# Permanent life insurance premiums going UP.



## wheel (Jun 22, 2010)

Permanent life insurance premiums are looking like they are going up substantially, and soon. 

I'm hearing indications that permanent life insurance premiums are going up by as much as 20% in the next 3 months or so, and there may be increases again past that. And since we're talking permanent insurance that's a 20% increase forever. Manulife has already announced a price increase for December, and in speaking with actuaries it would seem there's some pent up demand to increase rates.

Based on what I'm hearing as to the probably cause for these increases, I don't expect they'll be coming back down again.

You should view this as a firesale. If you're planning on buying permanent insurance in the future, now might be a good time to review. Personally I'd planned on converting some more of my term over in the next year or two and locking in maybe $250K or $500K for my kids, as they won't see rates like this again (I'm talking about buying insurance for my kids, not suggesting you need to do so for your kids).

As stable as the insurance industry is, we do see changes like this once in a while. if you've got a term to 100 policy from the early 90's or so, the prices are crazy cheap. And I own a term policy that has renewal premiums that are affordable - at the end of the term I just keep it at reasonable rates, no medical. They don't make'em like that anymore.

You read it here first.


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## HaroldCrump (Jun 10, 2009)

wheel said:


> Manulife has already announced a price increase for December, and in speaking with actuaries it would seem there's some pent up demand to increase rates.


Somebody's gotta pay for all those losses that the insurance companies have suffered....and guess who that somebody is!


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## FrugalTrader (Oct 13, 2008)

I'm curious, I don't really see the value of permanent insurance. Anyone care to comment why someone would purchase such coverage?


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## the-royal-mail (Dec 11, 2009)

I think insurance is a big scam. Better to keep your own money and self insure. Trouble is, nobody saves anymore, instead giving their money to companies that make it very difficult for you to collect. They are businesses, nothing more.


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## bltman (Aug 12, 2010)

FrugalTrader said:


> I'm curious, I don't really see the value of permanent insurance. Anyone care to comment why someone would purchase such coverage?


For most people there are no reasons 

That said, I have ½ my insurance in permanent and ½ in term. Why? I need coverage for longer than 20 years and have a chronic health condition (which means I may not be able to qualify again in the future). The extreme high cost of renewal on the 20 year term (and rates on harder to find 30+ year terms) made permanent not so bad in terms of cost. Those were my sole reasons. Absolutely no thought and my insurance sales agent did not pitch any tax or savings aspect of holding permanent. Our sole goal was to manage the application in such a manner as to get me non-rated rates for insurance even though I have health issues.


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## bltman (Aug 12, 2010)

the-royal-mail said:


> I think insurance is a big scam. Better to keep your own money and self insure. Trouble is, nobody saves anymore, instead giving their money to companies that make it very difficult for you to collect. They are businesses, nothing more.


If you are young, have a family and are the primary income earner in your family, term insurance is not a big scam. It needs to compensate your young family for the loss of the primary worker in the family - no amount of savings can do that in the early years.


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## Four Pillars (Apr 5, 2009)

FrugalTrader said:


> I'm curious, I don't really see the value of permanent insurance. Anyone care to comment why someone would purchase such coverage?


I think it is more of a lifestyle choice, than a financial choice. For example, I've heard that some people will buy insurance so that the family cottage can be easily kept in the family. This could apply to a family business as well.

If you don't have insurance, the estate might not be big enough for the beneficiaries to pay the capital gains tax (or they might not want to). Purchasing insurance allows the cottage owner to effectively pay the capital gains taxes in advance, so that the kids can just take over ownership on your death.


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## wheel (Jun 22, 2010)

FrugalTrader said:


> I'm curious, I don't really see the value of permanent insurance. Anyone care to comment why someone would purchase such coverage?


Generally the people that can't get permanent insurance at reasonable prices are the ones that want it the most. Ask people over 65, or with chronic health conditions and insurance isn't a scam, it's a steal of a deal.

You work all your life and build a business. You've got so much money that you can self insure. Except now when you die the gov't is going to take a big chunk of that. You don't want your beneficiaries to have to sell off all your estate assets to pay the tax costs. Cottages are a good example of that.

You don't have the money for a funeral but don't want to saddle others with the cost.

It's as simple as this. if you need money when you die, or want money when you die, then permanent life insurance tends to be the cheapest way to guarantee that. There's a lot of reasons why people need insurance when they die.

People in their income earning years typically won't believe this. Many of those same people when they get older change their minds. And for many of them, then it's too late.



> Why? I need coverage for longer than 20 years and have a chronic health condition (which means I may not be able to qualify again in the future).


You should consider investigating converting some of that term insurance over to permanent. You're not likely to see cheaper rates than now. And if you've got a chronic health condition then you already know why some people buy permanent insurance.

