Feb 26th, 2012 | By Sharon Shaw Elrod MSW EdD | Category: Senior Finances

Term Life Insurance an Option for Seniors

Term life insurance may be a good option for some seniors, and AARP is offering one you might want to consider. The policy is underwritten and offered by New York Life Insurance Company, partnering with AARP. The email arrived last week, and here are the details:

  • policies are offered at the $10,000, $20,000 and $50,000 limits;
  • no health exam required; just have to answer three health questions;
  • no waiting period;
  • have to be a member of AARP, which endorses the plan;
  • premiums are based on gender and age;
  • the term of the policy ends at age 80;

Pros and Cons of Term Life Insurance

Indeed, the AARP offering may be a good one for many seniors.  Over two million people are already covered by one or another of the AARP Life Insurance policies.  You need to talk with your trusted financial adviser to be sure it meets your needs.  The advantages include no health exam and no waiting period.  Typically in term policies, if death occurs within the first two years, the benefit is limited to what you put into the policy.

The policies are also very affordable for seniors. For example, a woman between ages 50 and 54 has a beginning policy premium of $10.46 for a $10,000 policy, and between ages 70-74, only increases to $39.84.  If you are fairly certain, for health and family history reasons, your life span will not exceed age 80, this is a good life insurance plan to consider.

However, the major disadvantage is that term life insurance is term-limited. That is, it has a date when it self-destructs, and no longer exists.  That’s the nature of term life insurance.  The example cited here is age 80.  You can pay into the policy for several (many?) years, expecting to die before you reach 80 years of age.  If that doesn’t happen, and you live beyond 80 years, the policy just goes away and your money has been invested with absolutely no return.

The important caveat with the AARP Level Benefit Term Life plan is that you can exchange your policy for a permanent one prior to age 80 without a health exam. You need to be prepared to pay higher rates if you choose to do this.



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