The prevailing wisdom has always been that term insurance is a financial product suitable for those who are in the beginning or middle stages of their careers. As one grows older and closer to retirement, the need for a term insurance policy diminishes. Most insurers also focus on customers between the age of 30 and 50 when it comes to educating about and selling term insurance.
Offerings for seniors
However, insurers are recognizing the need to provide seniors with customized products. These term insurance products are for those between the age of 50 and 85. Insurers understand that although it is important to start engaging with young customers, products can also be tailed for an older audience which may even have a robust investible surplus to pay for premiums.
Why would seniors purchase term insurance?
Liabilities or debt
There could be pending debt or liabilities that an individual may need to pay off and wouldn’t want the burden to be on the shoulders of dependents in the event that the individual passes away. One’s dependents may also have some loans to be settled. In either of these cases, a term insurance policy would come in handy. This is because if the individual passes away during the term, the death benefit could help pay off all the loans.
Still working
One may be a senior citizen but still working. This could be either due to earn additional income to keep financial insecurity at bay or there could be dependents. In certain cases when the income of the individual makes up a significant contribution to his/her family’s income, then the unfortunate demise of such an individual could have a huge impact on the family’s financial well-being as well as future aspirations.
Kids are Dependent
One assumes that senior citizens would most probably have financially independent children. This may not always be the case. One scenario could be that the individual married late and therefore is a parent to a child who is still studying. Another scenario could be either due to personal or professional setbacks, the offspring of the individual is not earning any income and is therefore dependent on the parent for the near future. It is quite possible that the offspring has a child and therefore the individual has to also take care of the grandchild. Another situation could be that the senior is forced to work due to having a large family where in spite of other family members working, the income isn’t enough. Due to such circumstances, the parent would be forced to think about the well-being of his or her offspring.
Spouse is dependent
Life could land one in a situation where the only other person that matters is the spouse. Either there are no children or relatives or they have moved on. Or the individual and the spouse don’t wish to depend on their children or relatives. In such a case, if the working spouse passes away the dependent spouse will have to depend on a child or relative for a steady source of income. Instead, the working spouse could purchase a term insurance policy and include the spouse as a nominee.
Leave a legacy or inheritance
As one grows older, the need to bequeath a legacy or a healthy inheritance to children or grandchildren beckons. Sometimes, there may not be enough to bequeath or the number of prospective inheritors may be more than accounted for. In such a case, a term insurance policy could also become an instrument that enables one to pass on a robust financial inheritance.
Setting taxes or legal fees
If you have property to pass on to your dependents, the same might attract property taxes and legal fees if your dependents decide to sell it. These could be either short term or long term capital gain taxes. The death benefit which they would receive could help in paying off these taxes or even legal fees that might be incurred.
Things to look out for
There are a few important aspects to consider for seniors when they are buying term insurance:
Smoking and non-smoking
Term Cover is available for smokers till they turn 75. The premium that an older person will have to pay for term insurance would be higher if he is a smoker as compared to if he isn’t. Therefore the temptation to hide this fact might be strong. This may have an adverse impact if your insurer finds out later, especially when the claim has been filed. Therefore it is advisable to disclose that one is a smoker.
Make dependents aware about claim process
If the dependent is not financially savvy or isn’t literate, then the process of claiming death benefit could be a tedious one. The financial dependent could be made aware of the same by explaining all the steps in an easy to understand manner.
Conclusion
Purchasing term insurance at an older age includes high premiums, increased number of exclusions, pre-existing illnesses etc. Yet, if it makes sense to purchase term insurance for the well-being of one’s dependents, then one should go ahead and buy a term policy. However, nothing beats the advantage of buying term insurance when one is still young as premiums are cheap and the protection term is high.
