If you watch television at all, you've probably seen commercials for life insurance for older adults. Whether you're enjoying a vibrant life in an assisted living community such as The Gardens at Barry Road already or you're considering such a move, you may wonder if life insurance is important for you and how it might impact your financial plans for long-term care.
Buying life insurance — or not — is a major financial decision that may require consultation with a financial advisor. What's right for you depends on a variety of factors, and only you can ultimately decide whether you should buy life insurance or not. But if you're starting to consider this for the first time (or the first time in a while), we've provided some basic information below to help you get started.
Term life insurance plans don't build cash value, so they're not considered assets or investments. When you see commercials targeted to senior audiences about life insurance, they're typically related to term life products.
Term life policies pay out a specific amount when the policy holder passes away. The amount is paid to the beneficiary, which is the person (or people) the policy holder chooses. You can choose to make your adult children, other relatives, close friends or even a charitable cause your beneficiary.
Some reasons people buy a term life insurance policy include:
• Covering the cost of final arrangements. A life insurance policy can help pay for funeral costs so that burden doesn’t fall on loved ones.
• Providing funds to settle estate debts. If you have outstanding debts, proceeds from a life insurance policy can cover them so that elements of your estate, such as property, doesn't have to be sold to pay them.
• Providing for living expenses for loved ones. This is a common consideration for those who still have dependents and want to ensure there's money to pay the bills and cover other costs.
• Leaving a legacy for loved ones. If you want to leave a legacy or help pay for your grandkid's future college tuition, a life insurance policy might help.
As you can see, you might not really need a term life insurance if you've planned ahead for some of these factors. If you've sold your home and paid off all your debts before moving into assisted living, you might not need life insurance to cover those obligations. That's even more true if you've preplanned and prepaid for your final arrangements and have a plan in place (such as a combination of medical and long-term care insurance and savings) to pay for any future medical expenses.
If all of that is true, you might forego the expense of a life insurance policy. Again, it's important to consider your individual financial situation and consult with experts if you aren't sure.
You can't typically buy a life insurance policy that will immediately help with paying for assisted living costs, and a term life insurance policy will never do so. However, if you already own life insurance as an investment, you may be able to convert it into a format that helps cover long-term care costs.
Whole life insurance policies gain cash value over time. Typically, you buy these initially at a younger age and pay into them over a period of 20 or more years. Once you reach a certain point, you have the option to cash out the whole life plan for whatever value is in it.
If you decide that you don't need life insurance as a death benefit, you might consider cashing out a whole life plan with a good amount of cash value and using that money to pay for assisted living or anything else during retirement, including travel or education. Depending on your plan, you may also be able to convert the cash value into a long-term care plan or annuity that pays out a certain amount each month to increase your income during retirement.
This is definitely a decision you want to consult a financial advisor or your insurance agent about. They can help you understand all your options and how to maximize the benefits from your insurance investment.
It's important to note that when buying life insurance as a senior, you may find your choices are a bit limited. That's because life insurance companies are making a small gamble with every policy they sell. They use factors such as age, health, gender and even where you live geographically to make a guess about their risk in selling you a plan. As an older adult, you may not be able to purchase plans with enormous payouts, for example, though it depends on your individual situation and how much you're willing to pay for your premiums.
If you're considering a life insurance plan, find a reputable agent or financial advisor in Kansas City who can help you find the best options for your needs.