Retirees may find life and health insurance particularly useful for several reasons:
1. Settling funeral expenses in advance
In general, financial advisors estimate funeral expenses at $10,000 per person (funeral home, religious service, burial, tombstone and, as the case may be, a reception for loved ones, etc.).
The $2,500 death benefit provided in Ontario by the Canada Pension Plan covers only a portion of these costs. The benefit is paid to individuals who have made sufficient contributions to the plan, i.e. most workers in Ontario. It is added to other estate income and is therefore taxable.
2. After-death taxes
When a person dies, the tax implications can be significant, which is why some people take out insurance to protect the value of property bequeathed to loved ones. When the time comes, the insured amount will cover the amount due in taxes.
3. Inheritance and planned donations
You can also take out personal insurance to leave a financial inheritance to one or more loved ones, or to make a donation to a charity or research organization, for example. These are personal, not financial decisions.