# Life insurance in retirement



## Mechanic (Oct 29, 2013)

I have always had a fairly large $500k term policy on my life, as an umbrella to cover all expenses, taxes on investments etc for my wife should anything happen to me. We've been retired now for several years and the policy renewal showed up with a huge increase in premium of over 700% to about $10k a year. I tried to talk to the life insurance company about why such a big increase for a healthy retiree in his early sixties but they were quite rude and said that's how term insurance works. Just pondering whether it's even worth carrying life insurance as we get older and what others have found. I do still have a couple of smaller whole life coverages in place.


----------



## smihaila (Apr 6, 2009)

Ditch the current insurer, and shop around.

Canadian "insurance" companies are notoriously known as a big mafiosi, oligopolist cartel. So besides shopping around, it may also be worth evaluating also some US insurers - it's less of a cartel there, due to 10x population and some appearance of competition...


----------



## Canadafan (Oct 19, 2014)

Mechanic said:


> I have always had a fairly large $500k term policy on my life, as an umbrella to cover all expenses, taxes on investments etc for my wife should anything happen to me. We've been retired now for several years and the policy renewal showed up with a huge increase in premium of over 700% to about $10k a year. I tried to talk to the life insurance company about why such a big increase for a healthy retiree in his early sixties but they were quite rude and said that's how term insurance works. Just pondering whether it's even worth carrying life insurance as we get older and what others have found. I do still have a couple of smaller whole life coverages in place.


Great question?
I have a term to 100 policy. A very valuable commodity & near impossible to get now.My payments started at age 29 and continue un-changed to age 100.
A policy of $200K costs $600/ year this example. I also am just over 60.
Question which needs to be answered: If you were to pass-away. Would you wife be able to carry on?
All registured investmets would go to her tax free, for example. So if it is a concern about non-registured assets above RRSP/RRIF/LIF or what ever, probably not an issue other than lost opportunity.
If your estate/assetsa re set up properly for a married couple ( that being joint ownership) , your oassing woould have miniual tax implications. As if done right she is already an owner of the assets.
A $10K liability is a huge expense. My opinion, You rquestion(s) should be discussed with an estate lawyer, financial planner and tax accountant.
BTW we did just that. Should I pass, my wife owns all of our assets tax free. She would get 60% of my pension and portions of my CPP. The $200K would cover various expenses with me gone & make up the diference of the 40% pension loss.
I heard a similar story from a friend of mine , also low age 60s. he is not going to re-new. policy.


----------



## Rusty O'Toole (Feb 1, 2012)

What do you need insurance for? I take it that in earlier years it was protection for your family just in case. But now you are retired and presumably, they are financially secure no matter what happens. To me the point of term insurance is protection while you build up an estate, if you have done this you no longer need the insurance.


----------



## AltaRed (Jun 8, 2009)

I dropped all life insurance when I retired. There was no longer a need to 'insure' my continued employment income and retirement is the time for withdrawal from one's portfolio in any event. As mentioned by post #3, to the extent assets are in JTWROS, they pass on to surviving spouse without tax implications. Even for assets that are in individual ownership, just how big would the tax bill be anyway?

The only reason to have term life then would be if certain individual assets were illiquid, such as business ownership shares in which case the business should be paying the premium, and a recreational property in an individual name.

Added: Or a last-to-die recreational property like a cottage left to heirs and wanting enough insurance to cover the cap gains tax hit so that heirs could afford to keep it. Insurance to cover portfolio cap gains taxes upon last-to-die death is a bit of a red herring. Chances are those taxes will be less than 20-30 years of insurance premiums paid over time for a policy face value just to cover them.


----------



## sags (May 15, 2010)

Estates can take a long time to settle, so insurance policies that pass directly to a beneficiary (outside the estate) can be very beneficial in the interim.

We each have paid up life insurance policies, but dropped our term policies when we retired because of the continually rising cost.

I understand why people get term life insurance, but there is benefit to whole life insurance policies for people who start early..


