Blue Zone 2.0: Living to be 100, part 2

With Singaporeans living longer, traditional notions of life insurance now have to be revised. This is especially true for individuals who are lucky enough to reach their 100^th year or beyond; at this point, even one’s beneficiaries may already be retired, and their needs and aspirations may be unrecognisable compared to their younger days. For this reason, life insurance needs to evolve, and the policies need to be constantly refreshed for the longer-lived among us:

How does life insurance change as you reach 100+ years of age?
Before we get into it, let’s have a quick rundown of what life insurance is supposed to do:

Life insurance pays out to your chosen beneficiaries (be it family, charitable organisations, or other people you care about), when you pass on or are permanently disabled. This means that life insurance mainly benefits others you care about, rather than yourself; and it ensures they’re financially protected when you’re gone.

The challenge here is that, should you live to a very advanced age, the situation for your beneficiaries may be very different. This means you need to consider factors such as:

• The amount that your beneficiaries will need, now that they’re likely also older
• Possibly changing your beneficiaries altogether
• Whether your life insurance policy stretches long enough to cover you till death
• Deciding if it’s time to take the cash value
• Changing nature of organisations, if charitable causes are involved

1. The amount that your beneficiaries will need, now that they’re likely also older
This already happens at a much earlier stage in life. For example, when your children are very young, you may want to ensure much higher payouts if you pass on (as they will need extensive care and support).

By the time your children are 18 or 21 however, you might reconsider how much they need - they’re older and have the ability to work on their own. At this point, you may want your life insurance to benefit your ageing spouse more than your children.

As you begin to approach 100 or beyond, however, your children will be much older; some may even be retired already. This can mean they have fully paid-up mortgages, and don’t need to worry about accommodation (thus requiring less from your life insurance policy).

On the flip side, if they’re in poor health, you may want to consider raising the amount to leave to them (if it’s viable, as raising your life insurance coverage at such an advanced age may be very expensive).

Advice from a qualified financial representative is important here, as the resulting planning can get more complex. One thing is for sure: this shows your life insurance planning is never a one-off activity, and you may need to change it up at many different life stages.

2. Possibly changing your beneficiaries altogether
If all your children are happily retired, or nearing retirement, you may decide they don’t really need help from you anymore. This could be the right time to focus on life insurance that will benefit your grandchildren, or even causes that you care about (e.g., the SPCA, NKF, your old school, and so on).

This is probably best done after a conversation with your family though, so everyone is clear that this isn’t some kind of slight. If you have centenarians in your family who are doing this, you may also want to ensure they’re not being unduly influenced by caregivers, members of certain organisations, and so forth.

3. Whether your life insurance policy stretches long enough to cover you till death
How long does your life insurance policy provide coverage? The answer is: it depends. There are policies that cover you till 90 or beyond; but there are also simpler policies - such as a term life policy - that only covers you for a fixed number of years.

If you’re 25 years old, for example, then a 50-year term life plan will end when you’re 75. This is a major issue, as trying to find new life insurance at that age is going to be tough. Even if you do find an insurer, it could be prohibitively expensive, as by then you would likely have more pre-existing conditions, or be considered a much higher risk.

Life insurance is almost always a better deal if you buy while younger, and lock in a better rate. Speak to a financial representative to start planning ahead.

4. Deciding if it’s time to take the cash value
Some, but not all, life insurance policies accumulate cash value over the years. The cash value may have a guaranteed and non-guaranteed portion, making it hard to predict the exact amounts (this is separate from the guaranteed death benefit, which is always paid out exactly as stipulated).

However, almost all policies have some way for you to access this cash value; this can range from allowing you to take out a loan against it, to giving you a sum of money for surrendering the policy.

Most of the time, this isn’t done as it can result in lower payouts. However, if you’re approaching an advanced age, and your children are already old and established, you might decide there’s no real need for further life insurance. This could mean deciding to surrender the policy, and allocating the funds elsewhere in your retirement planning.

This isn’t something to do lightly; but it is worth talking to your financial representative about it, if you feel you’re reaching an especially old age.

5. Changing nature of organisations, if charitable causes are involved
If your beneficiaries involve a charity, or an organisation like a religious institution or school, be sure to check on them over the years.

It can be a legal mess if you name an organisation as a beneficiary, but the organisation has disbanded or changed its name by the time you pass away (if you live to 100+, there’s a much higher risk of that happening). You’ll also want to make sure that, over such a long period, the organisation still maintains the mission or causes that inspired you to support them. Otherwise, as we said in point 2, it may be time to change the beneficiaries.

Life insurance is never static, and needs constant updating
It’s normal for your beneficiaries and coverage to change over the course of your life; but always keep in mind that your options tend to narrow as you get older (as there are probably fewer organisations willing to insure you, and if they do it may be for much higher premiums).

Do consider this when deciding the length of your policy; and spare a thought for contingency plans. Finally, do also consider having a financial representative who can be with you for the long term to manage the late stage of your planning.