10/18/23
If you’re a senior looking to purchase life insurance, the best way to get the correct coverage is to break the problem down into three steps:
1. How much life insurance coverage?
2. Best type of life insurance coverage?
3. Best company for the chosen amount and type of life insurance?
When we’re young, we’re generally purchasing life insurance to replace our income – we need enough life insurance to maintain our family’s standard of living in the event of our premature passing – to cover things like looking after the kids, paying a mortgage, etc. In this case we can use a how much life insurance do I need? calculator to determine the right amount of coverage.
But as seniors, we’re most likely less concerned about mortgages, the kids are now grown and financially independent. So what are we looking to cover?
For seniors, the financial need generally comes from two areas. The first is final expense. This is to cover things like burial costs and funeral expenses which can often run $10,000-$20,000. The second is called ‘estate creation’ but really just means we want to leave some money behind to our children or grandchildren. Defining the amount of these two things and adding them together gives us the amount of coverage we should be looking at.
For example, if you decide that you need just final expense coverage to cover your funeral costs, then an amount of $25,000 would be sufficient in many cases. If you also want to provide some money for a couple of children or grandchildren, then you might look at total coverage of $50,000. In our experience, amounts in the range of $25,000 to $50,000 are common.
When we’re young and looking for a large amount of coverage while the kids are still dependent, we recommend term life insurance. Term life insurance is inexpensive, but it’s also only suitable for a defined period of time – like 20 or 30 years. Term insurance works well because it’s an inexpensive way to get a larger amount of life insurance coverage, with the expectation that we will cancel it when we get older.
As seniors however, the needs change. Final expenses and leaving money behind to our beneficiaries is no longer a temporary problem – we want coverage that lasts the rest of our life. In addition, we are generally looking at much smaller amounts of coverage. Term insurance is not the correct type of life insurance for these needs.
Instead, we look at what’s known as permanent life insurance. Permanent life insurance policies have premiums and coverage guaranteed for life – once the policy is in force, the premiums remain level until we pass. This type of life insurance assures us that the coverage remains affordable as we get older, because the premiums don’t increase over time.
There’s three basic types of permanent life insurance: Term to 100, Universal Life Insurance, and whole life insurance. Which of these is appropriate?
Well, if we are looking for “the least expensive way to get life insurance, no matter how old we are when we die”, then the correct answer is Term to 100. Term to 100 life insurance has premiums and coverage that are guaranteed level for life – and no other attributes (the policy is just premiums and coverage). Whole life and universal life have other features such as cash surrender values which, while perhaps providing additional benefits, do so at an additional cost. In other words, whole life insurance and universal life insurance costs more than Term to 100. Therefore the least expensive way to get life insurance for life, is Term to 100.
Once we know the amount of coverage you’re seeking, and that we are probably looking at Term to 100, then in most cases the best company is simply the least expensive coverage. That requires that we shop out the coverage and run quotes from a variety of life insurance companies in Canada.
While we don’t currently have the ability to quote Term to 100 life insurance premiums on our website, we are able to provide quotes over the phone. Visit our contact us page, give us a call and we’ll provide you quotes for Term to 100 life insurance right over the phone. As well, we can answer any questions you may have.