Do People Over 65 Need Life Insurance? Since we see a lot of marketing for senior life these days, it makes us wonder if grandma or grandpa should be covered.
There is not one simple answer for everybody.
Here are some reasons why older people would want to be covered.
It is up to you to read them, and then decide if buying a policy would be a good decision for you or somebody you care for.
Final Expenses A lot of senior life is sold to cover burials, funerals, and debts.
These end of life costs are called final expenses.
While funerals can cost several thousand dollars in the US today, these are usually still considered smaller face value policies.
Many final expense policies are sold with death benefits from $2,500 to $25,000.
Because of the lower face value compared to a lot of other types of life insurance, they are kept more affordable.
They are also designed to be easier to issue to older people who may not be in perfect health.
Who needs a final expense policy? Funerals and burials average about $8,000 in the US.
If coming up with that much cash will be a burden to the family, a senior life policy may be an affordable way to plan for this.
If funeral arrangements have already been made, some older people just want a way to leave children or grandchildren some cash.
Estate Settlement One use of a life insurance policy is to make sure that an estate is distributed fairly.
Let us say a business owner has 3 children.
Only one of these children is being groomed to take over the business.
The business owner plans to leave the business to this child when he or she dies.
But he or she still wants to be fair to the other children.
In this case, the proceeds from life insurance can award the other two children with a cash settlement they have agreed to take instead of an ownership stake in the business.
This can smooth over a lot of future problems.
Another common example might be having one child who lives in the family home.
This grown child could inherit the house, but other children could be compensated with cash.
Business Owners or Key Man Policies Key man or business owners life insurance is used to help protect a company if an important (key) person in the company passes away.
It gives a business money to use to replace that person, or it makes up for the loss of that person.
Sometimes lenders may require a policy before they will provide financing to a company, especially when the owner is older.
They want to be assured that they will get their money back from the borrower.
If the borrower should pass away, they will take the death benefit from a life insurance policy.
Tax Advantages of Wealth Transfer Through Life Insurance Most of the time, life insurance benefits are not taxed.
The beneficiaries get to keep the whole amount without having to share with the IRS.
That is why many people choose to use a policy as a way for their kids to inherit money.