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

Many seniors plan for retirement to cover their expenses later in life. However, seniors may still have debts, dependents, and unforeseen expenses that can be a burden. Life insurance is a way for seniors to protect their families and loved ones in the event they pass away. 

Finding good life insurance can be difficult if you don’t know where to start. So today, our team at Alliance Income is here to talk about getting the best life insurance for seniors in Canada. We discuss the different types of life insurance policies for seniors and how you can choose the best policy for your needs.

Why Should Seniors Get Life Insurance?

Even if you have enough money saved to cover living expenses during retirement, taking out a life insurance policy can still be a good idea. Seniors might have other expenses and want to provide for family members in case they pass away. Life insurance for seniors can help you:

  • Pay off outstanding debts
  • Cover end-of-life expenses, such as funeral costs and medical bills
  • Pass wealth on to surviving family members

Life insurance products for seniors are generally more expensive than policies for younger people but the cost can still be worth it to provide a financial cushion for family and loved ones in the event of a tragedy. 

Types of Life Insurance for Seniors

Seniors generally have four main types of life insurance products to choose between: term, whole, simplified, and guaranteed life insurance policies. Each type of policy has advantages and disadvantages. 

Term Life Insurance

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.

Whole Life Insurance

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. 

Simplified Life Insurance

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

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.

How Much Does Life Insurance for Seniors Cost?

Cost for insurance policies can differ dramatically depending on the policy and the insured. For example, the average cost for a 10-year $500,000 policy for a 40-year-old would be approximately $26 per month, while the same policy for a 60-year-old would cost around $137 a month.

Prices are higher for whole life policies. A $250,000 whole life policy for a 40-year-old male would cost an average of $200 a month, while the same policy for a 60-year-old would be roughly $300 a month. 

Factors that affect life insurance costs include:

Age

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

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

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. 

Coverage Amount

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

Smoking Status

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

Lifestyle

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.

Which Kind of Life Insurance Is the Best Life Insurance for Seniors?

The best life insurance for seniors depends on your specific age, health, income, retirement plans, and needs. Generally speaking, term life policies are the best life insurance for seniors in Canada. Term policies offer predictable and affordable premiums and a wide range of coverage limits ranging up to over $1 million. 

However, seniors who make a higher income and want a way to build wealth tax-free might consider a whole life policy. Whole life policies will not expire and have useful tax benefits and wealth-building strategies built in. Whole life policies are also ideal if you have long-term dependents who need continual care. 

You can look into simplified or guaranteed life insurance plans if you have health conditions or other factors that disqualify you from coverage. Keep in mind that these policies cost more for lower coverage limits. In some cases, you can combine a simplified or guaranteed policy with a term or whole life policy to maximize returns.

Tips for Choosing a Life Insurance Policy

Shopping for life insurance can be intimidating if you are not familiar with how insurance works. Below are some guidelines on what to consider when comparing life insurance companies and policies.

Figure Out How Much Coverage You Need

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.

Think About Time Frames

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. 

Consider Your Budget

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. 

Compare Rates

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. 

Talk to a Financial Professional

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.

Senior Life Insurance FAQ’s

Below are some of the most common questions about life insurance we receive.

It depends on the type of insurance you get. If you get a whole or term life policy, you will most likely need a paramedical exam to determine risk and eligibility. However, providers also offer simplified life insurance policies that have higher premiums but do not require a medical exam.

Yes, you can usually renew term life insurance after the original term ends. Your provider may require an additional medical exam to renew a term policy.

Generally speaking, there is no age limit for buying a whole life policy. However, many providers have a 75-year age limit to buy term policies. As such, you’ll most likely have to buy a whole life policy if you are older than 75.

There is no legal limit to the maximum amount of coverage seniors can buy in Canada. Individual policies and providers set maximum insurance limits. Whole life policies typically have the highest coverage limits, while simplified and guaranteed policies usually have the lowest coverage limits.

You can use the benefits from a life insurance policy to cover funeral expenses. You will have to make sure the beneficiary knows to use the money for funeral costs, or you can write it into your will to establish how to use the funds. Final expense policies can also cover funeral costs.

With a convertible life insurance policy, you can switch between term and permanent coverage without requiring an additional medical exam. Life insurance companies offer convertible policies for seniors but typically limit when you can convert. Most plans let you convert until you turn 75.

No, seniors can apply for any kind of insurance that others can. Canadian law does not specify the meaning of “senior,” so different providers use different definitions when creating age restrictions for plans. However, there are types of insurance with benefits particularly useful for seniors.

Life insurance for seniors has a few drawbacks. The most obvious drawback is high premiums if you have existing health issues. Limits on life insurance policies may also not be enough to cover end-of-life costs.

Yes, getting life insurance as a senior is almost always worth it. Life insurance provides a financial safety net for family and loved ones in case you pass away. They can also help pay for end-of-life issues.

Conclusion: Fill Out a Quote Form Today!

At Alliance Income, we make it easy to find and compare quotes from providers nationwide. Our easy-to-system can match you with the best insurance products. Looking for the best life insurance for seniors? Fill out our online form today to receive a quote!

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