A life insurance policy is an agreement made by contract to an Insurance agency, where your heir(s) will be paid a sum of money if you die.
Most insurance companies usually cover term insurance, which is where the agreement will end after a pre-designated period of time.
With lives getting unpredictable and day by day increasing expenses on healthcare, people are compelled to invest into various kinds of health insurances.
In the U.S. numerous policies help people in settling medical expenses through private insurances, or programmers financially supported by the government.
What is a Life Insurance Policy?
A life insurance policy is an agreement between a person and an insurance company in which the insurance company agrees to pay a pre-determined amount of sum in the event that some mishap occurs to the person who has a life insurance policy.
There are also two types of life insurance policies you can choose from term life insurance and permanent life insurance. Term life insurance, as the name suggests, occurs for a limited period of time.
Nowadays, there are even options to buy online life insurances without hassle.
Why is Medicare not Always the Answer?
Sure, you can take a look at Medicare, basically the extra insurance you take in the health insurance category. The policies of medical care taken up originally were a great cover for a majority of the bills related to your healthcare but, often there were still gaps left to fill.
Medicare policies and plans provide the consumers with a far better estimate of pricing on their expenses.
Plans like copayments, deductibles, and coinsurance which is all placed within the old Medicare policies are further elaborated and financially predicted in Medicare. It also covers healthcare if by chance you need to travel to some other country than the United States.
However, they might not be your best bet when it comes to choosing the best life insurance for seniors.
For one, not everyone who applies for insurance will receive it, as these insurance companies take big risks and will evaluate each applicant’s liability critically.
If an applicant is deemed to be too big of a risk, they will not be accepted. This is where graded life insurance comes in.
What is Graded Benefit Life Insurance?
For people who are not able to obtain insurance through the normal means, and are in less than perfect health, this is the best solution. Whole Life Insurance is a permanent policy that will last forever, unlike those that expire over time, more here.
Though there are other forms of permanent insurance out there, what makes this stand out is the “graded” part of the equation. This means that as time passes, the premiums that you pay will not increase, but the benefits that you receive will get better.
Companies make this work by adding a limitation on the benefits received. Typically, it would be a 25% limit in the first two years, 50% in the third year, 75% in the fourth year, and 100% from the fifth year onwards.
As such, if you were to pass away within the first two years of the agreement, the beneficiary will receive only a small amount of the full value. This amount will total up to the amount paid until that moment as well as the interest accrued during that time.
However, once you pass the two-year mark, the beneficiary will receive the full value of the insurance. One other point to note is that if the person were to die of an accidental death, the beneficiary will receive the full value, even if it is within two years.
The reason insurance companies add this limitation is to reduce the risk that is put on them, thereby allowing them to accept a lot of applications and not having the need to critically examine every applicant who comes to them.
10 Reasons You Will Love a Grade Benefit Life Insurance
This type of insurance can be highly rewarding and here are 10 reasons why getting this type of insurance is beneficial for seniors:
1. Premiums Remain the Same
The problem with term insurance is that there are constant increments to the premium rates. These rates can increase the longer you use the insurance, and any additional health conditions will increase it as well.
Also, many of the life insurance options available cost much higher as you grow older, making it very unaffordable.
By having a steady premium, you will not have to worry about making the payments constantly on a fixed income as the premium rate will not change for as long as you live.
Even if you move away or you gain other more serious health problems, the rate will remain the same. Seniors will only have a very fixed income that they can work with, and this feature takes away that problem.
2. The Interest Rates are Great
Interest rates usually range from 7 to 10 percent which is a lot higher than what you would get at a bank. Some companies are known to give rates as high as 20% after the second year of use as well.
This makes it a worthwhile investment as you are able to get a much higher return on your money. Keeping the money in the bank will accrue your interest as well, but you will not receive the same benefits as offered by this plan.
3. Is Better for Seniors
The policy may look like the best option for everyone to get. However, because of how it is planned, the best candidates would be those who have a deteriorating medical condition that will worsen over time.
This is not focused on people who know they have a short time to live, but those who are able to determine that they will live in the foreseeable future.
This is also applicable if you have a medical condition that you know will incur high levels of cost in the future due to the high rates of the other insurance plans available.
