The best life insurance for seniors in Canada is a policy that is tailored to meet the unique needs of seniors. Seniors have different insurance needs than younger people, and as such, their life insurance policies should reflect this.
As you age, it becomes increasingly important to have life insurance. This is because your loved ones will likely have to pay out of pocket for final expense costs such as funeral and interment costs as well as taxes at death such as income tax owing or capital gains taxes at asset disposition.
If you have assets other than your primary residence, and non-registered investments, they are all considered to have been disposed of before death under Canadian laws. As such, your estate will be responsible for paying any capital gains taxes at death, this means that whatever you leave to your heirs will be reduced by the amount of taxes owing.
Life insurance for seniors is also an important estate planning tool for wealthy Canadians so you can leave more of your estate to your heirs instead of the government.
There are three main types of life insurance policies that are best suitable for Canadian seniors: whole life, universal life, and term to age 100 life insurance.
There are many factors to consider when choosing a life insurance policy for a senior citizen in Canada.
If you have a pre-existing medical condition, you may have trouble obtaining life insurance through traditional insurance companies. In such cases, you may want to consider a life insurance policy through a Simplified Issue or a No-Medical life insurance company such as Industrial Alliance or Canada Protection Plan.
Before making any decisions, be sure to speak with a life insurance advisor to discuss your specific needs and what life insurance policy would be best for you.
The Best Life Insurance for Canadian Seniors
Whole Life Insurance
Whole life insurance is the original permanent life insurance policy type and it covers you for your entire life as long as you pay the premiums or when it’s considered to have been “paid up”. It has level premiums, meaning your payments will never increase, and the death benefit is also guaranteed.
The main advantage of whole life insurance is that it builds cash value over time that you can access through policy loans, bank collateral loans, or direct withdrawals. This cash value can be used for any purpose, such as supplementing the life insured’s retirement income, paying for long-term care costs, or meeting other financial needs.
Universal Life
Universal Life, on the other hand, is a more flexible type of permanent life insurance. The premiums are usually not level but can be increased or decreased as the life insured needs change over time. And while the death benefit is also considered permanent, the cash value component can fluctuate depending on market conditions.
Universal life is best suited for people who want more control over their life insurance policy and who don’t mind market fluctuations.
Unlike whole life where your cash values accumulate through surplus premiums and dividend earnings, your cash value accumulation with universal life depends on your policy’s investment portfolio.
Term to Age 100 life insurance
Term to Age 100 life insurance isn’t a traditional term life insurance where there’s an end date of between 10 and 40 years. Most people think that a term to 100 insurance is term insurance as it’s rather ill-named but it’s actually permanent life insurance that, similar to whole life, guarantees your coverage up to age 100 as long as premiums are made on a monthly or annual basis.
The obvious difference between a term 100 and whole life is that there’s no cash value or equity build-up component with term 100. Think of it as a stripped-down version of whole life insurance.
If you’re just planning to implement final expense coverage, and you’re in good health, a term to 100 policy may be the life insurance for you, especially if budget is a concern.
Why You Should Avoid Term Insurance In Your Senior Years
If you’ve been researching online before you found this article, you may have read varied opinions as to what the best life insurance is for seniors. You may have read that term life insurance is one of the quoted “best life insurance for seniors”. While term life insurance gives good life coverage, I wouldn’t want to issue this to seniors not unless budget constraints make it prohibitive to acquire a more suitable coverage.
The problem with term life insurance is that it’s designed to cover non-permanent financial obligations, such as income replacement, and mortgage protection; if you’re in your senior years or if you’re looking for the best life coverage for a Canadian senior, you may be looking for a policy for final expense or estate preservation purposes. These financial obligations are considered permanent in nature as there are no end dates to them and will only arise when the person passes. The only problem is that we don’t necessarily know when that time comes, so say if you implement a 10-year term life insurance, there’s a high chance that you’re going to outlive your coverage. Renewing it in the 11th year is cost-prohibitive.
What is Term life insurance and How Does It Work
Term life insurance is an affordable, short-term option. Its best use-case is income or asset protection. This is best suited for couples with young children who are looking to protect their household’s financial stability in case of premature death.
