Best Life Insurance for Seniors in Canada: What Are Your Choices?

Term life policies are the most common type of life insurance and offer coverage for a set time period. The typical term policy lasts for anywhere between 15 and 20 years, though some providers offer policies ranging from five to 30 years.

Term life policies are relatively affordable and have straightforward payout conditions. If you are on a budget, you can get a respectable term life policy for relatively affordable premiums. The main downside of term policies is they carry few tax advantages. 

Pros

• Term policies offer affordable and relatively consistent premiums.
• Term conditions and time frames are easy to understand.
• Many term policies have very high coverage amounts, giving you more than enough to cover end-of-life expenses. 
• Death benefits go to recipients tax-free. 
• You can cancel the policy whenever you want without penalties.  

Cons

• Term life policies will expire after a set period. 
• Term life insurance does not offer wealth-building strategies.
• Most insurance providers have an upper age limit for term life policies.

In contrast to term life insurance, whole life insurance (permanent life insurance) does not expire and will last as long as you pay the premium. Whole life policy payments have two parts. The premium part covers the cost of the policy, including administrative costs.

The remainder of the premium is the cash value of the policy. The cash value accrues interest, meaning you can use it to grow your wealth. 

Whole life policies do not expire but usually have higher premiums than term life policies. The main benefit of a whole life policy is the cash portion that can gain value tax-free. You can also take out a tax-free loan against the cash value of a whole life policy. These tax advantages mean that whole life insurance is also a useful vehicle for wealth generation. 

Whole life policies have level premiums, meaning that the portion of the premium that pays for the insurance increases the longer you have the policy. The result is that cash value growth slows down the longer you hold the policy. 

Pros

• Whole life policies do not expire and are active as long as you pay the premiums.
• The cash value portion accrues interest tax-free.
• You can take out tax-free loans against the cash value of the policy. 
• Many permanent policies are flexible and let you adjust policy premiums and death benefits. 

Cons

• Whole life policies are usually more expensive than term life policies. 
• Cash value gains decrease as more of your monthly payments cover paying for the policy.
• Conditions for whole life policies are more complicated and harder to understand. 

Most of the time, you will have to get a medical exam to qualify for a term or whole life policy. If you do not want to deal with getting a medical exam, you can instead opt for simplified life insurance. Simplified life insurance provides the same kind of coverage as other types of insurance but does not require a medical exam.

Simplified life insurance is easier to apply for because it has a simplified underwriting process, and you only have to answer a few health-related questions to apply. However, simplified insurance has relatively high premiums and lower coverage amounts. Most simplified policies offer less than $100,000 in coverage. 

Pros

• The simplified approval process makes it easy to apply.
• You do not need a medical exam to qualify for a policy. 
• You can find both simplified term and permanent policies. 

Cons

• Simplified policies have higher premiums and lower coverage limits. 
• Some policies have a gap before the policy goes into effect; during this time, they won’t pay benefits if you pass away. 

Guaranteed life insurance policies are an alternative to the other three that provide some level of coverage, no matter your current health or medical history. Guaranteed policies don’t require a medical exam or a health questionnaire.

The tradeoffs are higher premiums and lower coverage limits. Insurers are taking a larger risk by insuring you regardless of your health, so they need to make up the cost. The upshot is that you get coverage no matter your health and get a guaranteed payout if you pass away. 

Guaranteed policies often have a one to two-year period before the policy goes into effect. Death benefits for guaranteed policies are lower than for other kinds of policies, and providers offer permanent policies that won’t expire. 

Pros

• Guaranteed policies do not require a medical exam or health questionnaire. 
• You get guaranteed coverage and death benefits in case you pass away. 
• Many providers offer term and whole versions of guaranteed life insurance. 

Cons

• Since the insurers are taking on a lot of risks, you’ll have to pay higher premiums. 
• Many policies have a one to two-year gap in coverage.
• Policy coverage limits are low, with a typical maximum of $50,000.

The older you are, the more expensive your policy will be. For example, a 40-year-old would get a significant discount on a life insurance policy compared to a 60-year-old. 

Health is another significant cost determiner. If you have a pre-existing health condition, such as diabetes or heart disease, you’ll have to pay a higher premium to cover the additional risk. Providers may also look at your family health history to judge risk.

Gender also plays a role in determining life insurance costs. Women have higher life expectancies than men, so insurance companies generally charge more to insure men. Whether or not a policy takes into account self-ID gender identity or chromosomal sex depends on the specific provider. 

Higher coverage limits mean higher premium payments. A typical life insurance policy can grant over $200,000 in benefits. 

Smokers have a significantly higher risk of health conditions, so you will have to pay more for coverage if you smoke cigarettes.

If you engage in risky behaviours or habits, you will be more expensive to insure. For example, you may have to pay higher premiums if you have a driving accident record or engage in risky hobbies like skydiving.

The first thing to consider is how large of a policy to buy. You need enough money to cover any expenses you might leave behind if you pass away. Several websites have calculators you can use to estimate the amount of coverage you should buy. An online self assessment tool such as this one can really help sort out any financial questions you may have when purchasing.

You can also estimate the amount of coverage by multiplying your annual income by eight. So if your yearly income is $60,000, you should look for a policy with at least $500,000 in coverage. 

Another way to estimate costs is to add up family member expenses (e.g. car bills, education, mortgage payments, etc.) and multiply by 0.07. That should give you a rough idea of how much money you need for 7% growth to cover expenses in the future.

It’s also important to consider the time frame when you will need insurance. For instance, if you only need coverage until your children move out of the house, you can opt for a 10 to 20-year term policy. Conversely, you may have dependents that need continual care. In that case, a permanent life insurance policy might be the best idea. 

Whole life policies offer several tax advantages over term life policies but are significantly more expensive. You will need to consider your overall budget before buying a policy. In some cases, the cost of a permanent policy might not be worth the additional benefits. In those cases, a term policy provides an affordable and predictable alternative. 

Make sure to compare rates from the highest-rated providers. Don’t just pick a policy based on the lowest premium costs. A higher premium might be worth it if the policy has additional advantages like tax benefits. The more offers you compare, the more likely you are to get a good deal on a policy for seniors. 

Life insurance provides several opportunities to plan and build wealth. You should talk to a financial professional, so you can explore strategies to take advantage of the tax benefits of life insurance and manage your finances for inheritance. Talking to a professional helps you keep an objective eye on your finances so you can plan as efficiently as possible.