Senior life insurance is an important consideration for those entering or already in their retirement years. Your financial obligations may have changed since but having cover in place allows you to avoid passing on any financial burden to those you love most.
Life cover offers a financial safety net to ensure that in the event of your death any final expenses or debt you may have remaining is taken care of.
What types of life insurance are available to seniors?
Life cover. Your nominated beneficiaries receive a lump-sum payment upon your death, which means that your loved ones will be financially secure when you are no longer around to provide for or take care of them.
Maximum age of entry:
Can range from 64 – 79
Total Permanent Disability (TPD) cover. A lump sum benefit in the event of permanent or partial disablement and can be used for everyday costs of living with a disability. Definition of disablement may vary between insurers, so it is essential to determine when a benefit will be paid. This cover can be purchased as a standalone cover or bundled with the life cover policy.
Maximum age of entry:
Trauma insurance. Also known as critical illness insurance. Provides a lump sum benefit if you suffer a medical condition such as cancer or a heart attack, and other serious conditions more common with older age. This cover can be purchased as a standalone cover or bundled with the life cover policy.
Maximum age of entry:
Funeral insurance. While the benefits of a life insurance policy can be used for various purposes other than paying for the funeral expenses, the payout from funeral insurance is usually used for covering the costs associated with a funeral. Most policies allow applicants to take out between $1,000 and $30,000 in cover.
Maximum age of entry:
Typically 70 (although some specialised providers may have a higher entry age.
Income protection. With an expiry age of 65, income cover is only relevant for applicants below this age bracket. Income protection insurance provides a lump sum benefit of up to 75% of your income.
Maximum age of entry:
Typically 60 (although some specialised providers will offer a higher entry age)
Am I eligible for life insurance?
The maximum age that seniors can apply for cover really depends on the type of policy that you choose, which may vary between providers but generally, the following rules apply.
Life Insurance. Maximum entry age of 75 with an expiry age of 100.
Income Protection. Maximum entry age of 60 with an expiry age of 65.
Trauma Insurance. Maximum entry age of 64 with an expiry age of 70.
TPD Insurance. Maximum entry age of 64 with an expiry age of 70.
Funeral Insurance. Maximum entry age of 70 years.
What factors influence the cost of a premium?
Life insurance premiums are calculated based on different risk factors a person is exposed to. An insurer uses the criteria below to determine the premium payable.
Age. With most types of insurance, the older you are, the higher your premiums will be. When you apply for cover in your senior years, you can expect the premiums you pay to be more expensive compared to people that apply for cover when they are younger. This is due to age-related health risks.
Gender. Men typically pay more in premiums than women because statistics show men have a lower life expectancy.
Smoking status. If you are a smoker you usually have to pay two to three times more in premiums than a non-smoker. To be assessed as a non smoker for insurance purposes you need to have ceased smoking for 12 months.
Medical history. A standard risk means you are in generally good health and can qualify for a lower premium, even if you have minor health issues such as high blood pressure or high cholesterol. However, if you have a number of pre-existing health conditions, your premiums may be higher.
Family medical history. Your insurer may ask details of any medical conditions of your immediate family members, which may include heart disease, cancers, diabetes, mental health disorders etc.
Pastimes. Insurers may ask if you are involved in any hobbies or pastimes that can increase the likelihood of a claim.
Occupation. If you’re still employed, the nature of your occupation may also lead to an increase in premiums, if your insurer deems it to be higher risk.
Is it possible to find cheap life insurance as a senior?
Life insurance gets more expensive the older you get. However, some key steps to finding affordable cover include:
Take the time to research what cover is suitable for your needs
Determine an adequate level of cover based on your existing financial obligations
Take steps to improve your health. Giving up smoking may lead to a reduction in premiums in the future
Look out for special offers and discounts offered by the insurer to cut your premium
Consider how your premium is structured and pay to reduce the overall amount
Receive assistance from an insurance consultant to help you find and compare different policy options
Is my pre-existing medical condition covered?
While some life insurers won’t cover pre-existing medical conditions (especially for seniors) there are some exceptions. These are a few standard ways insurers may assess your condition:
Provide you with cover, but exclude the pre-existing medical condition
Provide you with cover with restrictions on the condition e.g. a partial benefit
Provide you with cover for an additional premium
‘Fully underwritten’ – Why it’s important
Be on the lookout for a policy that offers ‘fully underwritten’ cover, which means you’ll know upfront if you are covered or not and what the next steps are. Most policies you get through an adviser will be fully underwritten.
