Available options for aging consumers

Feb 07, 2012

The aging population can still benefit from life insurance coverage.

Data from an online insurance quote provider showed an increase in searches for the keyword "life cover for over 50," suggesting more aging consumers are researching life insurance to protect their assets and loved ones from financial burden. Because an older population has less time to pay for a life insurance policy, many aging consumers prefer to purchase a term policy that provides full coverage for a specific period of time.

In fact, the aging population is quite large, with one American turning 50 every eight seconds. Currently, there are more than 35 million Americans over the age of 65, and that number is set to increase significantly in the near future as the baby boomers reach retirement age. There were approximately 77 million babies born between 1946 and 1964, and these consumers will need financial protection as they enter their golden years, Life Health Pro reported.

The number of seniors in the United States is increasing faster than younger populations, which in turn is raising the median age of the nation from 35.3 reported in 2000 to 37.2 in 2010. Seven states have even reported median ages of 40 or older, U.S. Census data shows.

While baby boomers have experienced significant innovation so far in their lifetime, they still suffer many impairments. The source reported about one third of baby boomers are obese and 36 percent are overweight. A LiveStrong-Associated Press report found only half of baby boomers exercise regularly, and 37 percent do not practice strength training exercises, which can aid in muscle and bone retention later in life.

Thus, as the baby boomers are aging they are becoming riskier clients for life insurance providers. Therefore, many providers have developed innovative and comprehensive risk analysis to gain deeper insight into each consumer, while considering more than traditional impairments when making their decision. These new evaluations take many factors into account including current lifestyle and activities, past health patterns and medical history. Providers can then offer better underwriting terms and more competitive premiums to the aging population, the source reported.

Further, many life insurance providers are conducting research to gain a better understanding of how specific impairments of clients relate to each other. This research aims to help providers identify which impairments should be red flags, which are not a problem and how combinations of impairments can affect overall health and coverage, the source reported.

For example, research from Genworth Financial is considering the history of an applicant's impairments combined with knowledge about lifestyle choices to better determine if a consumer is a high risk for the provider. Looking at the inter-relationship of conditions is key to the research. One applicant may have osteoarthritis, asthma and heart disease. Asthma and heart disease can be related to morbidity from a cardiovascular perspective, but osteoarthritis may not affect an applicant's survival. Therefore, using precise analysis to separate these factors, companies are able to breakdown each applicant more efficiently, the source reported.

The Genworth research is also evaluating the natural history of diseases and impairments. If an applicant has had asthma for 70 years and has developed chronic obstructive pulmonary disease late in life, this could be a sign of a healthy applicant. However, if COPD is developed after 20 years of asthma, the applicant might be a higher risk, as the disease seems to be evolving faster in their body, the source reported.

Many insurance providers are taking a multi-disciplinary approach when working with older applicants. The healthcare field is identifying diseases earlier, and making strides to transform once debilitating or deadly conditions into treatable symptoms. Therefore, life insurance providers must consider more than medical problems, but also look at early signs of frailty. While an 80-year-old man is likely to experience multiple impairments, but he could be quite robust and prove to be a long-term survivor, the source reported.

Underwriters are using a variety of tools to assess each applicant including phone interviews to examine factors such as cognition, orientation and ability to perform daily living tasks. Other cognitive factors such as recall and decision making are evaluated as well, the source reported.

To cater to the aging population, life insurance providers and financial institutions are offering more options for seniors looking for additional income. In an interview with North Carolina news provider WNCN, financial coach Pete D'Arruda said there are many alternative sources of income for seniors if their pensions or retirement income is altered, including moderate risk Master Limited Partnerships or Real Estate Investment Trusts, both available with income streams.

According to Investing Answers, a Master Limited Partnership is a publicly traded limited partnership that operates in the natural resource, financial services and real estate industries. These options combine the tax advantages of a partnership with the liquidity options of a publicly traded stock.

Investopedia defines a Real Estate Investment Trust as a security that sells like a stock and invests in real estate directly through properties or mortgages. These offerings receive special tax considerations and offer high yields to investors, as well as a high liquidity.

Annuities also offer a low risk option for seniors in need of retirement income. In addition, universal life insurance coverage can be a valuable asset. D'Arruda said a consumer can over-fund the cash value of a life insurance policy, which can accumulate in a tax-deferred basis. As the money grows, it can be accessed by the policyholder as a source of income during a person's golden years, the source reported.

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