----------



## ian (Jun 18, 2016)

We never bought whole life insurance. We started to save early and invest early. Got lots of term through my employer when our children were young and the risk high. By the time I retired both children were gone. Had one smaller term policy independent of my employer. Terminated it a few years prior to retirement because the risk was no longer present. No value

The only insurance I have since retiring is a 15K policy from my pension plan and a 60 percent survivor pension. No need for anything else. There are sufficient funds to pay any taxes on my or our death.

I believe you need to start the financial risk to you and your spouse and family. Then determine how best to mitigate that risk based on your resources. 

The insurance salesperson has one and only one goal. To sell you the insurance product that yields the most amount of commission on acceptance, the most amount of ongoing yearly commission. That typically means whole life or some form of whole life mixed with a retirement savings plan the details of which are not even completely discernable by the person selling the policy. But the hidden admin fees or understated admin fees will most likely be extremely high.


----------



## pwm (Jan 19, 2012)

I've been retired 15 years and we have no form of life insurance. I had term policies with my employer which terminated on my retirement. I had life insurance when I needed it, now I don't.


----------



## Gator13 (Jan 5, 2020)

We will drop our term life insurance when we retire. We'll have enough assets and we have no requirement to keep the policy to pay taxes on inheritance or anything like that.


----------



## RussT (Jul 11, 2016)

I dropped a large term life policy when the premiums took a large jump I believe around age 70. I have a small policy on my life that has level premiums for the remainder of my life. I have no need for this policy but I decided to retain this one.

The present value of the future premiums is less than the present value of the policy unless I live to the age of 90 which I judge to be unlikely. I guess if I make it past 90 I lose this bet but I doubt I'll care.


----------



## kcowan (Jul 1, 2010)

I cancelled two whole life policies at age 60 when i retired. They had a cash value that was taxable,


----------



## OptsyEagle (Nov 29, 2009)

Mechanic said:


> I have always had a fairly large $500k term policy on my life, as an umbrella to cover all expenses, taxes on investments etc for my wife should anything happen to me. We've been retired now for several years and the policy renewal showed up with a huge increase in premium of over 700% to about $10k a year. I tried to talk to the life insurance company about why such a big increase for a healthy retiree in his early sixties but they were quite rude and said that's how term insurance works. Just pondering whether it's even worth carrying life insurance as we get older and what others have found. I do still have a couple of smaller whole life coverages in place.


That is how term insurance works so I doubt they were being rude. More like they were not giving you the explanation you were hoping for. So I will.

Term insurance is priced based on your odds of dying during that term. As you may know your odds of dying increase each year. I doubt you are upset because of the increase, but more the size of the increase. If you look at a mortality chart you will see that for younger ages the graph of death risk kind of goes sideways left to right with a slow increase upward over time. As you get to age 45-50 the risk graph tends to start steepening up. In your 60s it is pretty much going almost straight up. The price you pay for term insurance will follow that curve. No matter how healthy you are, the chances of you dying this term is about 500% more then the last term. Sorry for that news.

Now why did I say 500% when they wanted 700% increase? Well, there is your opportunity to shop around. They are not gouging you but 700% increase pays for two risk factors when you only possess the one. It is this. That term insurance you have is also guaranteed renewable at the next term. That means that you will not be asked any medical questions to obtain it for another term. Now think about it. Even a 500% increase would keep healthy people from wanting to renew it, but what about unhealthy people? A person who was told they were going to die in 2 years would renew it at any price. So your current policy has an "anti selection" risk to the insurance company. For the most part, only the sick will renew. The healthy will cancel. You can start to see the cost of that "guaranteed renewable" feature to the insurance company and that is what the extra 200% is paying for.

To fix that just shop around. A newly issued policy, even from the same insurer as the one you have, will be about 30% cheaper then a renewed policy. If you do shop around just make sure you obtain the new policy BEFORE you cancel the current one. The only difference between the two policies, once the new one is issued, is that the new one has a 2 year contestability clause and the old one does not. Contestability is where you have a pre-existing condition, that you knew about but did not disclose on the application. Since you currently have insurance, make sure you list every rash, and pain and runny nose etc., and you will overcome that clause nicely. Don't leave anything out is my point. Especially nothing you ever mentioned to your doctor, since that can be proved.


