The Canadian Association of Accredited Mortgage Professionals reported that of seniors over the age of 65, approximately 35% still have a mortgage. While the 25 year amortization limit has stemmed the trend of homeowners taking on mortgage debt for life, a more interesting trend has come into play – seniors are now taking on mortgages on behalf of their children. Like it or not, senior debt is here to stay, and they’ll need more than just refinancing strategies to combat increasing debt problems.
Senior Debt in Today’s Canada
The explosion and proliferation of debt among Canadian seniors certainly isn’t new, but the conditions of debt are always changing. As our population ages, the largest demographic so-called the “boomers” are continuing to work into retirement. In addition, significant credit explosions fuelled by low interest and massive housing growth have led to younger generations seemingly locked out of the wealth of today’s Canada.
It’s estimated that as many as 30% of younger homeowners expect financial support from their parents in order to afford a home. As seniors dip back into the housing market, they risk leaving little for their retirement years as they continue to support themselves and their children.
To the ends of protecting ourselves against the brunt force of debt, we may be looking at a financial climate in which life insurance for seniors is more valuable and more effective a financial tool than life insurance for their children.
The Needs of Life Insurance are Changing For Seniors
In the not-too-distance past, life insurance for seniors was defined generally as a means with which to cover outstanding debts, funeral expenses, or will small but meaningful gifts to loved one. The expectation is that seniors will have little, if any, significant debt when they die. This expectation is no longer true in light of these new financial changes.
Senior demographics are now facing a need to turn to more traditional forms of financial planning, the types usually reserved for new homeowners, new families, and other groups that are more inclined to take on increasing amounts of debt. Indeed, this need may be even more prominent, as seniors have less earning potential to properly cover these debts. Funeral insurance or final affairs packages no longer provide sufficient financial stability for seniors to bank on them.
In Response, Traditional Life Insurance Is More Accessible For Seniors
Major insurers and smaller mutual groups alike are recognizing that seniors are bringing more financial weight to the table, and in turn are offering them a greater selection of financial tools to address growing debt. Ten to fifteen years ago, life insurance options for seniors were restricted to late night commercials emphasizing leaving behind legacies or helping their family cover internment costs.
But that was then, this was now. With life expectancy on the rise, medical care improving, and later retirement, the ability for seniors to buy life insurance on par with their children is becoming both a real challenge for low-earning retirees and an opportunity to participate equitably in financial planning with younger generations.
Major insurance providers such as Sun Life, La Capitale, and Assumption Life have already begun to extend better options and more generous age limits on traditional life policies, and the potential to waive some medical requirements are becoming more common – even on products with very high face amounts.
As the financial troubles of seniors have increased, so have the tools available to combat them. In coming years, it’s not too unlikely we’ll see a larger upheaval in what we consider retirement and financial planning for seniors. However it remains that life insurance remains one of the most powerful financial tools seniors have available to them.