Seniors Whole Life Insurance offers lifetime life insurance protection for seniors.
Unlike term insurance, which only covers you for a stated term, such as ten, 15, 20 or 30 years, whole life insurance covers you for your entire life and is usually paid-up by a certain age listed on the policy.
There’s also an investment component that comes with whole life policies. Normally, you can choose between participating and non-participating whole life insurance policies for senior citizens. Participating means that you’ll be able to participate in the profits of the insurance company and it means that participating policies come with a dividend component that have been as high as 8% in the past. Non-participating is simply a whole life insurance policy without the dividend component.
The investment options expanded if you choose a universal life insurance policy. Although many insurance companies have exited the permanent insurance market due to abnormally low interest rates, universal policies allow you to choose your own investment options that can be given tax-free.
Many policies allow you to insure multiple lives on the same policy and the premiums can remain level for the life of the policy. The investment component of universal life insurance policies can grow a cash value and this cash value can grow using part of the premium payments. It grows through the interest, which is why many insurance companies have eliminated the universal life option because such a policy is no longer profitable for the insurance companies. There’s also a cash-surrender value for permanent life insurance policies in the event they are canceled.
Term insurance for seniors is usually described as simple, transparent and cheap and one of the challenges surrounding permanent insurance is it is none of those things. The premiums for universal life and whole life insurance are quite a bit more expensive than your typical 20-year term policy. Money Sense Magazine tags them as five times higher. They give the following example:
“A 35-year-old male non-smoker might pay $35 a month for a term policy with a death benefit of $500,000. A universal life policy with the same death benefit might cost $190 a month, while a comparable whole life policy could easily top $250.”
However, permanent life insurance options such as universal life can help you leave a legacy to your children no matter what age you die at, term life insurance only pays out if you pass away within the window of the term. Your children also may become uninsurable down the line, so you might want to insure them early for their entire lives, so that whatever health problems they develop as adults, they still have life insurance coverage regardless. Plus, if you’re one of those people fortunate enough to have more money than you know what to do with and more money than you can spend in your lifetime, you can use a permanent life insurance policy as a tax-shelter for your excess wealth. You should also consider a permanent policy if your estate will face significantly high taxes. If your partner happens to pass away before you, RRSP and RRIF investments are fully taxable in the year of death. If you don’t have an RRSP or you don’t know much about them, Wealthsimple explains the pros of an RRSP here. Research is key when it comes to finance. Depending on your province, that means 39% to 46% of your wealth will be owed to the government instead of your heirs.