Buying life insurance may not be high on the list of financial priorities of clients who have settled into retirement. Nor is the topic likely to be on their radar as a product that could be relevant for their needs. But, given the valuable role that insurance can play in a client’s estate plan, life insurance can be a useful financial planning tool for many clients well past the age of 65.

“Insuring an individual is a planning consideration, regardless of age,” says Asher Tward, vice president of estate planning with TriDelta Financial Partners Inc. in Toronto. “[Whether a client is] 80 or 60 or 30, insurance is a very powerful tool. And we use it a lot.”

Most insurance companies will issue life insurance to individuals up to age 85, and it is common for clients to buy life insurance when in their 60s and 70s as part of the estate planning process. Insurance can represent an effective way for these clients to offset taxes payable upon their death, cover funeral expenses or leave a legacy.

Insurance is one of the most efficient tools to help clients facilitate a seamless transfer of wealth, says Nathan Kupusa, president and founding partner of Solutions for Aging Inc. in Burlington, Ont.

“It’s a tax-free benefit that’s paid directly to the beneficiaries,” Kupusa says. “It’s an extremely good option.”

Insurance can allow your clients who are relying primarily upon a pension or an annuity for income in retirement to leave a legacy without worrying about how much they’re spending and what will be left over in the end.

Retired clients who are living on a pension income may not be setting anything aside for their heirs.

“So, what are they going to leave behind?” Tward says. “Insurance is a great way for them to guarantee that they have a legacy built for their kids.”

Clients who already have savings set aside and earmarked for their children and grandchildren may not think insurance is necessary for their estate plan. But by using those savings to fund an insurance policy, Kupusa says, you can help your clients increase the size of the inheritance they leave to their beneficiaries.

In addition, clients who expect to face a steep tax bill upon their death, such as those who have a large sum of money tied up in a corporation, can use an insurance policy to pay those taxes, Tward says.

Life insurance also presents a popular and tax-efficient way for clients to leave a charitable donation upon death, according to Marcy Ages, vice president with T.E. Wealth, a subsidiary of Industrial Alliance Insurance and Financial Services Inc., in Toronto.

Some advisors tend to bypass the topic of life insurance with their older clients, on the assumption that those clients will have difficulty getting coverage.

Although clients over the age of 80 often have a harder time getting approved, Tward says, clients in their 60s and 70s who are healthy usually have no trouble securing coverage. In Tward’s experience, even seniors with various health conditions have been approved at a standard rate.

“If your client is older, don’t write off insurance planning as an option based purely on their age,” Tward says. “That would be a mistake.”

Even if a client breezes through the underwriting process, however, affordability could present a barrier to obtaining insurance for some seniors. The cost of an insurance policy is substantially higher for a client who buys one at age 70 as opposed to at age 40 or 50.

“The cost [of obtaining life insurance] can be prohibitive at age 65,” Kupusa says. “If you’re retiring, you may have a limited budget. And adding a large insurance premium to a limited budget may not make sense to the client.”

Ages agrees that cost can make insurance unfeasible as an estate planning tool for many senior clients.

“If you’re talking to someone who is in their 60s about it, it’s going to be expensive,” she says. “To me, it’s lower down on the list of options.”

Kupusa says life insurance should be considered only as part of a comprehensive review of a client’s financial situation, taking into account the possibility of unforeseen medical costs that could emerge as the client advances in age.

“You want your client to be able to afford [an insurance policy] – not just for a year, but for the long term,” Kupusa says. “If it doesn’t make sense, just tell them. Be practical about it.”

Clients who have the means to afford insurance should not view the premiums as an expense, Tward says. By comparing the eventual payout of the policy with the total amount a client would pay in premiums, assuming he or she lives to life expectancy, you can demonstrate the potentially lucrative returns of an insurance policy.

“If we’re taking about an estate legacy that’s actually guaranteed to be there,” he adds, “then it’s not an expense; it’s an investment.”

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