Many people think they will be able to let insurance lapse once the house is paid for and the chudren are out on their own. But people of retirement age are revisiting insurance for other reasons, including estate planning. Some people over age 55 keep up their existing insurance plans, and some even buy new insurance.

As people age, term insurance premiums begin to become more expensive. Some people tell no longer qualify for insurance because of health problems. By age 75, most term insurance policies no longer apply.

For the single person with no dependants, there appears to be little need for a life insurance policy. The estate will pay for a modest funeral, and there is no one who needs to be supported.

But both singles and couples nearing retirement age begin to think more about estate planning and their income flow after retirement.
People should consult a financial planner to see how their insurance needs mesh with their plans for retirement or estate planning, says Dave Myers, regional consultant tax and estate planning for Manulife Financial in Winnipeg.

Many couples have one spouse with a company pension plan and one without, either because they have been out of the workforce or because their job provided no pension plan. The spouse with the pension plan has the choice of a life annuity for a single person only, or a spousal annuity, which extends over the life of both partners but gives a lower benefit.

If they choose the life annuity and the spouse with a pension plan dies, the surviving partner may be forced, to live on a government pension, Myers says.

An alternative is to buy a life insurance policy that will provide the spouse with a lump sum that can be invested to provide an income. The increased benefits of the life annuity may be high enough to support the cost of premiums. Or a whole life policy bought earlier in life can be kept up. The balance between premium cost and potential benefit in increased annuity payments would have to be worked out with a financial planner, Myers says.

Because premiums for universal or term-to-100 insurance are higher the later in life you buy them, it would be better to buy earlier in life, Myers says. But few people consider beyond their immediate needs when they are in their 30s and 40s. Many reach retirement with dribs and drabs of insurance - perhaps a company plan based on two times annual income and a private top-up plan bought initially to cover the mortgage.

At retirement the company plan is seldom convertible into a universal plan. And coverage may either cease or be greatly reduced.

So many retirement-age people are buying new insurance policies, says Paul Bourbonniere, retirement income specialist at Capital Management Group in Markharn, Ont.

They buy universal life or term-to-100 insurance policies, the kind that extend throughout their lives. People up to age 85 can buy such policies, although the premiums are higher for older people, he says.

The main reason to buy insurance at retirement is to preserve your estate, he says. When the first spouse dies, RRSPs, RIFs and the family home roll over to the surviving spouse tax-free.

But when the second spouse dies, the government takes the tax deferred on registered investments and on the capital gains in the family home before the children inherit.

An insurance policy can cover that tax, Bourbonniere says. And insurance benefits are always tax-free.

Avoiding the RIF tax is one of the most common uses of insurance for older people, he says. People say, 'I worked hard for this money. I don't want the government to get it.'

Some couples even combine a gift to a charity with their tax planning when they draw up their wills, he says. They may leave their RIFs to their children, but take out an insurance policy for an amount equal to the investment and leave it to a charity.

In the year they die, the government deems all their deferred taxes to be due. But a charitable tax credit equal to the value of the investment wipes out the tax due. Both their children and the charity are ahead, he says. Changes in the 1996 budget make it easier to leave money to charity, and many tax-saving methods involve insurance, Myers says.

Single people might want to consider an insurance policy as an effective way of leaving money to a favorite charity, he says. One method is to gift the benefit to the charity when you die. Another is to give the charity the policy now and make out cheques annually to cover the premiums. The donation you make to cover premiums are charitable donations and give you a tax credit, Myers says. And knowing the death benefit is coming can help a charity plan ahead in tough times.

The first people to consider in insurance planning are a spouse and dependent children. But some of the baby-boom generation have a new worry - dependent parents, says Jon Hitchcock, director of advanced sales and market development for Sun Life Assurance Co. in Toronto.

An elderly parent who has special health needs or requires constant care in a nursing home might rely on a son or daughter to pay for care.

An insurance policy can be set up to provide income as long as the parent lives, in case the child dies first.

Insurance is also valuable in succession planning, he says. Small-business owners must plan carefully for succession to ensure survival of their business when they die. They might want to leave enough money to buy out an existing partner. If a family member is already lined up to take on the job of running the company, the owner might want to leave enough for them to pay off debts and make a few mistakes as they get a feel for running the business. An insurance policy can be written to cover these contingencies.