As you may already know, a person who relies on active income is his or her family’s most important asset. In case that person passes while the children are still young, the loss of that breadwinner’s income can send the family into a tailspin.
A term life insurance policy provides a death benefit coverage that acts as a financial safety net
to a breadwinner’s loved ones in case something happens to them while their obligations are high (when children are young, and long-term debts such as a home mortgage). The death benefit can be used to pay off debts, financially support the family, or cover final expenses.
Best Life Insurance for Seniors with Health Conditions
When it comes to life insurance for seniors, getting approved is usually challenging, especially for those with health conditions. That’s because traditional life insurance companies typically consider those who have less than perfect health high-risk cases, so depending on the result of the life insurance underwriting, you may be charged more, or you declined coverage.
That said, there are still some good life insurance options available for Canadian seniors with health conditions.
Some of the best life insurance options for seniors with health conditions are a simplified issue or no-medical life insurance policies or the conversion of existing term life insurance (if available).
Term Policy Conversion
If you have an existing term life insurance that is nearing expiration, you may have the option to convert that same policy partially or in full, depending on your budget. The first thing that we have to look at is whether or not your policy is “convertible”.
Contact us for a life insurance review if you’re at risk of losing coverage due to term policy expiration, and we’ll help you come up with a solution so you need not lose life insurance coverage at old age.
A term life policy with a conversion option allows the insured to switch to a permanent policy without having to go through another medical exam. This is a good option for seniors who may not be able to qualify for a permanent policy due to their health conditions.
No-Medical Life Insurance
No medical life insurance is a life insurance policy that does not require any medical checks or exams. It is perfect for seniors who may have health conditions that would prevent them from getting life insurance through traditional means.
There are a couple of Canadian life insurance companies that offer no medical exam life policies with Canada Protection Plan, leading the pack.
So, what are the benefits of no medical life insurance?
First and foremost, it’s easy to qualify for, while most regular insurers now don’t require medical tests for coverages of up to $1M for Canadians under 50 years old. No medical life insurance carriers are more lenient to those who are with pre-existing conditions and will still offer you coverage.
The second benefit is that it’s fast – you can get life insurance coverage in as little as 24 hours in some cases.
Lastly, it tends to have a more simple qualifying process. This makes it a great option for those who have preexisting health conditions that might disqualify them from other life insurance policies. Additionally, most plans provide coverage for up to 80 years old.
Canada Protection Plan
If you’re a senior with health conditions, you know that life insurance can be a tough sell. After all, insurance companies don’t want to take on the risk of paying out a life insurance policy if you die soon after taking out the policy.
That’s why Canada Protection Plan (CPP) is such a great option. They offer life insurance policies for seniors with health conditions, and because they’re a non-medical life insurance company, there’s no need to go through a medical exam.
So why should you consider CPP? Here are just a few reasons:
– No medical exam is required
– Over 25,000 licensed life insurance advisors across Canada
– Policies for seniors with health conditions
– Fast and easy application process
If you’re looking for life insurance and don’t want to go through a medical exam, Canada Protection Plan is a great option. With over 25,000 licensed life insurance advisors across the country, they can help you find the right policy for your needs.
Simplified issue life insurance
Simplified issue life insurance, otherwise known as no-medical life insurance is another life insurance option for seniors with health conditions that may not be able to qualify for a traditional life policy.
Simplified issue life insurance is a type of life insurance that does not require a medical exam. The application process is quick and easy, and you can get approved for coverage in as little as 24 hours.
The downside to simplified issue life insurance is that it is more expensive than traditional life insurance because the life insurance company is taking on more risk by not requiring a medical exam.
Deferred Life
Deferred Life Insurance offers coverage of between $5,000.00 and $50,000.00 to Canadians between 61 and 80 years old, and $10,000.00 to $75,000.00 for ages between 18 and 60 years old.
If you’ve been previously declined and have a serious health condition like cancer, diabetes, or a heart condition, you may be approved for deferred life insurance.
