A short conversational explainer (Jayson Lowe and Richard) about what happens to Canadian life insurance policies if the insured lives past age 100. Key points covered so far: increasing longevity makes this question more common; participating whole-life policies (example: Equitable Life of Canada) remain in force past age 100 and remain eligible for dividends, but life-pay premium obligations cease at age 100 (policy becomes paid-up); outstanding policy loans continue and interest accrues (affecting death benefit); by contrast, term-to-100 contracts with no cash value end at age 100 with no payout if the insured outlives the term. The transcript indicates the video will also discuss how other carriers (Sun Life, Canada Life, Manulife) treat similar situations.
Chapters
What happens.
If the life insured lives past age 100?
A party for one. Yeah, As a celebration.
Like, whoa, dude, you did it.
High five.
I'm sorry, I didn't mean to break your arm. A lot of your friends might not be there, but it should be one heck of a party anyway.
Yeah. The centurion. So becoming a centurion, I guess, is what they say. Yeah.
And this is a question that comes up because of what we share with the, you know, the marketplace and with existing clients is that with a policy, when you have a dividend paying, participating whole life insurance contract or a system of contracts, the total cash value is contractually guaranteed to match the total death benefit by age 100 of the life that is insured. So naturally a question that comes up is, well, what happens if the life insured, who also happens to be the policy owner, lives past age 100? And so we'll walk through a couple of different life carriers in Canada and we'll just have a conversation, just an open conversation, Richard, about this because I think it'll be really educational and it'll not only help existing policyholders or prospective policyholders, but, but it'll also help other advisors out there across the country who might be wondering the same thing or who maybe have not been asked that question before. And it'll likely come up, you know, at some point in their dealings with their clients as well.
And to add to that, Jason, it's, it's also the probability, the likelihood that those questions are going to start happening is going to go up each and every year because of increased longevity. People are living longer. Lots of people are crossing that 100 barrier. And you know, with the advances of medical technology, we're probably going to see more and more. You know, a child born today has a very high probability of living to age 100.
Absolutely. And so let's begin with Equitable Life of Canada. So we're going to, we're going to run a commercial today for a few different life carers in the country, which is something that we prefer not to do, but we're going to go ahead and do that anyway. Equitable Life is Canada's largest mutual life insurance company. So there are no stockholders. The participating dividend paying whole life policyholders are the owners of the insurance company. Now, if, with Equitable, if the life insured is still alive at age 100, the policy will continue in effect and it will continue to be eligible for dividends. Now, of course, Richard, as you know, whenever a policy is illustrated, it's only illustrated up to age 100. So there's no illustrated values that carry on beyond that. But in all cases, if the life insured is still alive beyond the end of the illustrated years, the policy remains in effect and will continue to be eligible for dividends. If the policy premium payment option is a life payment, premiums are not required past age 100. It's paid up.
What I'm talking about here obviously, is you can have a policy where you have a single life insured, you can have a policy where it's joint life insured. So important to have a conversation with your advisor about how those things work. But in general, the policy itself does not endow. So what that means is that the death benefit's not going to be paid unless the life insurance company receives a claim for the life insurance benefit. And so it's just really interesting to know that, hey, congratulations, if you live past age 100, which there's going to be an ever increasing probability of that occurring just based on increased mortality, then your policy will continue. And that's really good news.
Well, it'll continue and also continue to earn dividends. Yeah, Life company as well. And all the contractual features you have will, will still be available. The, the other thing, however, you won't be able to continue paying a premium. So the life pay example, so Jason mentioned life pay. So it doesn't matter where you start. If you start at age 1, age 25, age 45, age 60, then your starting point, and then age 100 is the end point and premiums are paid during that period. It's called a life pay. And so once you cross age 100, there's no more. The calculated actuarial cost of the insurance has been completed, it's been fulfilled, which means there's no more requirement for premium at that point. So even if you wanted to continue paying a premium, you would not. Now, however, if you have a system of policies and you have other people that you've insured who are perhaps younger than you, you would probably still be able to pay premiums on those ones. As an example, you get a policy on your children, which your children aren't at age 100 yet, so you still have the ability to pay premiums there. So that's another reason why we talk about a system of policies. And again, you'll still have your loan provisions, et cetera. Now, one thing to be aware of is that if you've been using a policy for augmenting retirement income, using either a collateral assignment or some kind of a loan structure, and there's an outstanding loan. Well, that loan is still there as well and it's still increasing with, with interest accumulation at the same time. So again, there's a balancing act that there to be aware of. The key thing is that the policy doesn't just pay out and it's not ended, it continues to go because it's for your whole life. Now contrast that to another form of what's considered a form of permanent insurance, although I don't understand why. A term to 100 contract, so termed age 100, is a type of term insurance you can get which has no cash values. It's considered permanent because the industry considers age 100 a permanent contract. Well, if that contract goes to age 100 and you outlive it, then not only do you not have any of the premiums, you have no benefit. The benefit is over. It ends at that time because it was a term contract. So the whole life is for your whole life.
Going back to the whole life for a moment. So like you said, if there's a loan amount at age 100, the life insured is still alive. Yes. The interest will continue to accrue. However the interest is, it's not accruing to you, it's accruing to the death benefit. Then the policy will continue to grow.
Because it's growing because of the dividends. So again, there's a level of balance that can be maintained or attributed to those two things.
And then the other carriers, so speaking of, you know, Sun Life, of Canada, Canada Life, Manulife, they treat.
This type of contract no differently. The policy continues, dividends will continue to be paid. If there's a loan balance, interest will continue to accrue on that loan balance. However, the policy is still going to continue in terms of its, its growth and receipt of dividends and all those great things. But just important to know that there won't be an automatic payment of a death claim. The death benefit will not be paid until a claim is submitted. So if you live to age 110 and you're still in ownership of that contract, then a death claim would be submitted at that time and there would be obviously a significant death benefit that would be paid out to named beneficiaries on the insurance policy itself. So not much more to add there. Pretty, pretty straightforward. That's what happens. And we hope that this video was helpful and on the YouTubes because this is being posted to that, to that platform. There's going to be, as we always do, there's a recommended playlist we would encourage people to continue their journey of learning, continue growing. There's no such thing as having arrived in knowledge, always something new to learn.
