Are Life Insurance Companies Exploiting Seniors?
Canada's 2011 Census confirmed what we all were sure was coming. Back in 1971, the National Post reports, only 8% of us were 65 and older, and now, that percentage has ballooned to 14.8% — which is nearly 5 million seniors out of 33.5 million Canadians. It's the highest number of people over age 65 that there has ever been in this country.
With Canadian baby boomers approaching life as senior citizens, insurance companies are scrambling to figure out what's the best way to profit from this market segment.
Seniors pose a unique opportunity and risk for Canadian insurance companies.The opportunity lies in the fact that these people are older, so automatically, the premiums generated are going to be higher than other segments of the population. However, they also have a greater risk of dying over a given period of time, so insurance companies will probably have to pay out sooner than usual.
So how are Canadian seniors disadvantaged when trying to get life insurance?
LSM Insurance President Chantal Marr notes the following:
1. Seniors are obviously paying a much higher premium than younger applicants, as stated above.
For example, a 55-year-old, male non-smoker pays $718 a year for $100,000 of Term 20 life insurance, but a 65-year-old male would pay $2036 a year for that same $100,000 worth of term 20 life insurance. This is almost three times the normal rate.
2. Seniors have to go through a much more stringent life insurance eligibility screening than younger applicants, especially at a larger face amount.
3. Seniors are bombarded with direct mail and other advertising that solicits them to buy no-medical life insurance plans. However, what applicants over 65 and in otherwise good health don't know is that they would get much better value by applying for a traditional life insurance policy than going for one of these direct no-medical plans.
4. On the other side of that coin, seniors with health issues would still likely be much better off shopping for a no-medical life insurance policy through a broker, instead of one of the popular guaranteed-issue plans sold by the insurance companies directly. This is because direct guaranteed-issue plans offer the most expensive form of coverage and have a waiting period for non-accidental deaths. This means that if the insured dies in the first two policy years, their death benefit will be limited to a return-of- premium plus interest.
It's not impossible to get a good deal on life insurance as a senior, but it definitely takes careful consideration. Be warned that the wrong decision could translate into paying thousands of dollars of extra premium unnecessarily.