Do you need life insurance for if you die or for when you die?
If your main concern is protecting your family in case you die prematurely or unexpectedly, term life insurance will likely be the best choice. Consider which of the following debts you might need to cover:
- Cost of raising your children
- Children’s college expenses
- Large business loans
- Income replacement for your spouse
Next, calculate how long until:
- Your house is paid off
- Your children finish college
- Any other major debts are paid off
- You reach your planned retirement age
Term life enables you to secure affordable coverage aligning with your current and future finances. If you are going to be set with a pension or 401k when you retire, you can choose a “term” that will extend past your need for coverage. Most term life insurance companies offer term life for those over age 50 in 10-, 15-, and 20-year terms. Some might allow for 25- and 30-year policies.
We often find that rates for “Lifetime” policies are actually lower than those of 25 or 30-year term life policies for people aged 50-59. We’ve displayed the rates for these policies below.
The tables below show rates for a male aged 50-59 in excellent health seeking a 10-year, 15-year, or 20-year term policy.
To see more rates, or rates for a Female, please go our Rates By Age page.
James is 52 and Helen is 50. They have two children, ages 7 & 10, and 19 years remaining on their home mortgage. James will be eligible for his pension at the age of 67 and plans to retire before the age of 70.
Once James’ and Helen’s house is paid off and their children have graduated from college, they will no longer need life insurance, because James’ retirement funds would be enough to support Helen after the mortgage is settled.
For James and Helen, a 20-year term life insurance policy works perfectly, as James will retire in 18 years and they will no longer have a mortgage to pay in 19 years. Their children will also be well out of college at that time. Should something happen to James before then, the money will be there for Helen to pay the mortgage and care for the kids.
Convertible Term Life Insurance
The term life insurance policies we offer come with a guaranteed option to convert all or a portion of your death benefit to a permanent life insurance policy, regardless of whether your health changes after your term policy started. This is one of the most important features of term life insurance, and yet it’s rarely mentioned.
So, going back to the example of James and Helen, if James later determines he would want $50,000-$100,000 of coverage for final expenses once the mortgage is paid, he will be able to convert his term life policy to a permanent policy that never expires, without having to pass a new medical exam. If James were to be diagnosed with a serious health issue, such as cancer or a heart attack, this feature would be extremely valuable, as it becomes both more difficult and more expensive to qualify for life insurance with a major health concern.
If you need coverage for the rest of your life, a guaranteed universal life (GUL) policy provides a happy medium between term life and universal life. These policies are similar in cost to term life, but rather than providing coverage for a certain number of years, rates are instead guaranteed to a specific age. You can lock in your rate to age 90, 95, 100, or even 121 without locking up your money to build a “cash value”.
We often find that rates for GUL policies are actually lower than those of 30-year term life policies for people aged 50-59.
To see more rates, or rates for a Female, please go our Rates By Age page.
We’re seeing that the best savings and smartest strategies are in buying a GUL at age 75 or older instead of a term life policy. For example, at age 75, you could buy a 15-year term life policy with a $500,000 death benefit for roughly $1,257.75. Or, you could lock in the same coverage up to age 100 with a GUL policy that would cost roughly $1,484.44.
What we really love about GUL policies, though, is that they do not carry the market risk of non-guaranteed universal life insurance.
Many people take a misstep in buying a non-guaranteed policy, only to find that their overfunded investment later performs poorly and drains the cash accumulation. A GUL does not build cash value; you only pay for the coverage you need and nothing more.
For those who want to learn more about the difference between the two, see our previous article, Non-Guaranteed vs. Guaranteed Universal Life Insurance.
Smaller death benefits between $50,000 and $100,000 are considered “final expense” policies and are generally available without a medical exam.
There are 2 key things to pay attention to when shopping for a Final Expense policy.
- Is the cost (“premium”) fixed, or does it increase as you age?
- Is it a lifetime policy, or does coverage end at a specified age?
When buying a final expense policy, most people want an affordable fixed rate with coverage guaranteed for life.
Ideally, the older you get, the more “self-insured” you become. When you retire, the goal is to have paid off all of your debts so you can leave a legacy to your family. Term laddering (also called term layering or term staggering) is a strategy where you stack two or more term life insurance policies to cover debts that will diminish over time (such as your mortgage). Try our term laddering calculator to see if this might work for you.
In the same vein as term laddering, you might even consider buying a term life policy and a GUL policy if you will still carry a sizable need for coverage into your 80s or 90s.
Robert is 53 and the sole breadwinner for his household. Robert’s mortgage is paid off, but he needs to insure his income until his planned retirement age of 67, when his pension is fully vested.
If Robert were to die tomorrow, his wife would need $1,500 per month for day-to-day expenses. He also does not want her to have to sell their house if he and his income were gone.
His wife would need this money until she is able to access Robert’s retirement money in 14 years. For those 14 years, she would need $252,000 total to pay for living expenses (including the mortgage).
We recommended that Robert purchase a 15-year term policy with a $250,000 death benefit to ensure that his income would be replaced for his wife if he passed away before he retired. In addition to Robert’s need to insure his income until retirement age, he also wanted to leave an inheritance for his two daughters. For that separate need, we recommend that Robert purchase a guaranteed universal life policy to age 100.
Robert is now insured for a total of $350,000 of coverage until he is 68, when he will begin collecting his pension, and about 1 year before his term policy expires. Once Robert begins receiving his pension, he will cancel his term life insurance (with no fees or penalties) but keep his guaranteed universal life policy. This way, he is able to make sure that $100,000 will be left behind for his daughters when he dies.
Your cost of coverage will depend primarily on your health. Over age 50, you should be getting regular checkups. We highly recommend taking a medical exam for life insurance, because if you’re in good health, you can get extremely favorable rates even over age 50.
It is possible to get a non-medical policy (meaning you don’t have to take a medical exam), but the rates will be higher. Also keep in mind that age 65 is the cutoff for non-medical life insurance. If you’re the type who doesn’t like to go to the doctor, understand that it will be difficult to get a fully underwritten life insurance policy.
The best way to ensure you get the best coverage at the best rate is to work with an independent agent who can shop multiple carriers as opposed to only being able to sell through the insurer they work for.
JRC has longstanding relationships with 40+ top-rated life insurance companies. Save yourself the hassle of calling multiple companies, and let us do the work for you! Call us today at 855-247-9555, or get a free life insurance quote online.