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Choosing life insurance for seniors has considerations that go beyond the cost of a policy. You’ll want to have confidence in the financial strength of your life insurance company, and you should understand how well a company’s policy illustrations–examples of how a policy’s costs and benefits may develop over time—line up with their historical performance.
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We analyzed the best senior life insurance companies based on their cash value products using data provided by Veralytic, a leading publisher of pricing and performance research and competitiveness ratings for cash value life insurance products.
Why we picked it: AXA Equitable cash value products have excellent pricing stability. The policy illustrations are consistent with the company’s historical performance of invested assets.
Potential drawbacks: AXA Equitable’s ratings for financial strength and claims-paying ability are lower than other top competitors.
Why we picked it: Lincoln Financial has very good prices and policy illustrations that are consistent with the company’s historical performance.
Potential drawbacks: Access to cash value through policy loans or withdrawal may be limited in some of Lincoln Financial’s products. Some of the newer index universal life insurance products have significantly higher internal, or administrative, costs than other products.
Why we picked it: Pacific Life has very good pricing stability and better access to cash value compared to other insurers. The company has a track record of maintaining or reducing internal policy costs, which results in lower costs than other insurers.
Potential drawbacks: Pacific Life’s financial strength ratings have been historically lower than other top-rated competitors. Some of the newer indexed universal life insurance products have much higher internal policy costs compared to other products.
Why we picked it: Principal has excellent pricing stability and ranks highly for financial strength. The majority (96%) of the company’s cash value products have policy illustrations that are consistent with their historical performance.
Potential drawbacks: The company’s historical performance for invested assets has been lower than some top competitors. Internal policy costs are higher compared to other insurers we evaluated.
Why we picked it: Protective has excellent prices and very good pricing stability. Lower internal policy costs result in lower premiums and greater growth of cash value over time.
Potential drawbacks: Protective’s products have good access to cash value less than half (48%) the time, while the company’s claims-paying ability has been ranked in the top 10% less than half (45%) the time.
Why we picked it: Prudential combines very good cost competitiveness with excellent pricing stability. The policy illustrations are consistent with the company’s past performance for 95% of its cash value products.
Potential drawbacks: Only 56% of Prudential’s products have good access to cash value.
Why Do Seniors Need Life Insurance?
Seniors should consider buying life insurance for several reasons. These include:
Covering final expenses. These end-of-life expenses can include paying for your funeral or paying off debt that remains after you die.
Passing along wealth. With a life insurance policy, you may be able to provide an inheritance that supplements the assets you already own.
Leaving money to charity. You might want to purchase a life insurance policy whose proceeds will go to your favorite charity, such an animal shelter or an art museum.
Taking care of loved ones. Let’s say one of your grandchildren has a long-term disability that demands high-priced care or your spouse would struggle financially after you pass away. A life insurance payout could help ease their financial burden following your death.
Complementing other coverage. Perhaps you had life insurance through an employer, but now that you’re retired, this coverage might be insufficient or it might have ended when you left your job. A policy you buy on your own could help fill this gap.
What to Look for in a Senior Life Insurance Policy
When you’re shopping for life insurance, you should take your needs into account. Consider these three tips as you’re hunting for the right coverage:
1. Steer clear of a graded death benefit
Focus on policies that pay the full death benefit from the outset. In this case, you should look into traditional life insurance and stay away from “senior” policies whose death benefits are limited in the first few years.
2. Weigh term life vs. permanent life insurance
Term life and permanent life insurance policies offer their own advantages and come with very different price points.
Term life insurance pays benefits only if you die during the policy’s term, which typically is up to 30 years. It’s normally much less expensive than whole life coverage. Term life insurance can be a smart choice if you’re looking for a policy that provides a death benefit but doesn’t build cash value. It also can be a good option for someone who’s on a tight budget.
Permanent life insurance (also known as whole life insurance) pays benefits no matter when you die, but only if the policy remains in effect. It might be the best alternative if you’re seeking long-term protection and you’d like to accumulate cash value. When it comes to cash value, you might seek a policy that delivers what’s known as “early high cash value” on the front end of the policy. Some permanent life policies don’t offer cash value during the first two years.
3. Get professional guidance
Regardless of whether you settle on term life or permanent life insurance, be sure to work with a trusted financial advisor to help pick the coverage that best suits your needs.
We evaluated cash value life insurance products using data provided by Veralytic, an independent publisher of life insurance analytics.
Our scores were based on:
Pricing stability (35% of score) considers whether a company’s pricing—policy expenses, cost of insurance and illustrated earnings rate on cash value—appears to be reasonable and adequate, based on the company’s historical experience with pricing.
Cost competitiveness (35% of score) of internal policy charges and premiums. This includes fixed administration expenses, the cost of insurance and cash-value wrap fees.
Financial strength (10% of score) measures the insurer’s combined financial strength ratings from four leading ratings agencies.
Historical performance (10% of score) measures whether the historical performance of the company’s investments that underlie policy account values are better than similar products.
Access to cash value (10% of score) analyzes the liquidity of cash value and restrictions accessing the policy account. Generally, the higher the liquidity—particularly in the early policy years—the better. Some insurers, however, charge more for greater liquidity, so you need to see whether there’s a tradeoff.
John Egan is a freelance writer, editor and content marketing strategist in Austin, Texas. His work has been published by Experian, Bankrate, National Real Estate Investor, U.S. News & World Report, Urban Land magazine and other outlets.