For the rest of you that don't believe that some people have a need for permanent insurance, lemme quote this one again:


> That said, I have ½ my insurance in permanent and ½ in term. Why? I need coverage for longer than 20 years and have a chronic health condition (which means I may not be able to qualify again in the future).


People who can't get permanent insurance, want it. Why does this poster 'need' permanent insurance? 

Quite frankly, people would do well to attempt to seperate some of the rhetoric on both sides and look at the matter a bit less emotionally.


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## bltman (Aug 12, 2010)

wheel said:


> People who can't get permanent insurance, want it. Why does this poster 'need' permanent insurance?
> 
> Quite frankly, people would do well to attempt to seperate some of the rhetoric on both sides and look at the matter a bit less emotionally.


I agree but permanent insurance is expensive and most people don't need it. My dad is well into his 60s, has term insurance and is relatively healthy. He saved lots of money by going with term and continuously renewing (or getting new policies). 

If you only want it for a 20 year period, term is significantly cheaper. If 30 years terms were easier to come by, I would have chosen a 30 year term over permanent.


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## wheel (Jun 22, 2010)

bltman said:


> I agree but permanent insurance is expensive and most people don't need it. My dad is well into his 60s, has term insurance and is relatively healthy. He saved lots of money by going with term and continuously renewing (or getting new policies).


You're missing the point. Of COURSE he's happy. He'll be happy until he gets into his later 60's or until he has a medical condition. I understand he's happy with term. You should understand that my point is that attitudes shift - people change their mind about what type of insurance they want - and they do it all the time. What triggers this change in attitude is:
- older age
- medical conditions
- becoming more affluent (despite the self-insurer's mantra)

Do you think you may become either older, or eventually have medical conditions? If so, I'm assuring you that your attitude about permanent insurance will almost certainly change at that time. Is that so hard to believe? There's an unbiased example of this right in this thread. 

So lets say you're older or have a medical condition. Now you want to buy permanent insurance. How's that going to work? Well, it's not going to work, that's how it's going to work. No matter how badly you want it. Too late.Yes, I told you so.

In addition, your father's renewal policy is no more - they don't make them like that anymore. Your term policy you buy today is technically renewable, but effectively it's not.I have an old school policy like that myself. Saw the writing on the wall and bought one of the last one's out the door. I'm doing the same this month with permanent insurance, the product is changing for the worse and it ain't coming back.

All that being said, I might as well argue with a stump  because there's no convincing people they are going to change their mind until after they change their mind. It's no different than trying to convince royal mail that insurance isn't a scam. Does that sound like it's based on reason or experience? 

Just make sure your term policy has conversion, so you can change your mind without catstrophic consequences.


In any event, for those that remain unconvinced, there's no news pending. For those that have been on the fence, or thinking about it, you need to start moving with an application - now.


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## wheel (Jun 22, 2010)

Four Pillars said:


> I think it is more of a lifestyle choice, than a financial choice. For example, I've heard that some people will buy insurance so that the family cottage can be easily kept in the family. This could apply to a family business as well.
> 
> If you don't have insurance, the estate might not be big enough for the beneficiaries to pay the capital gains tax (or they might not want to). Purchasing insurance allows the cottage owner to effectively pay the capital gains taxes in advance, so that the kids can just take over ownership on your death.


Your post reminded me I should probably clarify something. Most folks I've seen aren't looking for a brazillion dollars of permanent. They simply want $50,000 or $100,000 of permanent insurance, just enough to settle things up.


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## plaza (Sep 16, 2010)

I have been debating for the longest time to get a universal policy or a term. I started the procedure for a Term 20 with RBC, but was also looking for a universal policy with a quick pay 10. The rates are extremely high for a million coverage which is what has been putting me off, but it would allow me to leave my kids with 250k each at death (well more like 175-200k after the estate taxes/capital gains have been paid).

If the prices are really suppose to be going up, then maybe it's the time.

As for my term, I was doing a million policy also for $60/month, but in 20 years if I renew it jumps to 800/month and then $4500/month when I am 73 which is NUTS! Should I be shopping around for other companies that offer much more competitive rates at renewal because of no medical or all they all the same?


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## MoneyGal (Apr 24, 2009)

You should not be buying term insurance when you are 73. 

You should buy it when it is cheap and you don't have the capacity to self-insure, and you should work to self-insure during the term of your insurance so that you don't need to renew it. 

If you still need/want insurance in 20 years (and the price you are quoted today is more than you are willing to pay for premiums), you should start to look now at products other than term insurance.


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## plaza (Sep 16, 2010)

I have a (maybe dumb) question...let's say I have a million dollar permanent insurance that over time cost me 100k in premiums, would i be able to use that policy as a colateral to a real estate loan? Is that do-able in Canada?


