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As you age, you start to think more about your legacy and protecting your family’s financial security. You want to leave things in order for the ones you love after you’re gone, but you’re concerned you won’t be accepted for full life insurance because of your age. We’ve asked Chantal Marr of LSM Insurance to share with us her knowledge about this topic. Chantal is a licensed life insurance broker who regularly contributes to such Canadian publications as Money Sense and the Toronto Star.
It is important to know that now, in the times of COVID-19, the life insurance industry is changing rapidly. Due to limited physical proximity, in-person medical tests are nearly impossible. That is why the share of insurance policies that can be sold without in-person medical exams grows significantly. These are either “Medically Underwritten Policies without Medical Exam’ (harder to get for seniors due to their age) or “No Medical Life Insurance” policies (more about it in the section 5).
Life Insurance for Seniors – Useful to Know
1. You’re entitled to go fishing (for eligibility requirements): A traditional fully underwritten whole life or universal life policy gives you coverage for life, pays out the insurance benefit upon your death and includes an investment component of accumulated cash value. Whether you are eligible depends on an initial screening process that considers factors like health, age, gender and history of prior claims. If you are unsure if you qualify, find out what information is needed by submitting a preliminary inquiry at a few insurance agencies.
2. You may not be a sure thing (for credit or loan life insurance): Personal loan and line of credit insurance programs offer life protection for the insured balance of your loan or credit line. However, many creditor life insurance policies cut you off at 65 (i.e. you may not be able to get this kind of insurance at 65 or over—and even if you do get it, coverage may cease when you’re around 75). Find out if there are age limits attached to your credit insurance.
3. If you are older, maybe you should go for broke(r): Should you go direct with an insurance agency or use an insurance broker to secure the best deal? Direct carriers usually have lower age maximums than broker-sold plans, but many direct policies won’t insure people over 65. In contrast, insurance companies that use brokers, such as Industrial Alliance or Empire Life, insure people up to age 85 if you are looking for a life insurance policy for seniors.
4. The older you are, the less insurers care if you smoke: We’ve all heard that some policies tie higher premiums to smokers and that “do you smoke?” is a frequently asked question in screening. However, did you know that the insurance price difference between smokers and non-smokers decreases as you age?
5. Sometimes “no medical” can mean no money: If you are having difficulty getting life insurance (e.g. due to particular insurance pre-conditions such as diabetes or heart attack history), you may choose a no medical life insurance policy (no medical exams are required). However, if the policy offers a graded or deferred benefit it can mean that death benefits are limited during the first few policy years or simply not covered if death is due to medical reasons. Please consider that even no medical life insurance has several sub-types (meaning different levels of protection and insurance rates) such as Simplified Issue Life Insurance Plans and Guaranteed Issue Life Insurance Plans.
Simplified Issue Life Insurance (also called Simplified Life Insurance) has no medical exams but it still has a medical questionnaire. As long as you are able to answer truthfully “No” to all questions, you qualify for Simplified Issue Life Insurance. In the past, the maximal coverage limits for this insurance type were $200,000 – $300,000 but throughout 2018-2019 they went up significantly. Now, in the times of COVID-19, when in-person medical tests are nearly impossible, coverage insurance limits are reaching $500,000 – $1,000,000.
Guaranteed Issue Life Insurance (also called Guaranteed Life Insurance) comes with no medical exams and no questionnaire meaning that you always qualify for it. It is important to know though that its maximum coverage is significantly lower, around $25,000 and this is the most expensive insurance type. It also comes with a “deferred payments”-clause mentioned above.
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6. If the payout can wait, estate planning can be more affordable: If you are looking into life insurance for estate planning, check out “last to die” policies. These policies offer much lower premiums as the death benefit is paid out on the passing of the second spouse (i.e. if you die, the death benefit is held until your spouse also dies).
7. If you are older, it’s a good time to shop (for the best premiums): Among insurance companies, the discrepancies in the amount you pay as a premium are much larger for seniors than for younger applicants. With such a range of premiums for seniors, it’s worth doing a little shopping around to see which policies might better meet your needs. Some seniors may look for very particular life insurance quotes such as funeral insurance quotes (also called burial insurance plans) to protect their families against unexpected final expenses.
8. Before you go with term, check the get-out clause: While a term life insurance policy offers tantalizingly cheaper monthly premiums for the 10 to 30 years of coverage, the premiums rise significantly at each renewal. Next time around, you may want a permanent policy so you can accumulate cash value on a tax-deferred basis or just for the hassle-free life coverage at a guaranteed premium amount. Beyond a certain age, that may not be possible. If you choose a term policy, make sure you know what the maximum age of conversion is to a permanent plan. (For example, it is age 70 for RBC and BMO, and age 69 for TD Bank.)
9. Beware of rising insurance charges: If you choose a universal policy, be sure the cost of insurance charges are guaranteed to stay the same over time. Some universal life plans have escalating costs of insurance charges that make the plan very expensive to continue in the later years.
10. You can still get an edge over inflation: Look at universal life or whole life policies that have an increasing death benefit option to give you the edge over inflation. On top of the death benefit amount, this option allows any amount left in the policy fund to accumulate cash value and the total to be paid tax-free to the beneficiary.
Chantal Marr is a licensed life insurance broker and a head of LSM insurance, one of few insurance brokerages working with nearly all life insurance providers and offering life insurance across nearly all Canadian provinces.She is a member of the Independent Financial Brokers of Canada. Much of her success stems from her ability to listen to her clients’ needs. If you are interested to find out more about Life Insurance Savings and connect with Chantal for a free quote / assessment of your situation, please complete and submit the small form on the left.
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