Over 50s Life Insurance Tips

People are living longer than ever nowadays, and this has changed the insurance industry. It is not surprising that policies which wouldn't have made sense for people in their 50s, say 40 years ago, might actually suit a 55-year-old person today, who on average has a good shot at living well into their 80s or beyond. If you find yourself about to enter 50s or even if you are already there, you may be wondering about life insurance for the first time in your life, or you may have already outlived a term policy that you took out in your 20s or 30s. Either way, a little knowledge as to what life insurance might best suit you now, and what to watch out for, might be in order.

Term life insurance rates are almost always lower than whole life rates for similar coverage. That's because if you live longer than the term of your policy, the insurance company will not pay you anything in exchange for all the years that you faithfully paid your premiums. You are statistically very likely to outlive your policy, especially if you buy it in your 20s or 30s. Whole life guarantees a payout to your beneficiaries (or back to you when you reach the age of 90 or 100, and it is this guarantee that has you paying so much more. Either way, there are pros and cons with term and whole life, but what are the implications of choosing one or the other form of life insurance when you are in your 50s?

Since a person in their 50s is less likely to outlive a 20- or 30- year policy, naturally a term policy bought by someone at that age will cost more. The fact is that the difference between monthly premiums for term and whole life narrows after the age of about 50, and it also becomes more difficult to even find term life for a person at that age or older.

At the same time, a stipulation with whole life is that this 'guaranteed' death benefit is not at all guaranteed if you miss premium payments. Remember that we ar talking about decades in your life when your income will most likely be declining, so that this is not something to be taken lightly.

So the choice between going with term life insurance or whole life in your 50s is not at all straightforward, and here are some additional things to consider:

A major reason that people opt for whole life policies is the so-called cash value that usually underlies the policy. This cash value accrues interest and goes toward the death benefit paid out when you pass away. Depending on the fine print in your policy, you can usually borrow against the cash value, or even take it as a lump sum if you want to terminate your policy early. The problem is that whole life policies offered to people over 50 may not have this cash value amount at all.

But before you lean towards term life, consider: you buy a 20-30 year term policy in your 50s, and the good news is that you are still alive at the end of the policy life. The bad news is that you will have paid into the policy for decades and now have nothing to show for it. Might all that premium money have been better put into conservative investments whose value at the end of the policy might very well exceed the death benefit?

Now, you can find term policies that have a provision to extend them, return your premium to you as a (tax-free) lump sum, or even convert them into whole life policies at the conclusion of the term, but obviously these features will add to the policy's cost.

A final point I should make against whole life policies is that they are notorious for having various fees that eat into your cash value, and for a lot of experts this fact as much as anything else leaves them recommending term life policies over whole life.

Read your policy carefully because often with an over 50s policy, if you die two years or less after taking out the policy there might be a reduced payout, or no payout at all.

One more thing. Be aware that the amount allocated in the policy toward burial expenses will by no means necessarily cover those expenses in their entirety.

In this article my aim was to generally outline some of the things to keep in mind if you want to take out a life insurance policy when you are in your 50s, or older. Just remember that learning about this subject will put real money in your pocket if you make the right decision.