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## Four Pillars (Apr 5, 2009)

wheel said:


> Do you think you may become either older, or eventually have medical conditions? If so, I'm assuring you that your attitude about permanent insurance will almost certainly change at that time. Is that so hard to believe? There's an unbiased example of this right in this thread.


This is nonsense. Nobody "needs" permanent life insurance. Some people want it for various reasons and apparently some people really, really want it.

The basic point of insurance is to insure against some sort of bad scenario (like the family breadwinner dying) - exactly what defines "bad" is up to the person buying the insurance.

Some people buy term to cover the cost of the funeral. Some people buy more to cover their mortgage. Others buy way more to ensure the survivor (and their eventual new partner) don't have to work anymore.

If you are in a situation where you think you will want life insurance when you die of old age, then go ahead. Wheel's advice to buy now is spot on. But that doesn't change the fact that nobody truly needs it.


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## MoneyGal (Apr 24, 2009)

Maybe not for protecting a declining asset (the value of human capital), but the tax arbitrage opportunities with permanent insurance are pretty powerful. 

Even people with no human capital protection motive for buying (permanent) life insurance might do so anyways for the tax-sheltering benefits.


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## the-royal-mail (Dec 11, 2009)

So what do most people normally do when it comes to funeral arrangements? Leave it to the family to figure it out after they die? Or rely on this type of insurance? I have heard of pre-arranging funerals, easier to do that when you are alive I guess, pay the costs upfront somehow so your family isn't stuck with a $15K bill. Interesting points are being raised here.


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## davext (Apr 11, 2010)

IMHO, getting insurance is like getting a loan from the bank. When you really need it, you can't get it so you should consider getting it if you don't actually want it. I have insurance just in case, and I also have a couple credit cards and credit lines that I don't use but intend to for investment property purposes and for my business operations. 

I have permanent insurance but I know I can afford it. It's only for $250,000. I also have critical illness insurance for $100,000. I will consider buying term insurance if I need more coverage. 

Maybe it's just me but it's nice to know that if anything happens to me, there's some tax free money at the end of the road.


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## kcowan (Jul 1, 2010)

I have permanent insurance. I bought it when I retired to replace my non-survivor pension. I put the money in and they give it back to my wife eventually (minus their profit). It is a segregated policy with investment options.

It used to be better when I bought it because I bought it from Maritime Life. Now through two acquisitions, it is a part of Industrial Alliance, and although the funds I selected are grandfathered, the IA investment choices are pretty lousy. This was a development that I did not anticipate.

Would I do it again? It depends.


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## wheel (Jun 22, 2010)

> This is nonsense. Nobody "needs" permanent life insurance. Some people want it for various reasons and apparently some people really, really want it.


It's not nonsense. People 'need' permanent insurance as much as people 'need' term insurance. All life insurance is based on 'want'. Young people 'want' term insurance, but don't need it. Older people and folks with medical conditions 'want' permanent insurance. * It's the very same level of 'want' you have for term insurance right now. 
*
Look at royal mail. He doesn't 'need' term insurance. He also doesn't even 'want' term insurance. Even if he's got a family that depends on his income.

You, I expect look at that and say you 'want' term insurance. Don't suggest that you 'need' term insurance. You don't, any more than royal mail needs it. You're dead, why the heck do you need insurance?

Now, convince royal mail that he 'needs' term insurance. That's the conversation I'm having here with you about permanent insurance . 

Now convince plaza that he doesn't 'need' permanent insurance. I don't see anyone having that conversation either. And even though he's demonstrating exactly what I've been saying, nobody chooses to refute it.

And 65 year olds don't 'need' to leave behind $100,000 any more than you 'need' to leave behind $1MM of insurance to your young family. You 'want' to leave that money behind and choose to rationalize the decision. You know if you don't have life insurance and you die that your family won't die or anything right? It's Canada, worst case they'll go on welfare and they'll still have food and shelter. Seniors start rationalizing that they need to leave some money behind to their kids to clean up debts, taxes, burial costs, etc. They're all crazy like that . So why isn't everyone here saving their term insurance premiums? Because they don't need - whoops! - want - their family to be destitute should they die. You younger folks are crazy like that.

Permanent insurance has too much baggage when it comes to past marketing practices that I don't even attempt to convince people who have their mind made up. That's not the point I've been making. *The point is that many people change their mind *and 'want' permanent insurance later. Once you accept that - and it's really not open to a lot of debate no matter how much people don't like the idea - then deciding that getting permanent insurance sooner rather than later starts to make a lot more sense. If you don't accept the possibility that many people change their minds later, then I agree with you completely - you don't 'need' permanent life insurance.


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## kcowan (Jul 1, 2010)

Wants and needs are in the mind of the buyer. It is the job of the salesman to turn wants into needs.


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