Life Insurance After 65: Term, Whole Life, and When Each Still Fits

An agent quotes you a new life policy at 68. The price is high, and you cannot tell if you need the thing at all. That is a common spot after 65. The need that made life insurance a must at 40 may be gone. Or a new need may have taken its place: a spouse who counts on your pension, a loan with years left, or final costs you want covered. Life insurance comes in two basic types, term and cash value. The National Association of Insurance Commissioners (NAIC) puts it that way, and the split still holds at 70. This guide shows what each type does, and which needs each one still fits after 65. Our Paying for Care section holds more guides on the policies sold to older buyers.

Term life: cover for a set span

Term life is the simple form. You pick a death benefit and a term. You pay premiums for that term. If you die in the term, the insurer pays your beneficiary. If you live past the term, the policy ends and pays nothing.

Because it pays only on death in the term and builds no cash value, term gives the most cover per premium dollar of any life policy. That is its strength. Its weakness shows up late in life. A new term policy at 70 costs far more than the same policy at 40, and the terms sold get shorter as age rises. A policy bought at 45 for 20 years can run out at 65, just when a new need shows up.

Renewal terms matter. Some term policies let you renew at the end of the term, at a price that jumps with age. Some let you switch to a whole life policy without new health questions, within a set window. If you hold a term policy now, read those two parts before the term runs out. The choice you want may expire before the policy does.

Whole life: cover that lasts, with cash value

Whole life is the best known cash value policy. The premium stays the same for life. The death benefit is set. Part of each premium builds cash value inside the policy. That cash grows over years. You can borrow against it, and a loan left unpaid at death cuts the benefit your family gets. You can also quit the policy and take the cash value, minus any fees the contract sets.

Other cash value types exist. Universal life lets you shift premiums and benefits within limits. Variable life ties the cash value to investment funds you pick, so the value can fall as well as rise. All of them cost more than term for the same death benefit in the early years. The extra cost buys two things: cover that does not end at a set age, and the cash build-up.

For final costs, insurers also sell small whole life policies built for that job. Our guide on final expense insurance vs a prepaid funeral (slot 12 in today's slate) shows how those small policies compare with paying a funeral home ahead of time.

Start with the need, not the policy

At 40, the main need is often income. If you die, your pay stops, and your family still needs years of support. At 70, that need is often smaller or gone. So name the need in front of you first. The needs that show up after 65 tend to be these:

If none of those needs is in front of you, you may not need a new policy at all. A salesman at your door is not a need.

• A debt with an end date. A mortgage or loan with, say, eight years left. If you die first, your spouse must still pay it. Term cover for those eight years fits that shape.
• A gap in a spouse's income. Your pension may drop or stop at your death. If your spouse needs support until their own benefit starts or until savings can take over, a short term can bridge the gap.
• Final costs. Funeral, burial, and last bills come due at any age. This need has no end date. A small whole life policy fits it, since it pays whenever death comes.
• A dependent with lifelong needs. A child or family member who will never be self-supporting needs cover that cannot run out. Whole life fits, often with legal advice on how the money should be held.
• A wish to leave a set sum. Some people want to leave the same amount to each child or to a cause. Whole life pays that sum whenever death comes.

What about a policy you already hold?

Many people over 65 hold an old policy. Before you drop it or swap it, slow down.

• Do not cancel a policy before any new policy is in force. A gap can leave you with no cover at all.
• If a new policy is pitched as a swap for your old one, that is called a replacement. State rules require forms for replacements, because a swap can cost you: new contest periods start, fees can apply, and cash value built over years can be lost. Ask what you give up, in writing.
• A whole life policy you have held for years may have cash value you can use. Ask the insurer for the current cash value and the cost to keep the policy as it is.
• If money is tight, ask about choices before you lapse: a smaller death benefit for lower premiums, or using cash value to pay premiums for a time. Each choice has trade-offs the insurer must state.
• Never let a policy lapse by missing a payment in error. Use the grace period, and call the insurer if a payment was missed.

Who pays for what

• You pay the premiums on any policy you buy or keep. Premiums for a new policy at an older age are set by your age and health at the time you buy.
• The insurer pays the death benefit to your beneficiary when you die, per the contract: in the term for term life, at any age for whole life.
• Medicare and Medicaid do not pay life insurance premiums, and they do not pay a death benefit.
• Private pay covers the rest of the picture: if there is no policy, final costs and debts fall to your estate and your family.

Sample situation

Frank is 69. He retired last year. His house has six years of payments left, and his wife, Joan, would have to make those payments alone if he died. An agent urges him to buy a large whole life policy. Frank does the math on the need first. The real risk has an end date: six years of house payments. A 10-year term policy with a benefit sized to the loan and a small cushion costs far less than the whole life quote, and it covers the span of the risk. Frank and Joan also hold a small whole life policy from years ago, with cash value built up. They keep it for final costs, since that need has no end date. Frank asks the agent to put both quotes in writing, checks the term policy's health questions, and buys the term cover. The whole life pitch was not a scam. It was just the wrong shape for the need in front of him.

Match the shape of the policy to the shape of the need

That is the whole method. A need with an end date points to term. A need with no end date points to whole life. A need that is gone points to no new policy at all. Write the need down in one line before you talk to any agent. Then make each quote answer that line. Our guide on annuities covers the sister product agents often pitch at the same kitchen table, so you can keep the two apart.