Your Existing Policy: The Type Matters
For many seniors, what happens to life insurance after you turn 85 is determined by a policy purchased years or even decades ago. The fundamental difference lies between term and permanent life insurance. Understanding which type you have is the first step in assessing your options and future coverage.
The Fate of Term Life Insurance
Term life insurance is designed for a specific period, such as 10, 20, or 30 years. It provides coverage for that term only and typically expires without value at the end of the period. By age 85, it's highly probable that any term life policy you owned has already expired. In some cases, a policy may have a provision for renewal, but this comes at an exponentially higher premium that is often unaffordable. Some term policies also offer a conversion rider, allowing the policyholder to convert to a permanent plan, but this option typically expires well before age 85.
The Longevity of Permanent Policies
If you own a permanent policy, such as whole life or universal life, the situation is different. These policies are designed to last for your entire lifetime, as long as premiums are paid. They also build cash value over time, which can be a valuable asset in your later years. The coverage of an existing whole life policy will remain in force past age 85, assuming the premiums are maintained. For a universal life policy, which offers more flexibility, the coverage will continue as long as the policy's cash value is sufficient to cover policy fees, or if you continue paying premiums. Some policyholders may even be able to stop paying premiums and let the cash value sustain the policy, though this should be reviewed carefully with a financial advisor to avoid the policy lapsing.
Seeking New Coverage After Age 85
Finding new life insurance after age 85 is significantly more challenging and expensive. While traditional policies like term and standard whole life are no longer available, there are still a few limited options for those who need or desire coverage.
Final Expense Insurance: A Realistic Path
The primary type of policy available for those over 85 is final expense insurance, often referred to as burial or funeral insurance. This is a type of whole life policy with a smaller death benefit, usually ranging from $5,000 to $25,000. It is specifically designed to cover end-of-life costs, including funeral arrangements, medical bills, and other outstanding debts. The underwriting process is simplified, meaning it requires answering a health questionnaire but no medical exam. This makes it more accessible for seniors with pre-existing health conditions.
The High Cost of Coverage
As your age increases, so does the risk for the insurance company. For this reason, final expense insurance premiums for individuals over 85 are considerably higher than for younger applicants. The premium costs are often the most significant factor when considering a new policy at this age, and it is crucial to ensure the payments are affordable and sustainable long-term.
Alternatives and Financial Planning at 85+
Not everyone requires or can afford a new life insurance policy. For many seniors, other financial strategies may better suit their needs for covering end-of-life expenses.
Leveraging Your Existing Cash Value
If you have an existing permanent policy, its accumulated cash value can be a valuable resource. You can take out a loan against the cash value, which is generally not taxable, or make a withdrawal. These funds can be used for any purpose, including covering final expenses. However, any outstanding loan balance or withdrawals will reduce the death benefit paid to your beneficiaries.
Pre-Planning Your Final Expenses
Many people choose to simply set aside funds in a dedicated savings account or establish a payable-on-death (POD) account to cover funeral costs. This approach avoids the high premiums of final expense insurance and allows full control over the funds. Another option is working with a funeral home to set up a pre-need funeral plan, where funds are set aside directly for those specific services.
A Comparison of Coverage Options at 85+
For clarity, the following table compares an existing permanent life policy with a new final expense policy for someone over 85.
| Feature | Existing Permanent Policy (Whole/Universal) | New Final Expense Policy |
|---|---|---|
| Coverage Type | Whole Life, Universal Life | Whole Life (Simplified or Graded Issue) |
| Application | Policy already in force | Requires new application |
| Underwriting | N/A (for existing policy) | Simplified health questionnaire |
| Medical Exam | Not required | Not required |
| Max Age | No limit as long as premiums are paid | Up to age 90, sometimes less |
| Premium Cost | Locked in at issue | Very high premium, often fixed |
| Cash Value | Continues to accumulate | Builds cash value, but may be limited |
| Death Benefit | Higher amounts possible | Smaller, lower death benefit (e.g., $5k-$25k) |
The Application Process for Final Expense
Unlike policies for younger individuals, applying for final expense coverage after age 85 is less about a rigorous medical exam and more about a health assessment. The process typically involves a phone call with a licensed agent who will ask a series of health questions. Based on the answers, you may be approved for a policy with an immediate death benefit or one with a graded benefit. A graded benefit means that if you pass away within the first two or three years, your beneficiaries may only receive a return of premiums plus interest. The full death benefit is only paid if you survive this period. For most seniors who are otherwise insurable, immediate benefit policies without a waiting period are available.
Conclusion: Informed Decisions for Peace of Mind
When considering what happens to life insurance after you turn 85, it's clear that a one-size-fits-all solution does not exist. Your path is defined by your current policy and your future financial needs. For those with existing permanent coverage, maintaining premiums is key. For those seeking new coverage, final expense insurance is a viable, albeit costly, option for covering end-of-life expenses. It is always wise to consult a financial advisor or a licensed insurance agent to review your unique circumstances and determine the best course of action for your long-term peace of mind. For more insights on navigating late-life finances, consult reliable resources like the National Institute on Aging.
