Life Insurance for Seniors: Options and Advice for Retiring Physicians

Ahhh, the busy life of a physician! If you’re like many doctors, you spend more time in the office or catching up on paperwork than you do handling your personal affairs. So, things like the need for life insurance can sneak up on you. Before you know it, you’re staring down retirement and wondering what your options are now.

While the best time to get a life insurance policy is while you’re young, there’s never a wrong time. However, the advice and choices you have for handling your finances look a lot different, especially when it comes to investing in life insurance. We’ve broken down the basics of what you need to know about life insurance for senior physicians here.

Life Insurance Goals at Retirement

When you invest in life insurance policies early in life, it’s usually for one of three goals. You want to provide for your growing family if you pass away, covering things like student loans, mortgages, and college expenses. You want an asset that accrues cash value over time to help you reach your financial goals in retirement. Or, you’re looking for tax-efficient strategies to minimize your income tax liability.

Your goals may look similar as a senior, but retirement is just around the corner. Review this list of typical life insurance goals for physicians during your season in life. What’s most important to you? Those needs will guide you to the right type of life insurance coverage.

●       Leaving behind financial security for your loved ones

●       Covering any final expense costs, such as funeral and burial expenses and medical bills

●       Managing estate planning to reduce any tax burdens and ease the transfer of assets to your heirs without the need for probate

●       Paying off any outstanding debts

●       Establishing a legacy for future generations or donating to a charity

●       Maintaining your spouse’s quality of life and providing them with access to long-term care after you’re gone

These common goals may be met with the right life insurance policy. Once you know what you want your insurance to do, you can start shopping around.

Understanding Your Risk Score

Before we dive into the types of life insurance you may qualify for, let’s start with a caveat. Life insurance underwriters approve policies based on the applicant’s risk score. Your risk assessment includes factors such as:

●       Age

●       Gender

●       Medical and mental health history

●       Family health history

●       Lifestyle choices (career, hobbies, tobacco or alcohol use, etc.)

The lower your risk, the more likely you will get coverage approved. However, at this stage of your life, you may have received medical diagnoses that could exclude you from certain insurers or increase your premium payment. Cancer, cardiovascular disease, and poorly managed diabetes are examples. A high-risk score doesn’t mean you can’t get life insurance; it just may limit your options.

Types of Life Insurance for Seniors

Thanks to an increase in longevity, changes in life insurance regulations have shifted the maximum age you can be to take out a new policy. As long as you’re under 80-85 and in good health, you may qualify for any of the following types of life insurance.

Term Insurance

Designed to be a temporary protective policy with a start and end date, this coverage does not accrue cash value but is often easier to get approved for. Term insurance timeframes are usually in 10, 20, and 30-year increments. Because it does not accrue value, it is usually cheaper than permanent or whole-life policies, but there’s no guaranteed renewal if your policy expires and you’ve received an exclusionary medical diagnosis in the meantime.

Life Insurance Retirement Plans (LIRPs)

A long-term financial strategy, LIRPs/LIRP/life insurance retirement plans are permanent life insurance plans that offer a standard death benefit with tax advantages. Policyholders invest cash in this policy, where it accumulates cash value. It’s a wise option for physicians who need to minimize their tax obligations by investing part of their income. If you don’t need access to your cash immediately, a LIRP can help you meet your goals, withstanding market volatility and inflation and addressing the concern of cognitive decline and long-term care.

Whole Life Insurance

Whole-life policies accrue cash value over time and are available up to age 80 (in most cases). Some insurers don’t include an age limit on this type of insurance if you’re willing to pay a higher premium.

Final Expense Insurance

Solely designed to cover your burial and final expenses, this type of insurance is offered up to age 85. It won’t provide for your loved ones, but it will ensure they aren’t financially strained when paying for your funeral.

Guaranteed Issue Life Insurance

Concerned about your medical history? Guaranteed life insurance is a little more costly, but it comes with the advantage of letting you skip a medical exam. This coverage usually stops being offered around age 85.

Choose the Right Coverage Amount

The final part of deciding on life insurance as a senior physician is to know how much coverage is the sweet spot. Your financial advisor can assist you with this step, but in general, your death benefit should meet the goals of your insurance policy.

Start with making a list of your debts to ensure your family doesn’t have to pay them out of their pocket. Then, add on the average cost for final expenses and your preferred method of burial. Finally, consider your dependents’ ages and their standard of living. How much money would your family need to maintain that standard and pay for the major events you would have contributed to if you were still here, such as college, cars, and weddings?

The general rule of thumb is to have a death benefit that is between 7 and 10 times your yearly income. But, as a physician, your student loans, mortgages, and other debts could easily eat into that amount.

Working with a financial advisor helps you get a clear picture of your net worth (assets and liabilities) to choose a death benefit strategically. From there, the next step is finding an insurer willing to underwrite a policy for you with that amount or potentially to take out multiple policies to reach your goal.

Conclusion

Your ideal life insurance coverage includes a death benefit that provides for your family, meets your financial goals for them, and has a premium within your comfort zone. But as a senior, outside factors like your health and lifestyle play a role in what you’ll qualify for.

Be cautious of accepting the first type of insurance you’re offered, and evaluate the terms to see if they match your goals. Keep shopping around until you find coverage you can keep throughout your retirement years.