Key life insurance considerations for retirees

Life insurance offers protection for assets and against liabilities, but specific needs and objectives vary depending on the insured person’s age. Here are some important life insurance considerations for retirees.

Term life is generally more affordable than whole life, although the rates rise the older the person is when taking out a policy. Term life usually does not require invasive medical exams and high monthly premiums while still providing substantial financial protection for assets and surviving loved ones. Term life also does not require policyholders to pay high premiums in order to grow its cash value to generate an eventual benefit.

Instead, term life insurance companies rely on actuarial tables that indicate the likelihood of paying a claim during the time that a term life insurance plan is in effect. The results generally are more affordable rates that are fixed throughout the life of the policy. This makes it easier for retirees on fixed incomes to better afford life insurance protection for their assets without the crushing monthly premiums that typically come with whole life insurance policies.

Just because people reach retirement age does not mean they stop taking on debt, and new debt could require life insurance protection. Some people might take out a reverse mortgage or home equity loan to help pay for a life need, such as a sudden home repair or to cover the costs of health care that national plans do not provide.

Financing a new car also might require a decreasing term life plan to cover the potential cost of paying off the loan on the vehicle so that a surviving spouse is not left trying to pay off the debt while also dealing with the costs of losing a husband or wife. Life insurance also can offset the cost – if not the grief – of losing a loved one by helping to cover funeral and other expenses.

While Canada provides health care for its citizens, it does not cover long-term care, yet this can be a critical need for retirees. Fortunately, many life insurance policies also provide long-term care and disability coverage, but it is important to ensure such coverage is provided with a particular policy. With forethought and planning, it's possible to use life insurance late in life to help cover unexpected health care costs while also ensuring that assets and finances are protected.

There's no denying that life insurance typically becomes more expensive the older you get, but the benefits will generally far outweigh the costs of being covered. However, when making important decisions related to life insurance, it is always best to seek professional advice to ensure that you have the right coverage for your needs.