Life insurance is a financial product that protects your family from your financial debts when you die. The insurance policy pays a death benefit at your death to beneficiaries that you choose. While life insurance can be purchased at most ages in life, there are limits on how old you can be and still purchase life insurance.
Two broad types of life insurance are available. Term life insurance is life insurance that is temporary, which means that the policy renews either every year or after a set number of years. Permanent life insurance is the other type of life insurance. This type of insurance does not renew. Instead the policy is in force for your whole life as long as all premiums due are paid.
You may only purchase life insurance up to age 85, which is the age at which life insurance companies no longer sell life insurance to individuals. At age 85, you are considered uninsurable. However, you may keep a life insurance policy in force that is already purchased. For example, you may not purchase a policy after age 85, but a permanent life insurance policy remains in force beyond 85 if you live beyond that age.
Life insurance companies take the premiums you pay and invest them to pay future benefits. However, after a certain age, life insurance companies can't recover the cost of the premium you pay. Since this would not be a sustainable business practice, insurers simply deny coverage to individuals beyond a certain age.
The disadvantage to the age limit cutoff is that you can't buy life insurance when you might need it the most. One function of life insurance is to pay funeral and burial costs. Unless you have sufficient savings to cover these costs, your family will need a way to pay for your final expenses. If your life insurance policy lapses or terminates after age 85, you won't have the ability to leave the necessary funds for these costs to your family.
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- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007