Life insurance is crucial for financial planning, especially for seniors in Canada. For various reasons, Seniors Canadians feel the need of having a life insurance after age 60. This guide will help answer common questions and explain why life insurance can be a smart choice. It ensures your loved ones are financially secure, covering costs like funerals, outstanding debts, and leaving a legacy. You may face new financial challenges as you grow older, but life insurance gives you peace of mind because it ensures that your family will be cared for if something happens to you.
At Aarna Insurance, our advisor can guide you based on your need analysis, which option is best suited to you and your family.
Term life insurance provides coverage for a set period, such as 10, 15, or 20 years. Most insurance companies will not provide term insurance coverage past a specific age, often around age 75 or 80, simply because the risk of having to make a payout is too great. This means that they will stop issuing new policies at about age 65 or age 70, depending on the term of the policy. When insurance is provided to older ages, the premiums are very expensive.
For seniors around ages 65, 70, or even 75, the options are:
This type of term life insurance provides coverage for a specific period, often a year. The policy renews each year, and the premium is adjusted annually.
You pay a premium that can change every year based on your age and risk assessment of the insured. While the premium is generally lower in the earlier years, it increases as you get older.
This option can be beneficial if you need temporary coverage and want the ease of renewing your policy each year. Because the premiums increase with age, it can become quite expensive over time.
This type of term life insurance also provides coverage for a set period, but the premium remains the same throughout the term of the policy, such as 10 or 20 years.
You agree to a fixed premium that does not change during the term of the policy, even as you age. For example, if you purchase a 20 year term policy, you will pay the same premium for all 20 years.
This option offers predictable costs and is often more affordable than YRT policies, especially when you lock in the premium at a younger age. If you renew the policy after the term ends, you might pay a higher premium because of your increased age.
As you age, these premiums can become quite expensive.
Premiums for permanent insurance typically remain same over the lifetime of the life insured. In the early years of a permanent insurance policy, premiums are usually higher than those for a comparable amount of term life insurance. There are whole life insurance and Universal Life Insurance policies. Seniors typically avoid Universal Life insurance because it can be complex, and at this age, they prefer to avoid risk.
The excess amount paid for a permanent policy is used to build up a reserve that may help in future.
Whole Life L 100 Insurance (With Cash Surrender Value)
Whole Life L 100 is a type of permanent life insurance that provides coverage for your entire life. It includes a feature called a cash surrender value.
You pay premiums regularly, and over time, a portion of these payments builds up as a cash value within the policy. If you decide to cancel the policy before you pass away, you can receive this cash value as a lump sum.
The cash surrender value provides a savings component, which is useful if you need funds in the future. This value grows over time, and you can use it for various purposes, like taking out a loan against the policy or withdrawing cash.
Whole Life T 100 Insurance (Without Cash Surrender Value)
Whole Life T 100 is another type of permanent life insurance that covers you for your entire life but does not include a cash surrender value.
Similar to L 100, you pay regular premiums for lifetime coverage. Unlike L 100, there is no cash value accumulated within the policy. If you cancel the policy, you will not receive any money back.
This type of policy is often more affordable than those with a cash value component since you are not paying for the investment part. It is a simple option for those who only want the insurance coverage without the additional savings feature.
Why Consider No Medical Exam Life Insurance?
A simplified issue underwriting process makes use of a short application and instantly available evidence to quickly make an “accept” or “reject” decision, without any human underwriting or detailed medical underwriting. Simplified issue underwriting does not provide the for the possibility of preferred rates for those in good health, or rated policies for those with an increased risk of death due to their medical conditions. Premiums for these “no exam” policies tend to be higher than policies that are fully underwritten.
Simplified issue life insurance policies typically have higher maximum age limits, ranging from 75 to 85 years old, depending on the insurer. These policies are designed to accommodate older individuals and those with health issues, so they often allow applications from seniors up to a more advanced age than traditional policies.
