We have all seen the commercials touting final expense life insurance for just “a couple of dollars a day”. The emotional appeal of the commercials is strong. We all want to ensure we have funds set aside for funeral expenses when we die. None of us wants to be a burden on our loved ones. Are these final expense products a scam? Are there better options, such as guaranteed universal life insurance?
This article will look at why someone in their 70s would purchase a guaranteed universal life policy. How does it compare to term, whole life, or final expense policies. If you are age 70 or older, this article will bring clarity to a confusing topic and help you make an informed decision.
Guaranteed Universal Life – What is actually Guaranteed?
You might have searched for life insurance that is guaranteed. In other words, you want to apply for a policy and know that an approval is guaranteed. There are some policies that have almost no medical underwriting and are “guaranteed issue”. However, it’s important to know that the easier it is to qualify for coverage, the higher the premium. Additionally, the available face amounts get smaller along with the higher premiums.
Although the “guaranteed” part of guaranteed universal life (GUL) insurance doesn’t refer to guaranteed approval, there are some GUL policies that are Simplified Issue. In other words, no medical exam is required and the underwriting process is simplified and expedited.
So, what does the guaranteed part of GUL refer to?
- The guarantee means the premiums are guaranteed to stay level. Unlike some other types of universal life insurance, where premiums can fluctuate based on non-guaranteed fees and interest rates, GUL is fully guaranteed.
- The death benefit is guaranteed. As long as you pay the premiums, the policy will stay in force. Sometimes, GUL is referred to as Term for Life, No-lapse UL, or term to age 100. Several GUL carriers guarantee to pay regardless of when you die – even past age 120.
For more in depth information on GUL, please read one of our many articles on GUL such as Pros and Cons of Guaranteed Universal Life.
Why Consider Life Insurance in your 70s?
There are many reasons why someone age 70 or older would consider purchasing life insurance. Sure, you would pay lower premiums if you purchased a policy several years ago. However, life has a way of throwing us curveballs and change-ups…so we have to adjust. Below are some reasons why you might want to purchase a policy:
Realization that you are under-insured.
Perhaps a term policy lapsed or your financial situation changed. Some people retire and realize that they lost their employer-sponsored life insurance. Conversion options for group life policies can be cost prohibitive. For whatever reason, you might look at your situation and determine you simply need additional coverage.
Earmark a policy to cover final expenses.
Even though you might have retirement funds that could cover final expenses (funeral costs), you may prefer to have these expenses covered through a life insurance policy. Typically, the face amounts for final expense policies range from $5000 to $25,000. There are some GUL policies that have face amounts as low as $25,000. Often times, these policies are more cost-effective than a whole-life final expense policy. We explain more below in the section on Whole Life.
Leave a legacy – tax free
Sometimes, life insurance isn’t about crunching numbers, but it has more to do with taking care of loved ones. If you are in a position to provide a tax-free death benefit to your spouse, children, or grandchildren, then this could be an excellent choice. Receiving an inheritance can make a huge impact on your loved ones. Life insurance supersedes a will. So, if you want to designate beneficiaries, it’s a very simple and straightforward way to ensure your children or grandchildren receive what you desire.
Long-term care riders on life policies.
More and more people opt for hybrid life/long-term care policies instead of traditional long-term care insurance. In 2009, there were 72,736 policies sold. In 2013 (the most recent stats available as of September 2017), there were 305,068 policies sold. For more statistics on long-term care insurance, please check out this Morningstar article.
Many GUL policies have benefits for long-term care insurance or chronic/critical illness. These benefits and riders can help mitigate costs associated with long-term care.
Estate planning if your net worth is high
If the value of your estate exceeds the federal estate tax exemption, then the IRS will collect taxes before anything goes to your children. Life insurance for the purpose of avoiding the estate tax can be a very smart move. While we are not attorneys, we consult with estate tax experts on a regular basis. We often receive referrals from attorneys and financial advisors who look to an independent agency for the lowest-cost life insurance policies. They want what is best for their clients and realize their limitations.
Whole Life / Final Expense Compared to GUL
In general, whole life policies are more expensive than GUL policies for two reasons.
- Whole life policies are designed to generate cash-value, so this increases the premium.
- Most whole life policies, especially for people in their 70s, don’t have stringent underwriting guidelines. If you have a serious health condition, you could be better off with a whole life / final expense policy. We can help you determine the best type of policy based on your health and overall situation.
If you are in good health, then you will save a lot of money by forgoing the “quick and easy” method of buying life insurance. Yes, you will need an exam and the process can take a few weeks, but the savings can be as much as 50%. If you’re not sure whether you would qualify for Standard or Preferred rates through a fully underwritten policy, the call us for a free risk assessment. We have an in-house medical underwriter that can help us determine which types of plans would be most suitable and cost-effective for you.
Term Insurance versus GUL for someone in their 70s
If you have a very specific short-term need, then term insurance can make more sense. Let’s take a 70-year old male who wants coverage for just 10 years. Perhaps he is still working or wants to ensure debt is paid off. If this 70 year old is in good health and qualifies for the preferred rate, then a 10-year term would run only $103 to $108 per month. By comparison, a GUL guaranteed to age 100 would run $265 per month.
However, if a 70 year old wants a 20-year term (to age 90), there only a few carriers that offer coverage. Let’s compare that option to GUL:
- 20-year term: $209/month
- GUL to 100: $265/month
In this situation, it would make more sense to buy a GUL. If you buy a 20-year term at age 70, and live to age 91, then there is no coverage. You might want to run some quotes and compare term options to GUL options. Check out the numbers and then call us for advice.
How to Select a GUL Policy
As mentioned above, you can simply shop the market. Use our quoting tool on this page to check out the rates for your age and health. When using the quoting tool, please select “lifetime” in the drop down box.
Speak to an advisor. There could be some strategies you may overlook. For example, some people do better with a single-pay or limited-pay GUL. Premiums can be significantly lower if you are willing to make an initial lump-sum payment.
Ask for a customized quote!
This is important because several of the top guaranteed universal life plans do not appear on any comparison quoting tools (including ours). We know all the top carriers and can provide a customized quotes with these carriers. We use three of the best quote engines and can run customized quotes based on your unique needs.
Some GULs will terminate at age 100, so if you live past 100, you have no coverage. Other carriers provide a “lifetime” benefit, so even if you live to age 130, they will pay!
Guaranteed Universal Life Insurance for People in their 70s – Conclusion.
Hopefully, you have found this article informative. If you’re in your 70s and considering a life insurance policy, then you have some special people in your life. It means you are unselfish and giving! Really! While plenty of people would rather spend money on themselves, you want to take care of your loved ones.
Most people want to be smart with their money, especially when purchasing life insurance. If you can save a substantial amount of premium by shopping wisely, then it leaves more money to you and your family. We will be glad to listen to you and then provide feedback, advice and quotes, so you can make a good decision regarding life insurance. Please call us anytime.