Are You Ever Too Old to Buy Life Insurance?

Buying life insurance is an important financial move for many people. A life insurance policy pays out a death benefit when the covered person passes, so surviving beneficiaries aren't left without funds in their bank accounts that they need to maintain their lifestyle.

Purchasing life insurance should ideally be done at a young age, as insurers price policies based on risk of death during the term of coverage. Obviously, the older someone is when they buy a life insurance policy, the greater the risk they'll die soon, so the higher premiums will be.

The big question, then, is whether someone can ever become too old to buy life insurance.

When do insurance companies cut off older people from buying coverage?

The first big thing consumers need to think about when deciding if they are too old to buy life insurance is whether they will be able to qualify to buy a policy. And when it comes to answering this question, a consumer should consider the difference between term and whole life insurance.

Term life insurance policies are usually the better option for most people. They remain in effect for a set period of time, such as 10, 20, or 30 years. If the policyholder doesn't die during the coverage term, the death benefit does not pay out. Whole life policies, on the other hand, provide coverage indefinitely as long as policyholders pay premiums, so the death benefit will always be paid out.

Term and whole life insurers usually have differing rules for when someone becomes too old to buy life insurance. Many companies do not allow the purchase of term life insurance after around age 65 or 70. Whole life insurers usually allow for coverage to be bought for longer -- often up to age 85 or even age 90.

Guaranteed issue life insurance

Since there usually is an upper age limit, it is possible to become too old to buy certain kinds of coverage. However, there is almost always some kind of life insurance available to buy. For example, guaranteed issue plans are typically targeted toward older people. These policies are available regardless of health status, but usually have low coverage limits, and there may be a waiting period before full coverage goes into effect.

For example, if a policyholder with a guaranteed issue policy dies during the first year of coverage, the insurer may pay out nothing or only a small percentage of the death benefit. The full death benefit may not be available for two years or so after the insurance is purchased. So, someone who is very old when they buy a policy takes a chance of not living long enough for the full death benefit to come to loved ones.

Before buying guaranteed issue life insurance, older Americans need to read the fine print carefully, make sure they know when the policy will pay out, and think seriously about whether premiums are worth the payout or whether they'd be better off saving the money they'd have spent on those premiums and leaving that cash to their families.

When do older people stop needing coverage?

Aside from whether seniors can buy coverage, it's also worth thinking about when they should. For many people, there comes a point when they are "self-insured." This can happen if there are no dependents relying on them for income or services and if they have plenty of money to pay for their funeral costs. If surviving loved ones wouldn't need a death benefit to cover burial expenses or maintain their standard of living, there's generally no reason to buy life insurance.

Ultimately, it's always best to buy a policy at a young age, but those who are older should consider these issues to make an informed choice about when or if they should buy coverage as seniors.