Even before the COVID 19 pandemic, some insurance companies were moving towards accelerated underwriting for some applications, up to maximum ages and coverage amounts. This type of underwriting leverages technology, existing data, computer algorithms and artificial intelligence (AI) to assess applications. Insurers access data about the medical history of the applicant through the Medical Information Bureau (MIB), driving habits through motor vehicle records, credit history and any other available data. Algorithms combine all data points to quickly determine cost of coverage and if you are eligible.
Generally, the maximum age for these underwriting policies is around 60 to 70 years old. Some insurers may offer products up to age 75, but this can vary widely. The specific age limit often depends on the risk assessment criteria of the applicant and the amount of coverage sought. Higher coverage amounts may have lower maximum age limits.
This type of policy is designed for seniors who may have health conditions that make it difficult to qualify for other types of insurance. It offers lower coverage amounts at higher premiums. These policies are often used to cover final expenses, such as funeral costs, and usually offer death benefits ranging from $5,000 to $50,000.
Your health and lifestyle significantly influence your insurance options and premiums. Some policies cater specifically to seniors with preexisting conditions, while others offer discounts for healthy lifestyle choices.
Determine what you want to achieve with your life insurance policy. Whether it is leaving an inheritance, covering debts, or ensuring your funeral expenses are paid, understanding your goals will help you select the right type of coverage.
Assess your budget to understand how much you can afford to pay in premiums. It is essential to find a policy that provides adequate coverage without straining your finances.
Assess how much coverage you need based on your financial obligations, such as dependents, debts, and end of life expenses. This will help you decide the amount of insurance required.
Consult a Professional
Working with an insurance advisor or broker can help you go through the complex life insurance market and find a policy tailored to your specific needs. At Aarna Insurance, our insurance advisor will work with you to help you meet your insurance needs.
Compare Policies
Shopping around and comparing quotes from different insurers can help you find the best rates and coverage options.
Consider Policy Riders
Some policies offer riders for additional coverage, such as critical illness or long term care, which can provide extra protection.
Regularly Review Your Policy
Life circumstances can change, so it is important to review your policy from time to time to ensure it still meets your needs.
No Financial Dependents
If you have no financial dependents, life insurance may not be necessary, as it is primarily designed to provide financial support to dependents in the event of the death of the policyholder.
Sufficient Savings
Seniors with substantial savings and assets may find that these resources are sufficient to cover end of life expenses and support their loved ones.
High Premium Costs
If the cost of premiums is too high compared to the benefits, life insurance may not be advisable, especially for seniors on a fixed income.
Health Issues
Seniors with significant health problems may face high premiums or limited options. In such cases, other financial planning options might be more effective.
Conclusion
Life insurance for seniors in Canada is a valuable tool for ensuring financial security for your loved ones. By understanding your options and making informed decisions, you can select a policy that meets your needs and provides peace of mind. Whether you are seeking to cover final expenses, pay off debts, or leave a legacy, there are policies available to suit your unique situation.
At Aarna Insurance, we understand how tough and stressful navigating the insurance and financial planning landscape can be.
What you get from us:
Following resources provide valuable information and support for seniors regarding financial security, health care, and other essential services.
This section covers a wide range of topics for seniors, including financial security, health, and wellbeing.
Service Canada provides information on the Canadian Pension Plan (CPP), Old Age Security (OAS), and other benefits for seniors.
Offers retirement pensions and other benefits to contributors, including details on eligibility and application processes.
A monthly payment available to seniors aged 65 and older, with information on eligibility and benefits.
Provides resources and tools for managing finances, including retirement planning and insurance information.
Offers programs and services to improve the standard of living and quality of life for seniors.
This government department offers information and services for seniors, focusing on health care, financial assistance, and community support.
A national advocacy organization for seniors, providing information on health, finance, and policy issues.
CLHIA is an industry association that provides information about life and health insurance.
OLHI provides a free, independent service to help resolve disputes between consumers and their insurance companies.
Disclaimer: The above article is for informational purposes only and should not be considered as professional advice. Always consult with a licensed insurance broker or financial advisor before making any decisions regarding insurance coverage.