If you're paying for life insurance and you're retired, here's how to know if you should keep an old policy in place
Q: My mother is 97 years old, in excellent health and living independently in her own home. For a very lengthy period of time, she’s paid for a whole life insurance policy. The premium is $121, paid semi-annually. Does she really need to continue to pay premiums on this policy or can she cease paying and just leave the policy alone?
—Chris R., Waterloo, Ont.
A: She is 97? Fantastic! What is her secret? I want to meet her. And I want to be her. Wait. Sorry. You asked me the question. I’m afraid my answer requires you to follow up with your broker to understand some math.
Lorne Marr of LSM Insurance says you’ll need to call and find out, “if the annual dividend exceeds the annual premium and if so have them apply it to the premium.” The dividend fluctuates based on interest rates and the profitability of the insurance company. Marr goes on to say that, “if the annual dividend is not sufficient, she might be able to take the difference from the accumulated paid-up additions.” Paid-up additions result when the dividends left in the policy are not paid out in cash or in premium reductions, for example. While you’re on the phone, I would ask them what the payout will be on her passing. If there isn’t an accumulation of paid-up additions, it may well make good financial sense to continue to pay the premiums to make 100% sure that money eventually comes to her beneficiaries.
Ask Bruce: Leave a question for Bruce Sellery »
Watch:
[bc_video video_id=”6023949699001″ account_id=”6015698167001″ player_id=”lYro6suIR”]
More stories:
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
The “Infinite Banking Concept” is gaining popularity with Canadian retirees—but it’s not right for everyone. Here’s how this leverage...
Just in time for Canadian Financial Literacy Month in November, Four Steps to a Worry-Free Retirement course by Kyle...
If you became ill or injured, how long could you keep paying for household costs, including your mortgage? Here’s...
Mortgage protection can be a good idea, if for instance you have a condition or illness that might make...
A guide to critical illness insurance—why many Canadians are looking into this kind of insurance policy. Find out what...
Short-term disability insurance briefly provides income if you can’t work due to illness, an accident or hospitalization. But there’s...
Avoiding probate fees in Canada involves implementing strategies such as using beneficiary designations, joint ownership, and establishing trusts to...
What is life insurance? Do you need it and, if so, what kind? How much will it cost? Find...
Despite its complexities and cost, universal life insurance offers greater flexibility and some tax advantages. Here’s how it works....
Is a whole life insurance cash value taxable? Spoiler: Yes. But find out how to calculate the taxable amount....