Do You Still Need Life Insurance After 55?
If you're in your late 50s or 60s, the mortgage might be paid off, the kids are grown, and your net worth looks a lot different than it did at 35. So it's a fair question: does life insurance still make sense at this stage, or is it something you can let lapse?
The honest answer is it depends on what the insurance is actually doing for you. Life insurance serves different jobs at different life stages, and for a lot of pre-retirees and retirees, at least one of those jobs is still very much active.
The case for dropping it
If your original reason for buying life insurance was to replace employment income for a young family, and that family is now financially independent, the original job is done. If you're debt-free, your spouse has their own retirement income secured through CPP, OAS, and savings, and there's no one relying on your paycheque, a term policy that's about to renew at a much higher premium may no longer be worth keeping.
The case for keeping it (or getting it)
A few scenarios where life insurance still earns its place after 55:
Covering a tax bill at death. In Canada, your RRSP or RRIF is fully taxable in the year of death (unless it rolls to a spouse). If you have a large registered account, that could mean tens or hundreds of thousands of dollars owed to CRA in one year. See our articles: The Hidden Tax Trap of RRSP Drawdown And How to Avoid It and Understanding the Deemed Disposition Rule: Ontario's Hidden Estate Tax. A permanent life insurance policy can fund that liability tax-free, so your estate doesn't have to liquidate investments or property at an inconvenient time.
Equalizing an estate. If one child is taking over a business, a farm, or a property, and you want to leave something comparable to your other children, a life insurance payout is a clean way to do it without forcing a sale of the asset.
Leaving a legacy. Some people simply want to guarantee a certain amount goes to their kids, grandkids, or a charity, regardless of how markets perform or how long they live. Insurance is the only financial tool that guarantees a specific number on a specific event.
Covering a spouse's income gap. If a meaningful portion of your household income disappears when one spouse dies (for example, a pension that doesn't have a full survivor benefit), a policy can bridge that gap.
Business and partnership obligations. If you're a business owner with a buy-sell agreement, or you've personally guaranteed a business loan, insurance may still be structurally necessary, not optional.
What changes at this age
Two things are different from when you were younger. First, permanent insurance (whole life or universal life) tends to make more sense than term, because you're insuring a permanent need (tax liability, estate planning), not a temporary one (income replacement for 20 years). Second, underwriting gets more expensive and more particular. Health changes matter more, and waiting five more years to "figure it out" can meaningfully raise the cost or take options off the table entirely.
How to actually answer the question
The real exercise isn't "do I need life insurance" in the abstract. It's: what would happen financially, to my spouse, my estate, or my kids, if I died this year? If the answer involves a tax bill, an income gap, or an unequal inheritance, insurance is solving a real problem. If nobody's financial life changes, you may not need it.
This is worth running as an actual calculation, not a gut feeling. A proper look at your RRSP/RRIF balance, expected marginal tax rate at death, and estate goals will tell you whether you're overinsured, underinsured, or right where you should be.
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This publication is for informational purposes only and has been prepared from public sources which are meant to be reliable. None of the information in this should be construed as investment advice. Speak to your Investment Advisor to learn if this product is right for you. Designed Securities Ltd. (DSL) is regulated by the Canadian Investment Regulatory Organization (CIRO), and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Christopher Burke is registered to advise in securities to clients residing in Ontario. The views expressed are those of the author and not necessarily those of DSL. This report does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any reliable person to whom it is unlawful to make such offer or solicitation. Content is accurate as of the date of publication, and subject to change without notice.
