Navigating Life Insurance After Age 85
For many seniors, the decades after retirement bring a re-evaluation of financial needs. Life insurance, once a tool for long-term income replacement, often shifts its purpose towards covering final expenses and relieving loved ones of a potential financial burden. The landscape of available insurance products changes drastically for individuals over the age of 85, with traditional options becoming scarce and specialized policies taking their place.
Existing Term and Permanent Policies
If you already hold a life insurance policy, what happens at or after age 85 depends entirely on the type of coverage you have. This distinction is crucial for financial planning.
Term Life Insurance
Term life insurance is temporary coverage, designed to last for a specific period, such as 10, 20, or 30 years. These policies often have a maximum age limit for renewal, which for many insurers falls in the 80s. As you approach or pass 85, several scenarios could unfold:
- Expiration: Your policy reaches the end of its term and simply expires. Your coverage ceases, and you no longer have a life insurance policy in place.
- Automatic Conversion: Some policies have a conversion option, allowing you to convert your term policy into a permanent one. However, the deadline for this is often well before age 85, and if you've missed it, this is no longer an option.
- Yearly Renewals: A small number of insurers may offer a costly, year-by-year renewal option after the term expires, but premiums can increase dramatically with each passing year, making it financially unfeasible for most.
Permanent Life Insurance
Permanent policies, such as whole life or universal life, are designed to last a lifetime, assuming premiums are paid. These policies do not expire at a specific age like term policies.
- Policy Maturity: Some older whole life policies were designed to "mature" or pay out at age 100. Modern permanent policies are often designed to last until age 121 or beyond.
- Continuing Coverage: As long as you continue to pay your premiums, your whole or universal life policy remains active and the death benefit is guaranteed. The policy's cash value will also continue to grow.
- Using Cash Value: After 85, you might consider using the accumulated cash value within a permanent policy. You can take out loans against the cash value or surrender the policy entirely, although this would eliminate the death benefit.
Finding New Coverage After 85
For those without an existing permanent policy, finding a new life insurance plan after age 85 is possible but involves significant limitations. Traditional term and whole life products are generally no longer available. The market shifts towards specialized policies for end-of-life needs.
- Final Expense Insurance: This is the most common option for seniors over 85. Also known as burial or funeral insurance, these are small whole life policies with lower coverage amounts (typically up to $25,000 or $50,000). The purpose is to cover end-of-life costs such as funeral services, outstanding medical bills, and other small debts.
- Guaranteed Issue vs. Simplified Issue: Final expense policies come in two main flavors. Simplified issue requires a brief health questionnaire but no medical exam, often resulting in lower premiums and potentially immediate coverage. Guaranteed issue requires no health questions, making it an option for those in poor health, but it comes with a two-to-three-year graded death benefit waiting period and higher costs.
Comparing Insurance Options After Age 85
| Feature | Final Expense (Simplified Issue) | Final Expense (Guaranteed Issue) |
|---|---|---|
| Availability | Available to most seniors over 85 who can answer health questions. | Available to almost all applicants regardless of health. |
| Medical Exam | Not required. | Not required. |
| Health Questions | Yes, brief health questionnaire. | No health questions asked. |
| Approval | Quick, often within a day or two. | Guaranteed, no decline. |
| Waiting Period | Generally no waiting period; death benefit is immediate. | Graded death benefit; typically 2-3 year waiting period for full payout. |
| Premiums | Moderate to high, depending on health status. | Higher, reflecting the guaranteed acceptance. |
| Coverage Amounts | Typically up to $50,000. | Lower, usually up to $25,000. |
| Purpose | Funeral costs, medical bills, small debts. | Final expenses, burial, cremation. |
Practical Considerations and Alternatives
At this stage in life, evaluating the genuine need for life insurance is essential. Many people over 85 have paid off their major debts and have significant assets, reducing the need for income replacement insurance. The focus shifts to other methods of covering end-of-life costs.
Non-Insurance Options
- Pre-paid Funeral Arrangements: You can arrange and pre-pay for funeral services directly with a funeral home, locking in current prices and ensuring all details are handled. However, make sure the arrangements are transferable if you move.
- Savings Accounts or Trusts: Setting aside dedicated savings or establishing a Payable-on-Death (POD) bank account or a trust specifically for final expenses can be an effective alternative. This keeps the money liquid and separate from other assets.
- Life Settlements: For those with an existing permanent life insurance policy, a life settlement offers the option to sell the policy to a third party for a lump sum of cash. This amount is more than the cash surrender value but less than the death benefit. This option is complex and should be explored with a qualified financial advisor, as it has significant tax implications.
The Application Process for Seniors
For those over 85 seeking final expense insurance, the application process is generally simpler than with traditional life insurance. Many companies require applicants to speak with a licensed agent over the phone, rather than applying online. The agent will ask the required health questions and assist with the application. This is because specialized policies require careful communication to ensure the applicant fully understands the terms, particularly graded death benefits.
Conclusion
The question of what happens to life insurance after 85? has a complex answer that depends on your specific circumstances. For those with existing permanent policies, coverage typically continues as long as premiums are paid. For term policyholders, the policy may be nearing its end. Securing new coverage after 85 generally means looking at final expense policies designed for smaller death benefits and end-of-life costs. Considering the options carefully and discussing them with a financial professional or licensed agent is the best approach to ensuring your final wishes are financially protected. For more detailed information on different life insurance products, a reliable resource is the Life Insurance Information Institute.