Deteriorating health conditions may include and are not restricted to:
- Alzheimer’s Disease
- Parkinson’s Disease
- Heart Disease
Therefore, the best candidates would be those over the age of 50. This is usually the age that insurance companies will start advertising their package too.
4. The Required Age Helps
The price for this insurance is quoted in units, where the applicant will pay a specified amount per unit until they reach a fixed amount. This provides the user with the time that may be required to settle these amounts before they receive the benefits.
The prices of these units are determined by the age during which the insurance was purchased. Therefore, the older you are when you apply, the more the value of the unit will drop.
If you are close to your 70’s, then you will receive a smaller number of units which can amount to a mere few thousand dollars.
The benefit of this comes out the earlier you apply. Senior citizens, who want to purchase their insurance early, will face a lot more advantages through this policy.
5. No Examinations
In order to qualify for insurance, you will have to do a medical exam which can highlight a condition in you that could raise the rates much higher than you initially anticipated.
So, for people who have such problems and are not able to get insurance normally, this way would be more convenient as they can bypass the medical exam and get accepted into the insurance program.
6. Cash Value is Tax-Free
The cash component that comes along with this policy has a special feature. As the rates are accrued over time, the cash made is allowed to keep growing exponentially without being taxed.
This means that until the funds are withdrawn from the account, none of it will leave the account as taxes. Thus, you will save a lot of money in this way as if the value was taxed, the higher the amount of cash, the more the tax percentage will affect it.
The main reason for this policy to ensure that there is a suitable fund left behind for the beneficiaries or to cover the large amounts of debt remaining. The more that you are able to save, the better off you will be.
7. Liability is not an Issue
Even if you have some risk in your background that you are aware of, you can be eligible for this program. Other life insurance companies will usually never accept your application if the risk is simply too big.
Since this policy tends to overlook most of the factors that other companies check on, this makes it perfect for people in special or difficult circumstances to obtain life insurance for themselves and give them peace of mind.
Everyone needs some form of insurance, and this way, most people will not have to miss out on getting this important aspect into their life.
8. No Need to Worry About Unmarried or Young Children
In terms of seniors who have children or grandchildren who are still too young to take care of themselves alone, this plan is useful.
Knowing that you may have to leave them without anything is a massive motivator to get on this plan. It offers you the benefit of providing for them even after you have passed on.
9. Quick Coverage Process
Usually, the normal insurance plans can take many weeks for the company to organize and set up. That plus the medical exams can take a very long time to complete.
However, with this policy, you can bypass all of this and get your coverage sorted in a very short period of time.
10. Easy and Convenient
Most of the companies that offer this form of policy have their target market set at the older generation. Therefore, most of their services are tailored to match those needs.
A lot of these companies offer for the whole process to be completed through one quick phone call and that’s it.
There will be no need to go down their office or have an agent come to visit you occasionally to complete the process. This makes it a hassle-free experience and will be easier for the seniors to do themselves.
As we have discussed, the granted insurance plans have a lot of benefits that can definitely help those who are older.
However, it should be noted that this policy is typically targeted at those people who are unable to get normal insurance plans. This is an alternative to that problem and only acts as a solution for that.
The prices of the premium paid can be much higher compared to the usual plans but you will get a lot more reward as time progresses.
Most of the time, this type of policy is taken up as a last resort but if planned properly, the rewards can be reaped.
There are also instances where after you reach a certain age during the policy and it is still active, you can stop paying your premium as the cash value made will have matched the benefit value of the program.
So, if you are in it for the long haul, are unable to get insurance elsewhere or have a deteriorating medical condition, this form of insurance is the best solution for you.
Is Life Insurance a Good Investment?
Whether or not life insurance is good for you completely depends upon your situation. However, it is definitely a way to ensure that you protect your loved ones and your assets financially.
We have another article discussing the investment opportunities, read it here.
You can look at life insurance as an investment to protect all that you hold dear in life. Hiring a life insurance agent for this entirely up to you, but ultimately you will decide the best low-cost life insurance for you.
A graded life insurance, for instance, might just be what you are looking for as a senior.
Have you got yours yet?