Seniors Life Insurance: Six Factors to Consider
There Are Many Life Insurance Options For Seniors
It has long been a popular belief that by the time we are ready to retire, we will be debt free and have a bank load of money to spend any way we like, so there would no longer be a need for life insurance. Unfortunately for many Canadians, life didn’t turn out that way. More and more seniors are carrying debt into retirement. According to a recent debt study by Hoyes, Michalos Associates Inc. trustees in bankruptcy based in Ontario, the percentage of seniors with debt increased by nearly 60% over the past 10 years. This leaves a heavy burden on surviving family members.
But it’s not always easy for seniors to get life insurance.
The Canadian marketplace has changed dramatically for seniors looking for life insurance. Premiums have gone down in most instances, but at the same time, insurance companies are looking more closely at certain risk factors such as lifestyle and travel.
According to the World Health Organization (WHO), the average Canadian male born in 2012 can expect to live to 80 and females to 84. In comparison, males born in Canada in 1990 have a life expectancy of 74 and females of 81 on average.
WHO claims, “In high-income countries, most of the gain in life expectancy is because of fewer people dying before age 60 from heart disease and stroke. However, among high-income countries, the gap between longer life expectancy for women and men narrowed by one year, mainly because smoking rates for men fell more than for women.”
The Toronto Star reported the average 81-year-old man in Canada has a 38% chance of living to age 90 and a 73% chance of living to 85.
The article also presents a cautionary tale for any senior citizen buying life insurance: if you’re not careful and don’t read the policy information closely, you could live long enough to pay more in premiums than the life insurance policy you purchased is actually worth. This is because on many life insurance policies, the premiums just keep rising at exponential rates.
Eighty-one-year-old Raymond Ellis told The Star that he has paid nearly as much in premiums in the past 26 years as his $45,000 life insurance policy is worth. His annual premiums keep rising. This past year they were up 9.6% to $3,243, which means if premiums continue to rise at this rate, he will pay an additional $45,000 over the next 8.5 years.
“I have begged Manulife (Financial) for relief but they say there is nothing that can be done,” he is quoted saying. “They can only promise me that I will lose everything if I can’t make the monthly payments.”
Don’t end up in this situation. Consider the following six factors when looking into life insurance as a senior:
1. Premiums Are The Lowest At The Age You Are Now
Many insurance companies now offer life insurance to individuals up to age 85. However, the rates vary significantly between ages 65, 75 and 85. The best time to look into life insurance is at your current age because premiums generally cost more when you are older. Seniors with health issues might want to consider Assumption Life, Canada Protection and Industrial Alliance for Simplified Issue plans with No Medical Tests and only a few health questions. The coverage can start immediately – see point 6 for details. Equitable Life recently introduced a simplified issue plan similar to Assumption Life’s Golden Protection, but coverage is only available to applicants up to age 80.
“Fun is like life insurance; the older you get, the more it costs.” – Frank McKinney aka “Kin” Hubbard (1868-1930), American cartoonist, humorist and journalist.
2. The Cost Difference Increases More As A Senior
Face amounts can be as low as $5,000 and premiums can be as low as $20/month. But the price for life insurance for seniors increases exponentially as the insured ages. This means the cost difference between a 71 year old and a 70 year old is much more than the cost difference between a 41 year old and 40 year old.
“Every birthday puts you one year closer to your life expectancy and thus, you’re are more expensive to insure.” – Chris Huntley, life insurance agent at Huntley Wealth and Insurance.
3. Individual Life Insurance vs Creditor Insurance
Many creditor insurance plans end at age 69. Individuals who are approaching retirement or are currently retired and in good health should consider individual life insurance options instead of creditor insurance. Individual Life insurance is portable so if you switch banks or move to another home you can maintain your coverage. More information can be found at our Facts on Mortgage Insurance article.
4. Preferred Rates Can Save You Money On Your Premium
Preferred rates are available to those in excellent health and with an excellent family health history. Preferred rates can save you up to 35% and many companies have multiple preferred rate classifications so even if you do not qualify for the best preferred classification you can still enjoy a significant saving. The savings on preferred rate qualification for Permanent policies is less pronounced and not as many companies offer preferred rates on permanent policies. For more information see Understanding Preferred vs. Standard Rates .
“If I bought groceries the way I buy insurance, I’d eat a lot better – and so would my dog.” – Phil Gramm, Economist and former Congressman and Senator.
5. Last-to-Die Coverage Offers Lower Rates Than Traditional Life Insurance
Many insurance companies offer last-to-die coverage at a lower rate than traditional life insurance. This form of insurance is used primarily for estate planning and pays out a tax-free death benefit upon the passing of the last surviving spouse. Since the insurance benefits are paid out further in the future, the cost is substantially less. Last to die policies are usually only available as Permanent rather than Term policies and are most often used for Estate Planning purposes. Some examples of seniors using life insurance for estate planning include taxes on a cottage or investment property or taxes owed on the RRSP or RRIF.
“I detest life-insurance agents: they always argue that I shall someday die, which is not so.” – Stephen Butler Leacock (1869-1944), Canadian teacher, political scientist, writer, and humorist.
6. Guaranteed Issue Life Insurance
Guaranteed Issue policies are available for the hard-to-insure or people with health issues. Similar to Simplified Issue life insurance, these policies do not have medical tests, but they also do not have any health questions. These are often considered a last resort and are commonly sold directly by companies such as BMO Insurance and Manulife. This type of policy has a two-year waiting period for payouts on non accidental deaths.
“I called an insurance company to get a quote. They gave me one of Oscar Wilde’s best.” – Jarod Kintz, author, humorist.
Contact us at 1-866-899-4849 to get a free quote today. For non-medical life insurance quotes fill out the contact form on this quote page .
Posted by Chantal Marr.
Chantal Marr is a member of the Independent Financial Brokers of Canada.
Much of her success stems from her ability to listen to her clients’ needs.
Read Chantal’s background .
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