How to Use Life Insurance Policy For Seniors Over 80

If you are over 80 and have a life insurance policy, you may wonder how you can make the most of your coverage.

Luckily, whether you want to access some of your cash value or add a life insurance rider, there are many ways you can make your policy work for you. Here are some ways to use life insurance for seniors over 80:

1. Use the cash value

Permanent life policies come with cash value, a growth component that can be used in a variety of ways. One option seniors have is withdrawing the cash value.

Withdrawals are tax-free if they remain below the amount you’ve paid into your policy. It is also money that you don’t have to pay back. But be mindful that the cash value will stop growing if you withdraw from it. 

If you want your cash value to keep growing, then another option you have is borrowing against the cash value. You can request a certain amount from your insurer, and the cash value will be used as collateral. This requires no credit checks or approval process.

It is important to note that the cash value has to reach a specific size before you can borrow against it. In general, the maximum amount policyholders can borrow is up to 90 per cent of the cash value. 

If you borrow against your cash value, be sure to pay the annual interest, or it will be added to the value of your outstanding loan. If you don’t pay back the full loan in your lifetime, the amount will be deducted from your death benefit when you pass away.

2. Get a life insurance rider

There are several life insurance riders that you might benefit from as a senior over 80.

An inflation rider, for instance, is an add-on that can help your policy keep up with inflation. With this rider, your death benefit will increase by a fixed percentage to lessen the effects of inflation and allow beneficiaries to receive a larger death benefit when you pass away.

Another life insurance rider seniors can choose to supplement a term life insurance policy is a return of premium rider. This rider ensures that if you outlive your policy, you’ll be refunded some or all the premiums you paid towards it, tax-free.

3. Take your dividends out

Some companies that offer life insurance for seniors provide dividends with their whole life insurance policies.

A dividend is a portion of the insurance company’s profits paid to policyholders. The dividend you may receive depends on the amount you’ve paid into the policy.

For example, a $100,000 policy offering a 3 per cent dividend will typically pay a policyholder $3,000 a year. You can request your dividends as a check, put it towards your premium, or purchase additional insurance.

4. Convert your policy to an annuity

When you convert your policy to an annuity, your policy will pay you a monthly amount for a set time period.

Example time periods could be 10 to 20 years or life plus a certain amount to your beneficiaries. It is a non-revocable option that’s recommended to only be used late in life.

Keep in mind that if you go this route, you’ll no longer have to pay premiums. If you want to convert your policy to an annuity, consult with a financial professional to discuss your options.

Summary of Life Insurance Policy for Seniors Over 80

There are several ways to make a life insurance policy for seniors over 80 work.

From using the cash value component and getting a life insurance rider to taking dividends out and converting your policy to an annuity, you can make your coverage better suited for your needs as you get older. Consider all of these options when you are deciding what to do with your life insurance policy.