What expenses can life insurance cover?
The benefit payment from a seniors’ life insurance may be used for a number of remaining expenses. This may include:
Any outstanding mortgage and smaller personal debts, e.g. credit card debt
Financial planning benefit to be used by your partner
On-going living costs of your family
Creation of instant estate
A legacy to pass on to family members or charity
Cover from a Trauma or TPD benefit may be used for:
Modifications to your home. As you get older or you suffer an illness or injury, you may need to install ramps or safety features to aid your mobility, and these modifications and additions can be costly work, carried out by qualified tradespeople.
In-home assistance. You may also need to cover the costs to have someone visit you regularly in your home for health and personal reasons, or you may need to employ someone full time.
Ongoing medical needs. If you suffer an illness or injury, there are often ongoing costs associated with these treatments which can be costly.
Nursing home. If you are unable to stay in your home, you may need to move to a nursing home, which often requires a buy-in amount, and ongoing expenses.
What should you look for in a seniors life insurance policy?
Some key features to consider when looking at seniors life insurance plans include:
Premium freeze. The insured may select to pay the same premium they paid the previous year by reducing the sum-insured before the policy anniversary date.
Benefit indexation. The sum insured on your policy automatically increases each year to ensure your cover keeps pace with inflation.
Guaranteed future insurability. Enables you to increase the level of cover on your policy without undertaking another round of medical underwriting.
Interim cover. Provides complimentary interim life cover while the application is being assessed by insurer.
Funeral advancement benefit. The insurer makes an advanced payment (usually to a maximum of about $20,000) to your nominated beneficiary to assist with funeral expenses.
Financial planning benefit. The insurer provides an advance payment to cover any legal or estate planning costs.
Benefits and drawbacks of life insurance for seniors
Taking out life cover can seem like just another thing to organise, when all you want to do is relax and enjoy planning your retirement. However, there are some essential benefits and limitations you should consider when looking at seniors life insurance:
Benefits of life insurance
Protect your savings. If you’re still working, you don’t want to let an injury or illness force you into early retirement, which would mean you’d have to start living off your retirement savings earlier than expected. Having an adequate amount of cover would protect you in this eventuality.
Cover your final expenses. Your funeral has probably never been at the top of your savings goals. Seniors life insurance can pay out a benefit for funeral and burial expenses.
Drawbacks of life insurance
The cost. If you are just now taking out life insurance as a senior citizen, your premiums will be quite high, which can be prohibitively expensive if you’re on a fixed income.
Cover has an expiry date. Your policy could be due to expire soon depending on your age. Always check the expiry of your cover.
Pre-existing medical conditions excluded. Pre-existing conditions are typically excluded by most policies, and come with a higher premium or include heavy restrictions.
Life insurance at the later stages in life
Considered the prime of your life, with a lot of professional and life experience under your belt. Many people start looking towards retirement in their 50s, but it’s essential to remember there’s a good chance you’re still only halfway through a long and full life. This might be the right time to really focus on powering towards your savings and retirement goals, as the more you can put away now, the more you’ll have later. The right life insurance can help keep you on target, even if things go wrong.
Pay off your debts for your family if you pass away.
Help with your partner’s ongoing expenses.
Deliver income protection, so you can stay on track for savings goals even if you temporarily can’t work.
When you’re over 65 you’re officially a senior. You’re older, wiser and probably feeling the physical aches and pains that come with age by now. Unfortunately, these growing health issues will likely start taking up increasing amounts of your time, attention and money. It’s time to start considering how to actively use your KiwiSaver and life insurance, as you move away from a constant income and towards savings.
Your need for income protection. If you’re not working anymore, you may not need income protection.
Income protection expiry. Many income protection policies expire at the age of 65 or 70.
Increased premiums. At age 65+, your insurance premiums may start climbing rapidly. You may want to consider the costs and benefits, e.g. do you still need life insurance.
By now you’re either feeling the weight of years and your health is an increasing concern. You may want to consider estate planning in more detail. Many life and related insurance policies expire when you’re in your 70s. If you have been depending on benefits from these, or are expecting to rely on claims in the future then it’s wise to assess your existing cover and options.
Estate planning. Think about looking into estate planning.
Check the expiry age of your cover. Your life, trauma and income protection policies may have expired, or will be expiring soon.
