Most insurance companies will make it difficult for old people to access life insurance coverage. Due to old age, which is associated with bad health, no insurer will be interested in such people.
Thankfully, most insurance companies have now come up with life insurance plans that can be taken by the elderly. This article is going to discuss more on guaranteed universal life insurance for seniors.
What is Guaranteed Universal Life Insurance?
Guaranteed universal life insurance for seniors refers to a kind of whole life insurance policy that is given to old people between the ages of 50 to 85. This type of life insurance targets the old who would have difficulties accessing traditional life insurance plans due to their old age which is associated with poor health. The policy guarantees coverage to these people without requiring them to undertake medical examinations to ascertain the state of their health.
It is worth noting that with regards to the issuing life insurance for seniors, many insurance companies have very strict policies. This is especially true if the said individuals are not in good health.
As a matter of fact, insurance coverage may not be offered at all if the person needing coverage has serious health issues. This is the reason why many companies compel people to undergo medical tests before they can decide to offer coverage or not.
If you are in good health, you will be eligible for many life insurance policies with almost any insurance companies. The same cannot be said for individuals in bad health. For such people, universal life insurance for seniors may be their only option.
How Does It Work?
Like other types of life insurance policies, this type of policy coverage requires the insured to pay a certain amount of premiums each month in exchange for a death benefit in the event of death.
The insured can choose an age limit; for example, a 70 years old man can choose an age limit of 90. This means that the term of the policy will only cover the old man for 20 years and pay a death benefit if he dies within those 20 years.
For the duration of the term, the man is supposed to pay a fixed amount of money as premium payments. After the age of 90, he can opt for burial insurance.
An important thing to note is that the premiums to be charged will depend on the age limit set by the insured. Using the above example, the 70 years old man would pay less as premiums if he chose the age limit to be 80, as opposed to the 90 chosen. The reason for this being the fact that a longer policy life will most likely end up paying death benefits to the beneficiaries.
Who is NOT a Good Candidate for It?
One major selling point for this type of policy coverage is that it suits almost all people; regardless of health status or lifestyle.
However, certain conditions may make the policy coverage not suitable to some persons. What are some of these conditions? Below are some of them.
- Low on Budget: Guaranteed universal coverage for the elderly is a cheap way of getting life insurance coverage as compared to a whole life policy. However, a term life insurance policy is much cheaper than. If you are looking for the cheapest life coverage, a term life policy is a way to go but difficult to get for seniors.
- Late Payments of Premium: It very strict with regard to the payment of premiums. Late payment may result in cancellation of the policy. If your source of the premium is doubtable, you can lose the policy and lose the money paid as premiums. In such a case, it would be best to go for a policy that can accept late payment of premiums.
- Save money: If your intention is to use life insurance policies to save your money, universal life insurance may not be your best bet as it does not have a cash value. Such people would better take a whole life insurance policy coverage.
Advantages are Here
Universal life insurance has many advantages. Below are some of them.
- Acceptance is Guaranteed: Due to old age and the bad state of health, old people may not be eligible for the normal life insurance coverage. Such people are usually classified as uninsurable. However, acceptance is guaranteed here regardless of age and health condition.
- Premiums are fixed: As opposed to other life insurance policies, like modified life insurance, the premiums charged on this policy are fixed. This means the insured does not have to worry about paying more as premiums in the future.
- No Medical Tests: When seeking traditional policy, it is a requirement for people to take medical tests to ascertain the state of their health. Taking the tests may be a tedious process and could lead to denial of application if the person taking the test is found to have serious health problems. However, this policy has no such requirement. Coverage is given without any medical tests.
- Easy to Apply: The process involved in the application for this kind of coverage is easy and fast. Individuals may need to wait only for a few days to get everything in place.
- Death Benefit: With this kind of policy, a death benefit is guaranteed after the insured dies.
- Benefit Before Death: Some companies can pay a death benefit even before the insured dies. This happens when the insured is in critical health.
Universal life insurance is also associated with some disadvantages. Some of them are mentioned below.
- Limited Coverage: The amount of death benefit is small compared to other life insurance plans. The main reason is that most individuals die a few years after taking the coverage. This makes most insurance companies unwilling to give insurance coverage beyond a certain limit. In most cases, a company will not give more than $50,000.
- Expensive: Most of the people seeking coverage are old and deemed to be in a poor state of health. They are, therefore, required to pay large sums of money as premiums as the perceived risk of death is high. In some cases, the premiums paid will be higher than the death benefit awarded.
- Involves a 2 Years Waiting Period: Beneficiaries cannot make a death claim if the insured dies within two years after taking the policy. If death occurs before the two years are over, the insurance can only award beneficiaries with the amount that has been paid as premiums plus interest of 10%.
How to Pay Premiums?
After an individual has been offered a policy, he will have to agree with the insurance company how premiums are to be paid. The insured will have to decide whether to pay for premiums each month, after every three months or at the end of each year.
Most companies will advise their clients to set up an automatic payment system. In this case, your bank will have to pay premiums on your behalf on the stated dates. This is important to avoid being late in paying for premiums.
In the event that the insured forgets to pay for premiums for a certain period of time, the insurance company may cancel the insurance coverage. The insured will have to pay handsomely to have his insurance coverage reinstated. If at such a time, your health would have deteriorated, the insurance company may not agree to reinstate the coverage at all.
When taking any life insurance coverage, it is important to look at the cost. This will be compared with the expected benefit to be issued which will form the basis of whether to take the coverage or not.
It would be difficult to directly tell what the cost is. Different companies will have different rates. The rates charged will also depend on a number of factors.
Use our comparison tool to find out the right price for you in a few minutes.
The lifestyle of the insured will play an important role. Some lifestyle practices, like smoking, will increase the chances of death and would, therefore, demand more money to be paid as premiums.
Despite the fact that this type of policy guarantees coverage, health conditions will have to be considered. If the insured trusts that he is on good health, he can choose to undertake a medical exam which will have the effect of lowering the premium to be paid.
Similarly, the age of the insured and the length of the term taken will influence premium rates. For example, a 60 years old man taking the same policy with an 80 years old man would not be charged the same premium; the 90 years old would pay more.
What Happens When Term Expires & Insured is Alive?
As this article has discussed, guaranteed universal life insurance requires the insured to choose an age limit. Ideally, the insured should choose a limit that will guarantee death benefit; in these cases, an age that he cannot reach. However, in some circumstances, the insured will outlive the term specified in the policy.
In the event that this happens, the insurance company may choose to pay the death benefit to the insured. The problem with this is that the amount would be subjected to tax. This is because it will be deemed as matured benefits as opposed to death benefits paid after death and are not subjected to tax.
On the other hand, the insurance company may choose to end the policy contract and not pay any death benefits at all. To prevent this from happening, it would be best to look out for policies that feature an extension on maturity.
Under such extensions, when the policy matures, the insured will stop paying premiums but the death benefit will be paid to the family once the insured dies. The benefit paid in such a case will still qualify to be exempted from tax and would receive the death benefit in full from the insurance company.
Anyone Can Pay Premium
It is important to note that insurance companies do not care who as paying for premiums; as long as they are being paid, they have no problem. Most of the elderly people may not have the ability to pay for premiums.
In such cases, their children may come in and offer to pay for the premiums themselves. In any case, they are the ones who are going to receive the death benefit in case the insured dies.
As you have seen from this article, it is never too late for anyone to take life insurance. Through guaranteed universal life insurance for seniors is something that most elderly people can enjoy in their old age with the peace that they will leave something to their family or at least have some money to cover for their funeral expenses.