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MoneyWatch: Managing Your Money
By Joshua Rodriguez
Edited By Matt Richardson, Angelica Leicht
/ CBS News
Life insurance is usually something you buy earlier in life to protect your children, spouse or both if you die while they depend on your income. However, as a senior, your financial landscape has likely changed significantly. Chances are that your children don't depend on you financially anymore and your home is either paid off or close to it.
So, you're wondering if life insurance is even worth it anymore?
We talked to several experts to get their opinions. Spoiler alert. The answer is typically yes. Life insurance is worth the premiums, even for seniors.
Find out how affordable a life insurance plan can be now.
Is life insurance worth it for seniors?
Whether or not you need life insurance as a senior largely depends on what you plan to accomplish. "Life insurance can definitely be worth it for seniors," says Jordan Mangaliman, CEO of Goldline Financial Services in Fullerton, California. "However, it's important to understand every situation is different."
He went on to explain that "for seniors that have ample assets like real estate, retirement accounts, stocks, annuities etc., life insurance may not be necessary," with the caveat that "if seniors already have in-force life insurance, then it may be wise to keep it in force."
Mangaliman says, "ultimately, seniors are purchasing and keeping life insurance in-force as a part of their legacy to their beneficiaries. It serves as the most cost-efficient way to pay for estate taxes and ensure you're leaving your family with financial security when you pass instead of stress."
Life insurance can cover end-of-life expenses
End-of-life expenses can be costly, but you don't have to pass those costs on to your estate or those you love. A good reason for seniors to have life insurance is to cover final expenses, says Lori Gross, financial and investment advisor at Outlook Financial Center in Troy, Ohio. Insurance makes it so you're "not leaving that burden on a loved one."
Don't leave your loved one's with a bill. Get life insurance to cover end-of-life expenses today.
Life insurance can protect your estate
You can also use life insurance to protect your estate. An insurance policy can help in two ways:
- Pay off debt: You can use life insurance to pay off any outstanding debt. This will stop lenders from tapping into your estate before your heirs receive it.
- Taxes: Life insurance makes sense for "estate planning purposes," says Noah Damsky, CFA, Principal at Marina Wealth Advisors. But that's only if your "estate is in excess of the estate tax exemption." This is done by taking advantage of an irrevocable life insurance trust, which alleviates the tax burden associated with your death benefit.
Dan Casey, Investment Advisor Representative and Founder of Bridgeriver Advisors in Bloomfield, Hills, Michigan agrees.
"With the fact that life insurance has a tax-free death benefit, if a legacy for children is a top priority, even life insurance with high fees attributed to your age can still make sense when considering potentially higher taxes and inheritance complications introduced with the Secure Acts 1.0 and 2.0," Casey says.
Life insurance can protect your spouse
A meaningful life insurance policy becomes even more important when you have a spouse. "For the average person, the primary purpose of life insurance is to replace lost income," says Tyler Gray, CFP, Managing Director at SageOak Financial. "If someone depends on you for income and they would be negatively impacted by losing that income if you died, then there may be a need for life insurance, regardless of your age."
Erik Nero, CFP, Founder of First Step Wealth Planning agrees, especially if you have a life-only pension. He says that if you "choose a life-only pension, with no benefit to a surviving spouse," then life insurance can provide for your surviving spouse when you die.
Life insurance can help pay for your long-term care
Life insurance can be a means for accessing long-term care as well, or even be added to your long-term care benefit if you already have a policy to cover such expenses.
"Cash value life insurance, like universal life or whole life, could make sense especially as most carriers allow you to use the death benefit while you're alive if long-term care is needed," Casey says. Though, this coverage may not be automatic.
You may need to add a long-term care rider to your policy for this coverage as Gross points out. "Some policies have long-term care (LTC) riders attached to them, which will allow you to utilize a portion of the death benefit to offset your LTC costs, if you are not able to complete two of the six Activities of Daily Living (ADL)," she says.
The bottom line
Life insurance is a smart idea for most seniors. That's especially the case if you have a spouse, lack plans to cover end-of-life costs or don't have a long-term care insurance policy. The simple fact is that just about everyone has someone who loves them, depends on them or both. Life insurance gives seniors a way to protect those people, even when they're not here to do so themselves.
