# Life insurance post-retirement



## mediaman (Feb 16, 2015)

Apologies if this has been discussed before but I couldn't find it...

I am 61 now, recently retired and am reviewing my life insurance (aka early death insurance) options. I am reaching some conclusions, and wanted to run them by this group to confirm if my logic is sound, or badly flawed !

When I was in late twenties, a lifetime ago, with young children, a mortgage and the only income earner, my priorities were income replacement, and the paying off the mortgage , in the event of my untimely demise. At the time, in order to provide affordable and sufficient protection for my family, I took out a term insurance vs whole-life policy (yes- there is always debate over term-vs- whole- life, but regardless, that ship has sailed) . I was also paying into a company pension and contributing to RRSPs and later some TFSAs. Looking back I have no regrets.

Fast forward thirty years. My situation is now different -


My mortgage is paid off
Kids are grown and out of the house
In terms of income replacement, my main income is from the pension - if I die, my wife gets 2/3 of my pension, which is, to my thinking, is very similar to a large term insurance policy payout used to generate income.
My current term insurance premiums are now of course higher now (as they gradually increased every 10 years), but still not unreasonable ie $2000 a year for $250,000 payout. But the premiums will double in the final 5 years. and the policy will end at age 75. No coverage at all after that.
I looked into topping off what i have with a Term 20 insurance policy (about $1200 a year for $100K coverage if I take it now, while healthy) … however I would still have no coverage after 20 years, when I am 80, when arguably I would need it most. As I am covered to age 75 anyway, I don’t yet see the merits of this option
I also looked into a Term to 100 insurance policy (about $1500 a year for $50K coverage if I take it now, while healthy). I like the notion having some extra coverage for life and not worry about it again. However if I die at say 90, I would have paid in $45K! I know that’s not the point as if I die at 75, I would have only paid in $22,500 for a $50 k payout), but still, the math bothers me for Term to 100.
As I am older, I am also more concerned/aware not so much about death insurance, but about living insurance, ie the future need and expense of long term care (which could run a pricey $4k a month). There is LTC insurance for this at about $300/mo but there seems to be a lot of fine print. At the lower premiums, the rates are only guaranteed for five years; if you need the coverage there are terms and conditions - if you never need the coverage there may or may not be a return of premium. And that's only for me, not my wife Paying for two LTCS policies is prohibitive, And come to think of it, the need for LTC only exists when one of us is gone .. but there is no way to know now who goes first! If there was a family LTC package it might make more sense. I am thinking to let the kids are figure out the care (as I do now for my mom!) using my existing income and my assets and even reverse mortgages if needed. So, not convinced the math works out for LTC insurance.
*My conclusions are this:*

NEEDS - Recognize that my insurance need have reduced given the house is paid off, and my pensions provides income for my wife, for life
RETAIN EXISTING TERM COVERAGE - Keep the present $250k policy for at least the next 10 years. It’s a large payout (relative to the cost) in the event of my early death. Might be foolish to cancel at this stage, thought perhaps dropping to coverage to $125K might make sense in those final five years.
SELF- INSURE TO COVER ALL NEEDS AND BUILD EQUITY- To provide peace of mind for the age 75-to-life timeframe, , rather than taking out new Term 20 or Team to 100 or LTC policies, adopt a self-insurance strategy. Consider TFSA as my insurance policies. Continue the discipline to always max out contributions and never withdraw. Ignoring any growth:
By age 75, after 15 years, balances would be
- HIS: $41k plus 15 years at $5500k = about $125k
- HERS: $41k plus 15 years at $5500k = about $125k
By age 90, after 30 years, balance would be:
- HIS: $41k plus 30years at $5500k = about $200k
- HERS: $41k plus 30 years at $5500k = about $200k
That money is there for LTC, or death, and all for 'zero' premiums. And all tax free, just like insurance.
LEAVING A LEGACY FOR MY CHILDREN . They will have the house , the RRSP, the TFSA, etc Its enough. I dont need to pay in thousands more every year, in my retirement years, just so they get a additional x-hundred thousand dollar payout.


Is my logic sound, or badly flawed?


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## OnlyMyOpinion (Sep 1, 2013)

mediaman said:


> Apologies if this has been discussed before but I couldn't find it...
> I am 61 now, recently retired and am reviewing my life insurance (aka early death insurance) options.
> ...
> *My conclusions are this:*
> ...


Mediaman,
The above exactly describes myself and my conclusions as well.
A few comments:
1 You will not be refused LTC in a ward room (4), but a private room would require your own funds. You may not be overly concerned at that stage of life though. There are some pretty posh retirement homes and assisted living which come 'before' you need LTC that can be expensive. Perhaps you are including those settings?
2. While we have not yet addressed it, the cost of dying and burial/cremation is apparently increasing steeply. We should start looking into prepaid plans versus hanging onto the funds. I'm not sure which makes most financial sense but a big part of this is having everything looked after so your survivors don't have to be making tough/expensive decisions.
3. Our legacy is assured but its final value will depend on the nature of our lives between now and then.
4. Our wills, POA, HCD need to be revisited and conveyed to the executor (our children).

I've just spent a month sleeping on an apartment floor, looking after a mom with early dementia and visiting a dad in the hospital daily. Fortunately they are both now back to their retirement apartment and doing ok, but it really does serve to focus one on the need to plan - just as you are doing. 
It also blew hell out of my monthly retirement budget, but that's a hiccup.


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## OptsyEagle (Nov 29, 2009)

The life insurance question is easy to answer: Will someone you care about be seriously financially harmed if you were to die?

