Life Insurance: Age Limits And What Comes After

Life insurance policies vary in their terms and conditions. Some policies expire after a certain period, while others are designed to cover you for your entire life. Permanent life insurance policies, for instance, are intended to provide lifelong coverage as long as the premiums are paid. However, some older policies may have a maturity age of 100, which means the policy expires and coverage ends when the insured person reaches that age. On the other hand, term life insurance policies are valid for a fixed term, such as 10, 20, or 30 years, and typically do not build cash value. Once the term ends, the policy expires, and there is no payout unless a return-of-premium feature was included. Age and health are crucial factors in determining eligibility and the cost of coverage, with premiums generally increasing with age.

Term life insurance policies

Term life insurance is often the least costly option, as it offers a death benefit for a restricted time and doesn't have a cash value component like permanent insurance. However, term life insurance premiums increase with age. Most term life insurance policies expire without paying a death benefit, which lowers the insurer's overall risk.

When a term life insurance policy expires, the policyholder will usually receive a notice, and the premiums will stop. If the policy included a return-of-premium feature, the policyholder would receive a check for the premiums paid during the term. Some term policies offer the option to renew on a year-by-year basis after the initial term expires, although this is usually more expensive due to age-related risk increases.

If the policyholder still requires coverage after the term expires, they can choose to convert their term policy into a permanent policy. This allows them to change their term policy into a permanent one without needing to go through underwriting again. However, conversion riders have an expiration date, and not all policies let you convert until the end of the term.

Term life insurance is ideal for people who want substantial coverage at a low cost. It is often a good option for young, healthy people with families who want to ensure their dependents are provided for in the event of their early death.

Permanent life insurance policies

There are several types of permanent life insurance policies:

Whole Life Insurance

Whole life insurance is a common type of permanent life insurance that offers fixed premiums and a guaranteed death benefit. It builds cash value in a secure account, and has regularly scheduled premiums to keep the policy active.

Universal Life Insurance

Universal life insurance offers flexible premiums and death benefits. The main difference between whole and universal life insurance is that premium payments can be adjusted over time. For example, you may be able to skip a payment if you need to pay for other large expenses, like college tuition or a mortgage. However, this may negatively impact the cash value of the plan and premiums could eventually increase over time.

Variable Universal Life Insurance

Variable universal life insurance has flexible premiums and a savings component, but more factors influence how the savings can grow. The savings portion, or cash value, grows based on the investment methods that you choose. There is usually a minimum and maximum growth rate allowed. More variables lead to more risk but can also lead to more reward.

Indexed Universal Life Insurance

Indexed universal life insurance is another type of universal life insurance where the cash value grows based on a chosen stock market index. If the chosen index is performing well, the account will grow. If not, some companies allow it to grow at a minimum rate.

The cost of permanent life insurance depends on various factors, including age, medical history, family size, and location. It is generally more expensive than term life insurance but provides lifelong coverage and a financial asset.

Final expense insurance

Life insurance policies can be broadly divided into two types: term life insurance and permanent life insurance. Term life insurance is valid for a specific period, typically ranging from 10 to 30 years. Permanent life insurance, on the other hand, is designed to offer lifelong protection.

The median cost of a funeral in the United States is $7,848, but funerals can cost much more, with the average cost of a funeral being around $8,000 to $10,000 or more. Final expense insurance can help with these end-of-life costs, with coverage amounts typically ranging from $2,000 to $50,000.

Probate and legal fees

Life insurance policies don't always expire at a certain age. It depends on the type of policy. Term life insurance policies are only valid for a specific period, typically 10 to 30 years, after which they expire. On the other hand, permanent life insurance policies are designed to provide coverage for the entirety of the policyholder's life, as long as premiums are paid. However, permanent policies can accrue cash value over time, and if you live long enough, the policy will "mature" and pay out its cash value, ending your coverage. Many policies today are set to mature at 121 years of age, though older policies may mature at 100.

Life insurance proceeds typically do not go through probate, which is the court process of wrapping up a deceased person's estate. This is because the proceeds are paid directly to the named beneficiaries. However, there are some exceptions where life insurance payouts may end up in probate:

• No beneficiaries are named.
• None of the named beneficiaries are alive.
• The named beneficiary is the policyholder's estate rather than a specific person.
• The policyholder gets divorced, and their ex-spouse remains the beneficiary.

If the life insurance payout goes through probate, the insurance company issues a cheque to the probate court, which deducts any probate and attorney fees before distributing the remaining balance according to the will or state laws if there is no will.

To avoid probate, it is essential to keep beneficiary designations up to date. Beneficiaries should be alive, over the age of 18, and updated after significant life events such as divorce, marriage, or the death of a loved one. Designating a contingent or alternate beneficiary can also help ensure the policy doesn't go through probate.

In addition to probate fees, there are legal fees associated with the probate process, such as attorney fees for estate planning and guidance on avoiding probate. These fees can vary depending on the complexity of the estate and the specific situation.

Medical bills

Whether or not your life insurance stops depends on the type of policy you have. Term life insurance provides coverage for a specific period, typically ranging from 10 to 30 years. Once the term ends, the policy usually ends without any action needed from the policyholder. If you have a permanent life insurance policy, on the other hand, your policy will remain in force as long as you continue to pay the premiums on time and in full.

Now, let's discuss how life insurance can help cover medical bills.

One of the main reasons individuals purchase life insurance, especially at an older age, is to cover end-of-life expenses, including medical bills. If the insured person had a lingering illness or spent time in the hospital before their death, there could be substantial medical expenses. These can include hospital stays, medications, treatments, and possibly hospice or palliative care.

By having life insurance, you can ensure that your loved ones aren't burdened by these unexpected costs during their time of grief. It is a way to show that you care about your family and do not want to add financial stress to their emotional burden.

Additionally, some policies may cover end-of-life expenses such as palliative care or hospice care, as well as potential costs for a caregiver or nursing home. These expenses can add up quickly, and life insurance can provide a much-needed safety net.

It is important to carefully review the terms of your life insurance policy to understand what specific medical expenses are covered. Understanding your policy's provisions will help you plan effectively and ensure that you have the necessary coverage to protect yourself and your loved ones.

Furthermore, if you are considering purchasing life insurance, be mindful that premiums increase with age, and certain policies may have an age cap, often at 100 years, after which the policy matures and the death benefit is paid out.

Frequently asked questions