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If you're about to turn 60, you may be reconsidering your life insurance policy. After all, with kids out of the house and less dependent on your income, your life insurance policy may no longer be needed to provide for them after you're gone.
If retirement savings, investments and Social Security are enough to provide for final expenses and your survivors who still rely on your income—you may not need life insurance in your 60s. In some situations, however, having life insurance after 60 makes sense.
Do You Need Life Insurance After 60?
Depending on your financial responsibilities and resources, life insurance may not be necessary after 60. Still, life insurance can be useful at any age. More than half (57%) of Americans ages 65 and up have life insurance, according to Annuity.org. Reasons to keep life insurance after 60 include the following.
Supporting Survivors
In addition to your spouse, you may support children still living at home or elderly parents who require care. Consider your dependents' future expenses, such as weddings or college tuition, too.
Paying Your Debts
Do you have an outstanding mortgage, car loan, student loan or credit card bills? When you die, outstanding debts are paid with your estate's assets, which reduces what your heirs receive. Because life insurance payouts go to your heirs, rather than to pay debts, insurance can ease their financial burden.
Replacing Income
If you still work, insurance can replace your income and any job-related benefits that end with your death. Employer-provided health insurance or 401(k) matching contributions can be worth $2,000 per month or more, the Insurance Information Institute estimates.
Do you and your spouse already get Social Security? Individuals receive benefits based on their pre-retirement incomes. The spouse with a smaller pre-retirement income gets an amount based on that income or equal to half of the other spouse's benefit, whichever is greater. The smaller retirement benefit ends when the spouse with the bigger benefit dies, however, which could reduce your spouse's income. Life insurance can make up the difference.
Your dependents may receive Social Security survivor's benefits, but how much they receive and when depends on a variety of factors; life insurance can make up gaps.
Covering End-of-Life Expenses
Funeral costs can easily run more than $10,000. And there may also be bills from nursing homes and medical treatment that remain after your death. On average, medical care in the last year of life costs $80,000, according to The Lancet. Depending on state laws and other factors, your estate or family may be responsible for medical bills your insurance doesn't cover.
Building an Estate
Do you have significant assets? Permanent life insurance can be part of your estate plan, helping you build cash value and leave tax-free money to heirs.
Paying for Potential Health Issues
Long-term care insurance pays for in-home or nursing care if you can't manage activities of daily living, such as dressing or bathing. Some life insurance policies include long-term care or offer it as a rider. There are also insurance riders that let you tap your death benefit in case of a serious or terminal illness, or disability riders that pay your premiums if you become disabled and can't work.
How Much Life Insurance Do You Need After 60?
When purchasing life insurance, consider:
- Your expenses
- Your outstanding debts
- Your current financial obligations and monthly household expenses
- Your family's future financial needs
- Your current income and the value of your employee benefits
- Your liquid after-tax assets, including retirement plans, savings, pensions, other life insurance policies and Social Security benefits
Subtracting assets from expenses gives you an idea of how much life insurance you need.
Options for Life Insurance in Your 60s
If you decide you don't need life insurance, you can cancel your policy or let the term run out. Otherwise, you can:
- Keep your current coverage. If your existing insurance policy is affordable, keep it in force. You may also choose to adjust your coverage to better suit your current needs.
- Renew an existing policy. Some term life insurance is renewable, meaning you can keep your coverage without a medical exam. Renewals are generally done in one-year increments, with premiums increasing annually.
- Convert an existing policy. If you have group term life insurance at work and are retiring, see if this coverage ends with your employment or if you can keep it or convert it to an individual policy.
- Purchase a new policy. Buy new term life insurance, and premiums stay the same throughout the term. Over age 60, shorter terms, such as five or 10 years, may be all you need.
- Get no-exam life insurance. Getting life insurance typically requires a medical exam. Depending on your health, you might not qualify or might pay higher rates. However, you can also buy no-exam life insurance, which comes in two formats.
- Simplified issue life insurance: With this type of coverage, the insurer asks questions about your health history and family history and reviews your medical records to see if you qualify. Maximum coverage generally ranges from $25,000 to $300,000.
- Guaranteed issue life insurance: You're guaranteed coverage, but you'll still have to answer some questions about your health. This type of coverage is pricey, though, and has significant limitations: Coverage maxes out at $25,000 and if you die within two or three years, and your beneficiaries receive only the premiums you've paid plus interest.
Cost of Life Insurance Over 60
Life insurance costs are determined based on:
Your Age
Insurance premiums rise with age. While a 35-year-old man can expect to pay $20.90 per month for $500,000 worth of coverage, a 65-year-old man would pay $256.92 (more than 12 times as much), according to data from Policygenius.
Your Gender
Because women generally live longer than men, their life insurance premiums are typically lower.
Your Health
Preexisting medical conditions, such as diabetes, high blood pressure or a history of cancer, can mean getting less coverage and paying more for it. In some cases, you may be denied coverage altogether. Insurers can't deny coverage based on a disability, but they can charge more if your disability is likely to cause health complications or reduce your lifespan. Your family medical history (such as a history of heart disease) might also mean higher premiums.
Your Coverage
Buying $1 million worth of life insurance costs more than purchasing $25,000 worth. Keep your premiums low by purchasing only the coverage you need.
Type of Policy
Term life insurance is the most affordable type of coverage; renewable and no-exam term policies cost more than standard policies. Permanent life insurance is more expensive than term life insurance; within the permanent life category, whole life insurance costs more than universal life. Insurance riders will also add to your costs.
Your Credit Score
In some states, insurance carriers check your credit-based insurance score when setting premiums. Good credit could net you a lower premium. Credit-based insurance scores use similar data as regular credit scores. Check your credit report and credit score before applying for life insurance and take steps to improve your credit if needed.
Term vs. Whole Life Insurance in Your 60s
You can choose from two primary kinds of life insurance: term and permanent.
- Term life insurance lasts for a specific term, typically 10 to 30 years; premiums remain the same throughout. Your beneficiaries receive a death benefit if you die with the policy in force. When the term ends, you can purchase a new policy or may be able to renew the policy or convert it to permanent life insurance.
- Permanent life insurance lasts your whole life or up to 99 years. As with term life insurance, premiums generally remain the same throughout your life. Unlike term life insurance, permanent life insurance builds cash value that earns interest. As the cash value increases, you can withdraw the cash, borrow against it, add it to the death benefit or use it to pay premiums. However, if you don't use the cash value before your death, it reverts to the insurance carrier.
Term life insurance is simpler and more affordable than permanent life insurance, which costs up to 15 times as much. However, permanent life insurance may work for high-net-worth individuals who've maxed out their other tax-advantaged investment options.
The Bottom Line
Life insurance can provide security at any age, but whether you need it after 60 depends on your situation. Assess your financial obligations, your resources and your family's needs to determine if life insurance is necessary. While you're at it, set up free credit monitoring with Experian. You'll get alerts to important changes in your credit that can affect your family's finances, providing even more peace of mind.