Permanent life insurance policies for seniors in Canada come in three distinct varieties.
The first type of permanent life insurance policy for seniors in Canada is a term 100 insurance. This type of policy provides fixed premiums and lifetime protection. Term 100 policies generally do not build a cash value.
In recent years, insurance companies have either left the term 100 marketplace, or significantly raised their premiums in response to low interest rates. Canada Life, Standard Life, Great-West Life and Assumption Life all no longer offer term 100 policies. Meanwhile, the companies that have stayed in this market have increased their rates by more than 30%.
The second type of permanent life insurance policy for seniors in Canada is universal life insurance. Universal life policies can come in an increasing or level cost of insurance format.
The increasing cost of insurance structure provides a lower initial cost, but the rates go up as the insured gets older. On the other hand, the rates for level cost of insurance policies stay the same for the insured’s lifetime. Like term 100 insurance, many insurance companies have been raising their rates or leaving the market all together.
The third type of life insurance policy for seniors in Canada is whole life insurance. Whole life policies can be participating or non-participating. Participating whole life policies provide fixed premiums, lifetime protection and a guaranteed cash value.
However, unlike non-participating whole life insurance policies, these plans have a dividend. The dividend is not guaranteed and can be used to accumulate additional cash values, reduce premiums or buy additional life insurance coverage.
Syed Raza, an insurance broker based in Markham, Ontario, highlights that participating whole life insurance has the highest initial premium of all of these policies, but also has the added benefit of higher cash values. In addition, thanks to dividends, your death benefit is growing on a tax-sheltered basis. The death benefit is also paid out tax-free.
Another feature with permanent life insurance policies with a cash value is this value can be used to offset some future financial catastrophe. Some of these policies also allow for a limited-pay option, where the insured is covered for his/her lifetime with no additional premiums.
Certain term 100 policies have a reduced paid-up feature. This feature works a little differently: the insured can stop paying, but, as a consequence, the face amount is reduced. The longer the insured pays into the policy, the higher the death benefit is in the future.