----------



## Eclectic12 (Oct 20, 2010)

sags said:


> Estates can take a long time to settle, so insurance policies that pass directly to a beneficiary (outside the estate) can be very beneficial in the interim.


Sure ... but then again, if each are successor holders of a well funded TFSA, the cost/benefit might not work out.


Cjeers


----------



## afulldeck (Mar 28, 2012)

I don't like to bet against myself.


----------



## Beaver101 (Nov 14, 2011)

I'm surprised the insurance company (or more like the sales rep) didn't provide or list the premiums/rates upfront (aka in the policy sold, informing the the policyholder) for the "guaranteed renewable" feature. If I understand correctly from reading some marketing life insurance brochures, the guarantee is usually baked into the rates based on existing (aka prior years) mortality tables to begin with prior to the OP turning age 60.... Unless the insurance company is now selling term policies based on "current world-events" mortality stats, operating like property and casualty coverage rather than life which is a new marketing scheme.

It's also funny that there is no mention what percentage of commissions are accounted for the increase in the long post #12 "explanation". Plus the move to new policy at age 60 will possibly require quite a bit of medical evidence (ie blood tests, etc), especially for $500K of coverage, apart from health declaration of pre-conditions. Be prepared for that to save some premiums.


----------



## ian (Jun 18, 2016)

Our experience in settling two estates is that portions of an estate can take some time to settle. But much of it can pass immediately upon presentation of a death certificate-including liquid assets, pension survivorship rights, and life insurance payouts.

IF the deceased affairs are set up properly, things like joint ownership with a dependent spouse or a trusted relative or child in order to preclude a waiting period and avoiding the taxes and fees associated with probate (depending on the province). Even probate can be completed fairly quickly if assets are organized.

Insurers base their premiums on actuarial tables. You may be 70 and in excellent health but the insurance company will assume an average premium income of 17 years, ie to age 87 or so. There is no mystery in this. It is the same basis as annuities. It is basic logic, basic math.


----------



## Beaver101 (Nov 14, 2011)

^


> Insurers base their premiums on actuarial tables. You may be 70 and in excellent health but the insurance company will assume an average premium income of 17 years, ie to age 87 or so. There is no mystery in this. It is the same basis as annuities. It is basic logic, basic math.


 ... no, it's not based on basic logic, basic math as it's based on 'insurance math" which you seemed to nailed in your first sentence "insurers based their premiums on actuarial tables" ... but failed with the 2nd last of "same as annuities" ... no, it's not ... the insurance company don't want you to live forever if you buy an annuity from them but then don't want you to die if you get life insurance from them. Ie. they always win or supposedly based on their "expert" calculations.


----------



## Retiredguy (Jul 24, 2013)

OptsyEagle said:


> That is how term insurance works so I doubt they were being rude. More like they were not giving you the explanation you were hoping for. So I will.
> 
> Term insurance is priced based on your odds of dying during that term. As you may know your odds of dying increase each year. I doubt you are upset because of the increase, but more the size of the increase. If you look at a mortality chart you will see that for younger ages the graph of death risk kind of goes sideways left to right with a slow increase upward over time. As you get to age 45-50 the risk graph tends to start steepening up. In your 60s it is pretty much going almost straight up. The price you pay for term insurance will follow that curve. No matter how healthy you are, the chances of you dying this term is about 500% more then the last term. Sorry for that news.
> 
> ...


Thanks OE. I no longer carry insurance but really appreciate your explanation. About 10 years ago I decided to drop my 10 yr term policy because like Mechanic the the renewal premium jump was huge, about 6 x as I recall, and I really didn't need it. However if I had wanted to shop around a health flag would have made a new policy also very expensive. The health issue was long ago (now 25 yrs ago) proven to be not an issue, but the test results on my urine would be the same today as they were then. Since it is now 10 yrs since I dropped the policy, I feel I won!


----------

