Life Insurance At 80: How Much Cover Is Enough?

Life insurance is a way of ensuring your family is financially taken care of when you die. While many 80-year-olds don't need life insurance as they don't have children or dependents, you may still want to consider it to cover end-of-life expenses, pay off any remaining debt, and leave behind a financial gift for loved ones.

Funeral expenses

The average cost of a funeral varies depending on location and the type of funeral. In the US, the average traditional funeral costs $8,000–$12,000 for a traditional funeral. In the UK, the average funeral costs £9,658, or £4,141 for a basic funeral. Cremations are generally cheaper than burials, with the average cost of a cremation funeral in the UK being £3,795, compared to £5,077 for a burial.

When considering funeral expenses, it's important to factor in the various costs associated with the funeral. These can include funeral director fees, coffin, limousine, cremation or burial fees, minister or celebrant fees, professional fees for administering the deceased's estate, and optional extras such as flowers, order of service, memorial, and catering.

To cover funeral expenses, individuals may consider life insurance policies specifically designed for seniors over 80, such as final expense insurance, which can help cover funeral costs, medical bills, and other end-of-life expenses. These policies typically have lower death benefits but higher premiums per dollar of coverage. Alternatively, individuals can set aside money in a savings account to cover these costs.

Burial costs

When it comes to burial costs, there are a few options for life insurance for 80-year-olds. The first is final expense insurance, also known as burial or funeral insurance. This is a small whole life insurance policy that helps cover funeral costs, medical bills, and other end-of-life expenses. The death benefit is typically small, ranging from $5,000 to $25,000, but the premiums are lower. For example, an 80-year-old man can expect to pay around $197 per month for $10,000 in final expense coverage, while an 80-year-old woman would pay around $158 per month for the same coverage. This type of policy is generally easy to qualify for, as it usually does not require a medical exam, only a short application with a few health questions.

Another option is guaranteed issue life insurance, which also does not require a medical exam and has low premiums, but offers even smaller death benefits, typically ranging from $2,000 to $25,000.

Traditional whole life insurance policies have larger death benefits, but are more expensive and often require a medical exam for those over 80. Universal life insurance is another permanent option, but it is also costly and difficult to qualify for, as a medical exam is typically required.

When considering burial costs, it is important to keep in mind that the average cost of a funeral with a viewing, burial, and vault is $9,995, according to the National Funeral Directors Association. However, this cost can vary depending on location and specific arrangements.

In summary, when it comes to burial costs for 80-year-olds, final expense insurance is often the best option due to its affordability, ease of qualification, and sufficient death benefit to cover funeral and end-of-life expenses.

End-of-life costs

When it comes to end-of-life costs, there are a few key considerations to keep in mind. Firstly, it's important to distinguish between essential and non-essential expenses. Essential expenses typically include medical bills, funeral costs, and burial or cremation expenses. On the other hand, non-essential expenses might include things like leaving a financial gift for loved ones or paying off any remaining debt.

Medical Costs

Medical costs can vary widely depending on the type of care required and the length of time the individual is in need of care. For example, inpatient hospital care tends to be more expensive than hospice or palliative care. Additionally, the use of intensive procedures and futile treatment in the ICU can drive up medical costs significantly. According to a study by Aldridge and Kelley, end-of-life care for Medicare beneficiaries accounted for 13% of total Medicare spending in 2014. This percentage has been reported to be even higher by other sources, reaching up to 25%.

Funeral and Burial Costs

The average cost of a funeral with a viewing, burial, and vault for the casket is $9,995 in the United States, according to the National Funeral Directors Association. This cost can vary depending on the specific arrangements and services chosen. For example, final expense insurance, also known as burial or funeral insurance, can help cover these costs and is often a more affordable option for seniors over 80.

Debt and Financial Gifts

When planning for end-of-life expenses, it's important to consider all potential costs and have a comprehensive plan in place. This might include life insurance, savings, or investments to cover these expenses. By preparing in advance, individuals can ensure that their end-of-life costs are covered and that their loved ones are not burdened financially.

Outstanding debt

If you're 80 years old, you may not need life insurance, especially if you don't have children or other dependents. However, if you have outstanding debt, you may want to consider getting life insurance to cover these costs so that your loved ones aren't burdened by them.

The amount of life insurance you need depends on your unique financial situation. You can calculate this by adding up the costs of your end-of-life expenses, any debt you wish to pay off, and any extra money you want to leave for your family.

For example, if you have $15,000 left on your mortgage, want to leave $10,000 each for your two children, and estimate your end-of-life expenses to be $10,000, you would need $45,000 in life insurance coverage.

It's important to note that not all life insurance policies are the same. Term life insurance covers a fixed length of time, while whole life insurance is a permanent policy that pays out upon the policyholder's death, with no expiration date. At 80 years old, you may find it challenging to obtain term life insurance, but whole life insurance is still an option.

When deciding how much life insurance to purchase, carefully consider your financial obligations and outstanding debt to ensure your loved ones are provided for according to your wishes.

Financial gifts for loved ones

Cash

Giving cash is one of the most flexible financial gifts, as the recipient can use the funds in the way that will benefit them the most. In 2024, you can gift an individual up to $18,000 per year without incurring a federal gift tax liability. This amount typically increases annually based on inflation.

Contribute to a 529 Plan or Education Savings Account

By opening or contributing to a 529 plan or Coverdell education savings account, you can help a loved one save for higher education expenses. These accounts are specifically designed for educational expenses and offer tax advantages. Additionally, leftover funds in a 529 plan can be used to boost the beneficiary's retirement savings in a Roth IRA if certain conditions are met.

Pay Off Student Debt

Student loan debt can be a significant burden for many individuals. Helping your loved one pay off their student debt is a generous gift that can provide financial relief and positively impact their future.

Pay Medical Expenses

Medical bills can be financially challenging, especially after a significant health event. Paying some or all of your loved one's medical expenses can help alleviate their financial stress during a difficult time.

Earmark Funds for a Roth IRA

A Roth IRA is an individual retirement account that allows tax-free contributions and withdrawals. Gifting cash to your loved one to fund their Roth IRA can encourage them to save for retirement and build their retirement savings.

Stocks, Bonds, and Mutual Funds

Gifting stocks, bonds, or mutual funds can be a thoughtful way to introduce your loved one to investing and financial planning. These gifts can provide the opportunity for long-term growth and potential returns. However, it's important to consider the tax implications of gifting stocks, as there may be tax costs for both the giver and the recipient.

Help with a Home Down Payment

Assisting with a down payment for a loved one's home purchase can accelerate their path to homeownership. The gift tax exclusion applies to this type of gift, so amounts within the limits will be tax-free for both the giver and the recipient.

Purchase a Life Insurance Policy

A life insurance policy can provide financial security for your loved ones in the event of your death. You can name a friend or family member as the beneficiary, who will receive the death benefit. Alternatively, you can purchase a cash-value permanent life insurance policy in their name, giving them access to the policy's cash value account, which grows tax-free.

Create a Custodial Account

Opening a custodial account for a child in your life is a smart way to teach them about saving and investing. These accounts are typically set up and administered by an adult for a minor and can hold various assets or financial instruments.

Make a Charitable Donation in Their Name

Donating to a cause or charitable organization that is important to your loved one is a meaningful way to express your appreciation while supporting their passions and values.

Give the Gift of Financial Advice

Helping your loved ones gain access to financial advice or a financial plan can be a valuable gift. It can provide them with personalized guidance to better understand their finances and work towards their financial goals.

Frequently asked questions