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Life insurance for later in life

As you age and your health starts to deteriorate, having a financial safety net and protecting your nearest and dearest may become even more important. But how old is too old for insurance, and do you or your parents still need cover if they are nearing retirement or no longer have an income? The answer is there could still be benefits from keeping personal insurance cover.

Why you (or your parents) might still need insurance

As you get older, a lot of the reasons for having Life, TPD or income protection insurance might no longer apply. Perhaps you’ve stopped working, paid off your mortgage and no longer have family members to look after financially. You might now have enough income from super savings to save you from worrying about covering your living expenses in the future.

But before cancelling an existing Life or TPD policy to save on the premiums, it’s worth taking a closer look at your (or your parents’) situation. Maybe you still have life goals and responsibilities that could benefit from having insurance cover in place. Plus there could be health problems looming that will make demands on income and savings.

While health insurance is key in covering the cost of a hip replacement or cataract removal, life insurance can still have it’s benefits later in life, especially if you or ageing parents:

• Have a tight monthly budget to stick to
• Don’t have a lot in the way of savings to fall back on
• Are helping out family members with living expenses
• Will have to sell the family home to fund aged care
• Would like to leave family an inheritance

Meeting the cost of care

Some of us may find ourselves with ageing parents that will depend on us almost as much as our children. Sometimes the help they need is practical – like driving them to appointments and helping them around the house. But there may come a time when the time and support you can offer isn’t enough. And while there is some funding available from the government to help with aged care, there are some costs that won’t be covered.

If one of your parents needed to pay for their move into an aged care facility, for example, the only practical solution they may have to meet this cost is selling the family home. Having a TPD policy that offers them a payout when they lose capacity to care for themselves due to injury or illness could give them the choice not to sell, and keep more of their wealth to pass on to loved ones through their estate plan.

Consider a health-check before cancelling

Even when you or your parents are in a pretty good position financially-speaking, state of health is something to keep in mind when choosing whether to keep life or TPD cover. Before cancelling, consider organising a comprehensive medical check-up to make sure there aren’t any health problems that could spell trouble in the near future. For anyone that’s had a policy and been paying premiums for several decades, it makes sense to be sure they’re still fit as a fiddle before giving up the benefits of cover.

When do insurance policies expire?

Most policies will continue to accept new applications and provide ongoing cover for people up to around the age of 64 years old, provided there are no serious pre-existing conditions.

Applying for cover later in life might mean a medical exam or blood test is required.

But when it comes to taking out new cover later in life, it’s important to keep in mind that premiums on a policy will be far higher for cover in your 50s and 60s.

When looking at an existing insurance policy, or are thinking about getting a new one, there are two important terms to be aware of:

• Maximum entry age – most life insurance companies will set a cut-off age for getting a new life insurance policy or for switching to a new one. This is usually between 60-75 years of age but it will depend on the insurance provider and type of policy.
  
  
• Policy expiry age – this is the age when the life insurance policy will automatically end. This is usually 65 years for TPD cover, 70 years for Trauma and Income Protection and 99 years of age for Life (Death) cover - but again it will depend on the insurance provider and type of policy.

This could mean that continuing to pay for a life insurance policy during retirement could provide 30+ years of cover. That’s a lot of peace of mind and potential for a lump sum payout.

However, it's important to remember that you have to keep paying the premiums to get the benefits of cover. And depending on your policy the costs of those premiums will continue to increase or the amount you're covered for will reduce, as you get older. Just because you've paid for cover for a long time doesn't mean you' can't stop now - don't let the sunk cost fallacy steer you towards a decision that isn't in your best interests.

As always, make sure you read the Product Disclosure Statement (PDS) before you purchase any insurance policy.

Other considerations for ageing parents

Old age is complex and parents often need help from their children to get ready for a time in life where they can no longer make sound financial decisions. In our final topic, we explain why everyone – not just parents – really needs to have a will and the important legal documents that make up a good estate plan.