Senior citizens are an asset to the social culture. With their experience and knowledge worthy contribution in the society, the younger generation has a lot to perceive from them. However, when it comes to the insurance sector, their life proximity defines one high-risk factor for the insurance companies.
Well!
The normal human life expectancy is considered to be 70-80 years. In this case, the senior citizens above 60 years of age are believed to be at a risk of mortality.
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However, this doesn’t turn out the case with most of the people in modern times given to superior medical care advancement these days.
Therefore, various insurance companies have devised plans keeping in mind the requirements and risks associated with people who have crossed an age of 60 years. These plans have some reforms which are different from standard insurance policies because of high-risk factors associated with the senior citizens.
6 Risk Factors Associated with Seniors
Let Us Learn In Detail About These High-Risk Factors And Why They Are Associated With The Senior Citizens.
Age and Mortality
As we have already discussed above, the age expectancy of seniors is considered to be lesser than anyone else. Where in general there are people who survive beyond 65-75 years with ease, the insurance companies cannot afford to ignore the risk factors associated with age.
“I’ve observed that seniors represent a higher financial risk because their policies are more likely to pay out within a shorter timeframe. In fact, when looking at our recent claims data, I found that policies for clients over 65 had a 70% higher payout rate within the first five years compared to middle-aged adults,” says Gregory Rozdeba, CEO of Dundas Life.
They need to consider the fact that if anything happens to their candidate in the forthcoming span of time the insurance premiums may suffer a setback. Therefore, in a general, the insurance amount for the seniors is not very high. This reduces the term of their premiums as well.
Fewer Sources of Income
It is well known that once the people retire from their positions, they have to really plan their retirement survival. Where some of us plan the post-retirement life in a very functional way, there are others who completely invest all their money on their children- their education and upbringing. It leads them to become complete dependants for most of their expenses in old age.
In such cases, providing life insurance to senior citizens can be risky. If they do not have a constant source of income such as pension money or business funds etc, the senior citizens can serve as a critical financial risk to the firm.
Relying on redundant sources for income can make their own life unstable and miserable which may cause them to miss on the monthly premium payments. Due to this reason, most of the senior citizens’ premiums are small sized i.e. of a lesser amount.
“Along with the increasing longevity, there are increasing costs for health care as people age. This is more pronounced when studying the costs of long-term care and chronic illnesses,” explains Chris McDermott, Certified Life Care Planner at Intercoastal Consulting & Life Care Planning.
Chris says that many seniors do not accurately assess or estimate these costs. This can deplete savings and push greater reliance on insurance. Combined, longer life expectancy and costly care increase the complexity and the cost to insurers. It is not just about age. It is about techniques to mitigate health and financial risk by planning for the future.
High on dignity who do not seek help
A person who has earned throughout his or her life and has contributed wholeheartedly towards the well being of their children, it becomes difficult for them to ‘ask for’ help in their old age especially financial favors.
They wish to maintain the position of ‘giver’ or ‘provider’ in the family instead of being a burden to their children.
Understanding the human nature aspects, the insurance companies believe that senior citizens find it hard to ask for financial support from their children for buying a well worth insurance plan for themselves.
For this reason, burial and funeral plans which are most commonly bought by senior citizens cannot be risked to be priced or promised too high.
Threatening health condition
When we go to the parks or health clubs, we notice that maximum crowd of people who workout in natural surroundings is that of the senior citizens. This is because as people age, they start understanding the threats of deteriorating health conditions.
Unhealthy lifestyle during young age and onset of various medical conditions leads them to work out towards better health. However, a falling health condition is definitely a risky venture for an insurance company.
Seniors are considered to be on the verge of health problems as the age advances. Even though they may be fit at the time of buying life insurance, age can take over any of us at any point in time.
Considering the threat from various diseases that find it easy to shelter in weak and ailing human bodies, there is a high-risk factor associated with the senior citizens.
Lori Leonard, Chief Medical Officer of Mindset & Body Reset says, “I’ve seen firsthand how chronic conditions like diabetes and heart disease become more common with age, making them riskier to insure.”
She also adds, “Last month, I had a 72-year-old patient whose multiple health conditions made it really tough for him to find affordable coverage, which is pretty typical of what I see in my practice.”
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Lots of paperwork
When it comes to senior citizens, the insurance companies need to allocate dedicated resources and team for resolving their queries.
These people need to be trained to deal with all the difficulties and doubts associated with senior citizen sections. This causes high operational costing to the companies.
Secondly, while dealing with the senior citizen’s paperwork is often more because many of their ‘documented proofs’ tend to expire with the time that needs to be renewed such as driving license, passport, debit/credit cards etc.
The companies tend to invest a higher amount of resources and funds to the section where returns are relatively lower. This risk factor is often one of the reasons that insurance plans for seniors are comparatively expensive.
Pending debts
In many cases, it has been found that senior citizens tend to accumulate a lot of bills, debts or loans over a period of time.
There can be some due to personal responsibilities, health conditions or may be investment funding loans but once the debt accumulates, it becomes a part of financial spending. Given to unstructured earning parameters of senior citizens these pending debts and the bills can be really difficult to pay for the people this age.
Therefore it raises the risk bar for insurance companies as it question marks the seniors’ ability to pay the premiums on time.
Conclusion
Senior citizens are considered high-risk candidates for life insurance policies because of certain reasons such as reduced life expectancy, financial incapability, and medical concerns.
However, there are insurance policies that are specifically designed keeping in mind the needs and the limitations associated with the senior citizens.
Keeping in mind the high-risk aspect these policies can be a little more expensive and with lesser term amount coverage.
However, these policies can mostly suffice the needs of senior people as these are designed on the basis of rigorous research done in this field.