From the sounds of it I suspect your answer to the above question to be no. In that question, no where to be found was the questions: Would someone I care about like a big windfall of money if I were to die ...or...is paying X a good deal for someone other then me to get Y, if I died?

Anyway, you don't need life insurance and therefore anything you spend on life insurance will most likely be money wasted. So get rid of all of it. It is not a good deal, since the odds are highly likely the insurance company will never pay a nickel to any of your beneficiaries and it is an absolute certainty, that they will never pay a nickel to you.

As for the LTC insurance. I agree the fine print is pretty fine. I don't really care for the 5 year premium guarantee. The insurance companies who offer this have already demonstrated that their premium calculations were in error, in the past, and have already hiked up the premiums for customers in the past. My concern is that if it ever works out that it becomes a good deal for you, they will most certainly raise your premium and squash that good deal pretty quickly. Also, as someone mentioned, if you factor in all the money you will forgo from our government, if you become unable to look after yourself, the deal start get worse and worse.

So that being said, I wouldn't bother with LTC insurance either.


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## mediaman (Feb 16, 2015)

OnlyMyOpinion - All the best with your parents. Its an exhausting time, but I see it as a labour of love.

Thanks for the reply. Encouraging to see similar conclusion by others. 

Yes, important point re getting ones wills, POCs and HCDs brought up to date. Started that last week in fact, for both myself and my wife. Also having the open discussions with my adult children on everything so they know. Both my parents had that discussion with me back in the day with my so I wouldn't be in the dark at the very time I would be in an emotional roller-coaster. I am going a step further (heck I have some time now), and am setting up a binder, for my wife and kids, with all the basics, signed documents, contacts, notes etc. It wont of course answer every question they may ever have, but it will be a great start and avoid them having to scramble, and will hopefully give them some peace of mind.

Re funeral costs, yes needs to be covered - not sure about pre-paid options - I suppose if makes sense if one can hedge against ever increasing prices, on the other hand, what if I outlive the funeral home? ; are the funds protected in any way?


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## mediaman (Feb 16, 2015)

OptsyEagle said:


> .... no where to be found was the questions: Would someone I care about like a big windfall of money if I were to die ...or...is paying X a good deal for someone other then me to get Y, if I died?


I think we would all like to receive a big windfall, but its hard to figure out the benefit paying X to get Y when you don't know how long you are going to live. If I start now, for a $100K term to 100 policy, its about $3k a year in premiums, so:
If I die at 70, I would have paid in $30k (that could have otherwise grown) , but still a good deal for the insurance payout.
If I die at 80, I would have paid in $60k (that would have otherwise grown) , so less of a good deal for insurance.
If I die at 90, I would have paid in $90k , so that a bad deal.

I think I would rather avoid those premiums altogether and just fully fund my TFSA instead. If it turns out insurance would have been a better deal, I will never know!


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## OhGreatGuru (May 24, 2009)

I will not attempt to comment on your detailed proposals. I will instead just say your need (if any) for insurance depends on the surviving spouse's need for income after the pensions have been reduced. So do an income projection and figure it out.

On Long Term Care, if you are able to live comfortably now on your pension and other investments, the odds are you have enough income for LTC because this is heavily subsidized. Check your provincial associations for current rates to confirm. (Actually, even if you don't have enough income, you will be eligible for a further subsidized space. But then you will have less choice of where they put you, and it is likely to be an older, less desirable facility.) 

The financial pinch is more likely to be when you are no longer well enough to stay in your home, but too well to qualify for LTC. Because Seniors' residences (at least in most provinces) are not subsidized, and the costs for rent, meals & services can be high. OTOH you will have the proceeds from the sale of your mortgage-free home to help cover this.


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## cougar (Oct 15, 2014)

We have also chosen no life insurance at this stage in our lives-age 57 and 62 and each work some casual hours to stay active. We have no debt, a 16 year old at home but with enough money to educate her and provide an inheritance unless we both live until 90( and long before then she needs to provide for herself!) I have a private pension that will pay 100% to either of us for life. We are not purchasing long term care insurance either-but we do buy travel insurance when we travel.


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## fraser (May 15, 2010)

I only had a very small (100K) term life outside of my work coverage. At work, I loaded up on term insurance, 7 times my salary, because it was so inexpensive.

Work insurance went away on retirement other than a $10K company retirement policy. I cancelled the outside policy after reviewing our financials with the advisor. Could not see any reason to continue paying and increasing premium for something that we really did not need.

I do not think that you can learn from what other people have done. Review your own situation, the financial needs of your survivor, and then make the right decision for you. But...don't rely on an insurance agent. Get some independent advice. 

Five years on, I am glad that I axed the policy. Our assets in retirement have been growing, not shrinking.


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## Eclectic12 (Oct 20, 2010)

OnlyMyOpinion said:


> A few comments: ...
> 2. While we have not yet addressed it, the cost of dying and burial/cremation is apparently increasing steeply ...


Considering that I seem to recall George Takei (Sulu from Star Trek) writing in his autobiography that he was grateful his father insisted he invest some of his acting wages into funeral plots as an investment instead of the sports car he wanted (which was a long time ago) ... it would seem rising prices is not all that new.


Cheers


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## pwm (Jan 19, 2012)

I'm like fraser. I too left my life insurance behind when I retired. I have no life insurance now. I paid extra at my job for 5 X salary term insurance when I had a mortgage and kids at home. It was very inexpensive since I worked for the Life Insurance company that provided the coverage. I didn't feel I had any need for life insurance when I retired 10 years ago and never will again.


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