As the name implies, this policy has a deferral period where the death benefit is limited to a return of premium plus 3% simple interest if natural death occurs in the first two years. It will however pay the full death benefit if death before the second year is due to an accident.
After the 2-year deferral period has been fulfilled, the coverage will be in full effect, which means that the full death benefit is payable regardless of the cause of death.
Deferred Elite
The Deferred Elite, no medical life insurance tier, is similar to CPP’s Deferred Life, the only difference is that it will pay 50% of the death benefit should death occurs in the second policy year. If the death should occur in the policy’s first year, the death benefit is limited to a return of premium, plus 3% simple interest.
It does offer a higher amount of coverage for clients with less serious health conditions of up to $350,000.00. Take note that Canadian seniors over 80 years old can no longer apply.
Guaranteed Issue Life Insurance
Guaranteed issue life insurance is the life insurance option of last resort for seniors with health conditions that cannot qualify for any other type of life insurance.
When applying for a simplified-issue policy, if you are not eligible, the life insurance company will usually offer you a guaranteed issue life insurance policy instead.
It provides coverage of only up to $50,000 to your beneficiaries in the event of your death. The policy requires a waiting period of two years. In case death occurs before the 2-year waiting period, the benefit is limited to a premium refund, but the full benefit is in effect once the waiting period is fulfilled, which then can provide financial security for your family for your lifetime. You can book a free consultation with us here to see whether you qualify for a simplified issue or just a guaranteed issue policy here.
Industrial Alliance
When it comes to life insurance for seniors with health conditions, Industrial Alliance is another option available. This is because IA’s “Access Life” does not require a medical exam to issue a policy, which makes it much easier for seniors to qualify.
Additionally, there are no complicated application processes or waiting periods; you can be approved and have your policy in hand in just a few days.
Another great thing about Industrial Alliance is that they have been in business for over 130 years and are one of Canada’s largest life insurers. This means that you can be confident that you’re dealing with a reputable company when you buy an IA policy.
One thing to note is that IA’s Access Life only offers a pay life option for permanent policies as of this writing, so if you’re looking to pay off your policy in 20 years, you’re better off with CPP.
Final Thoughts: Best Life Insurance for Canadian Seniors
As you may see, there are a lot of options when it comes to life insurance for seniors, provided that you can get approved based on your health status, lifestyle, and medical and family history. If you had challenges getting approved in the past or you have a pre-existing medical condition, you’ll have to apply for a no-medical life insurance coverage as regular life insurance carriers will most likely decline your application but if you’re in good health, we can shoot for regular coverage.
When it comes to regular insurance providers, I’m more in favor of whole life and term to age 100 policies for Canadian seniors as both offer guaranteed lifetime coverage as long as premiums are made or when the policy is considered paid up in the case of a whole life policy.
As an advisor, I try to avoid term and universal life insurance for Canadian seniors over 60 years old.
Obviously, term life has an end date to it, and the renewal rates are cost-prohibitive, with most companies only offering coverage up to age 85. There’s a huge risk of outliving a term life insurance policy, especially if you’re aiming to protect your loved ones from end-of-life expenses like funeral costs and taxes at death.
Universal life insurance, on the other hand, while considered a permanent type of life insurance is dependent on market fluctuations. If you’re a senior, you may not have the time to deal with the market’s up and down but if in any case, your life insurance of choice is universal life, it has to be extremely over-funded so it stays in force regardless of market fluctuation.
Don’t get me wrong, universal life insurance is an excellent life insurance policy as it helps the policy owner grow wealth by investing the contributions in stock and bonds portfolio while being covered by a life insurance policy but there are far greater options for Canadians over 60 years old.
Both whole life and term to 100 insurance policies offer level premiums and guaranteed death benefits, the obvious advantage of a whole life insurance policy is that you can pay it off between 10 and 20 years and be covered for the rest of your life, while term to age 100 does not have the cash value component to make a limited pay possible, hence is the more cost-effective option if you’re looking for a lower monthly contribution amount.
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Finally, if you’re looking to get life insurance coverage in your senior years, please book an appointment with us, and we’ll help you find the best life policy for your needs.