Your TPD insurance policy might convert to modified TPD. This typically happens when you officially retire, and has a big impact on your level of cover.
Should you get funeral insurance?
Funeral insurance may be a good choice if you’re unable to apply for life insurance. Some essential tips to follow when applying for funeral insurance include:
Obtain quotes from multiple providers. Don’t get ripped off. Compare a number of quotes to ensure you’re getting the best deal.
Choose a policy backed by a reliable name. Make sure you do your research into the company before you buy your policy. Look for details such as the company’s history, awards, customer service and the claims process.
Compare the features and benefits of the policy. It’s essential to find out what events are covered. Read the product disclosure statement (PDS) to help you decide whether the funeral insurance plan is suitable for you or not.
Look for premium guarantees. Premium guarantees ensure you don’t get ripped off by making sure your premiums are capped when they reach the total sum you have insured.
Premium payment options. Find out whether your policy includes flexible repayment options.
Is funeral insurance a better choice for seniors?
In some cases, yes. With guaranteed acceptance usually offered to those under the age of 70, funeral insurance may be the only option for those that have been unsuccessful in taking out life cover in the past and don’t require a significant amount of cover. Most funeral insurance policies allow applicants to take out between $1,000 and $30,000 in cover.
Funeral insurance benefits
Simplified claims process. The benefit is paid quickly
Guaranteed acceptance usually provided to age 70
Increased benefits of up to three times the normal cover amount may be offered for death by accident after first 12 months
Funeral insurance drawbacks
A medical examination may be required
Premiums increase with age
If you live for 5-10 years longer than expected, you may end up paying more than the cost of the funeral in premiums
With most policies only covering accidental death in the first two years, death from a terminal illness may not be covered
As mentioned above one of the best things about funeral insurance for the older buyers is that you won’t be refused cover even up to age 70, no matter your health, lifestyle or gender and you can take out joint cover with your spouse. Some insurers offer seniors two choices, an age-based premium option or a fixed-premium option:
The age-based option is cost-effective earlier on, but as you age the premium cost automatically increases. The cost can become quite substantial as you get older, which you may find difficult to manage. Age-based premiums automatically increase each year to keep pace with inflation.
The fixed premium option is fixed at the time of taking out the cover and it always remains the same. It’s dearer than the age-based option initially but becomes cheaper in comparison, as the age-based option increases every year.
Tips to help you avoid life insurance scams
Make sure you use a reputable provider. A well-known, regulated insurance provider cannot take the risk of deceiving its valuable customers, so you have far greater security when you choose a company that is well-known, reputable and regulated.
Do your research. Take the time to research brands you are considering, which means looking at customer reviews, finding out more about the provider if you are not familiar with it, and even comparing different plans and providers so you boost your chances of getting a good deal.
Ask questions. If you have any questions or are uncertain about anything, make a list to ask the provider. From queries that you have about the plan itself to questions about the provider, its background, policies, and anything else you need clarification or peace of mind about.
Don’t rush into anything. Many seniors make the mistake of rushing into or feeling pressured into making a decision when it comes to life insurance cover. However, this can increase the chances of you making a costly mistake. Take some time to think about your choice before you make any commitment and if necessary seek advice from professionals.
Frequently asked questions
Even if you’re healthy, you’re not immune to accidents, and no one knows what the future has in store. Therefore, it is best to take out life insurance as early as possible, when you are less of a risk to the insurer, and your premiums will be lower.
Depending on your insurer, you can have extras such as accidental injury insurance, and total and permanent disability insurance, so you don’t have to die to receive a benefit payout.
Typically, any Kiwi resident who is aged between 50 and 70 can apply for a policy. In most cases you won’t need to have a blood test or a medical exam. Then, as long as you continue to pay your premiums on time, you are guaranteed to have your cover renewed each year.
You are normally covered no matter where you are in the world, as long as you remain a New Zealand citizen. However, make sure you check the PDS as there can be exceptions.
Some seniors policies may allow you to add your partner and your children to the policy.
A. Most policies have a fixed premium, so you won’t have to pay any more as you get older. Some may have a ‘premium waiver feature’, where you don’t have to pay any more premiums once you turn 90.
As Finder's insurance publisher, Alex Holderness aims to make confusing topics easy to understand. She's been published in Hospital Health, written for Australian Healthcare Week and is a contributing author for Google's Startup Grind. She has a keen passion for running and is currently studying for her General Insurance certification.
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