# Life Insurance



## Arcaneind (Apr 3, 2009)

I'm re-examining our life insurance needs prior to the Big-40!

We currently have a 20-yr Term life insurance policy but have re-evaluated it and we are probably under-insured to pay off the mortgage and the kids education.

I've used Kanetix.ca and asked my company to send me a quote on up'ing my current policy, but I'm wondering if there is a better way or better product?

Anyone?


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## Financial Highway (Apr 3, 2009)

I have worked in the insurance industry and when it comes to term insurance, pretty much all companies have the same product. Some companies offer discount when you purchase a combination of products, the company I used to work for we had a discount for combining some product. What I would do for most clients was a combination of 20 yr and 10 yr term plans and it would come out cheaper.

I would say maybe speak to an insurance broker who can provide you with at least 3 different products, brokers have access to more companies.


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## Arcaneind (Apr 3, 2009)

*Thanks Mr. Highway*

I shall seek out a broker.

But, in general, is term the best product for most people?


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## Rickson9 (Apr 9, 2009)

Arcaneind said:


> But, in general, is term the best product for most people?


Yes.


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## Financial Highway (Apr 3, 2009)

Arcaneind said:


> I shall seek out a broker.
> 
> But, in general, is term the best product for most people?


Yes generally it is if your goal is on a fixed term like mortgage or loans etc.
there are some situations you'd need/want to have whole life but those are few.

just beware the broker will probably tell you to buy whole life because it's cheaper now............


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## ShowMeTheMoney (Apr 12, 2009)

You say we, so I presume you have a spouse, and if you're looking to cover the mortgage and kid's education, look into first to die type policies, which are cheaper than two individual policies.


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## Arcaneind (Apr 3, 2009)

ShowMeTheMoney said:


> You say we, so I presume you have a spouse, and if you're looking to cover the mortgage and kid's education, look into first to die type policies, which are cheaper than two individual policies.


Okay, that's what we presently have. Sounds like I have the right product just at the wrong coverage value. Thanks all.


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## FrugalTrader (Oct 13, 2008)

Arcaneind said:


> Okay, that's what we presently have. Sounds like I have the right product just at the wrong coverage value. Thanks all.


We have a joint first to die policy as well, and below is how we determined how much coverage we needed:
http://www.milliondollarjourney.com/determining-our-life-insurance-needs-ii-scenario.htm


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## nick24 (Apr 3, 2009)

As I am soon to be a dad, I'm also looking at a life insurance plan.
I've taken advice from 3 sources
1 - my dad, who used to be an insurance broker
2 - my current financial advisor
3 - Canadian Capitalist website which featured a posting from Ellen Roseman > http://www.thestar.ca/comment/columnists/article/605987 

In *MY* situation:
1 - my dad said term 10, first to die
2 - my current financial advisor said term 10, first to die
3 - Ellen Roseman said don't buy life insurance from your bank if it is for life insurance for a mortgage

I echo what has been said above re joint vs 2 individual policies - however, a joint first to die 500k policy will pay out 500k if one or both people die, whereas up to 1m will be paid out if both people die with individual policies (if they are both at 500k, of course).

Kanetix.ca does offer some good deals, around $5 per month cheaper than what Canada Life (my cheapest quote via my financial advisor) is charging. I guess he needs to make a commission somewhere...!


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## Arcaneind (Apr 3, 2009)

nick24 said:


> I echo what has been said above re joint vs 2 individual policies - however, a joint first to die 500k policy will pay out 500k if one or both people die, whereas up to 1m will be paid out if both people die with individual policies (if they are both at 500k, of course).


My current joint first to die policy will pay out on both, should we die within 45 days of each other.


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## mayhan (Apr 20, 2009)

Arcaneind said:


> My current joint first to die policy will pay out on both, should we die within 45 days of each other.


Same with my policy (+- a week or two). I would venture to guess it is pretty standard


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## La_Maudite (Apr 10, 2009)

Hi,

I've been educating myself lately about personal finances, and thanks to these forums and blogs often linked to in the posts, I'm happy to say I've flushed high MER funds and I'm a little more careful regarding taxation issues. The last thing I've got to look into is our insurance coverage. Ok, maybe it won't be the last thing 

As for funds and taxation, I'm under the impression that we've not been served well by our advisor... euh... seller of mutual funds and insurance (topic discussed at length in another thread). So I'm sure I'll have plenty of questions regarding insurance converage in the days/weeks to come.



Financial Highway said:


> just beware the broker will probably tell you to buy whole life because it's cheaper now............


Are you implying that brokers have an incentive ($$$) to sell whole life instead of 10 or 20 years terms?

I understand that an analysis of the situation is needed to make an informed decision, but that would explain why I find our premium so high and why she didn't suggest joint coverage.

Carl

P.S. Is the Frugality forum the right place to discuss insurance?
P.P.S. I'm about to read all the insurance contracts we have and compare them to what's available on the market.... wish me luck 
P.P.P.S. I'm kicking myself for not reading about personal finance earlier


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## MoneyGal (Apr 24, 2009)

The commissions in life insurance in general are ENORMOUS. Enormous. 

However, relatively speaking, the commissions on term insurance are very low -- because the premiums are low. 

It varies by company, but the commissions are often the first 2+ years of premiums. So: just compare the premiums for a WL and a term policy, and you will have a sense of the difference in commission structure for the agent. Keep in mind that the *whole point* of permanent insurance policies is to overpay in the first years of the policy. Those "overpayment" large premiums are the basis for the agent's commission structure.


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## lb71 (Apr 3, 2009)

The commission rates will generally be the same for a whole life and term policy, but as MG pointed out, since the premiums are higher for WL, the agent then receives more commission. 

Also, rates tend to be highest in the first year, and then decrease over time, so there is incentive for the agent to have you flip policies every once and a while.


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## MoneyGal (Apr 24, 2009)

I apologize. My post should have said the commissions are often the first 1+ year of premiums, not 2+ years. 

(Note to self: you must have AT LEAST one cup of coffee before posting in the morning)


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## La_Maudite (Apr 10, 2009)

MoneyGal said:


> The commissions in life insurance in general are ENORMOUS. Enormous.





MoneyGal said:


> It varies by company, but the commissions are often the first 2+ years of premiums. So: just compare the premiums for a WL and a term policy, and you will have a sense of the difference in commission structure for the agent. Keep in mind that the *whole point* of permanent insurance policies is to overpay in the first years of the policy. Those "overpayment" large premiums are the basis for the agent's commission structure.



Wow, that's what I call information!  

And that explains why my wife just got a 9000$ premium whole life insurance paid in 20 years (that's on top of other life insurance btw... sigh). Damn I'm getting angrier by the minute. I'll call other insurers to see what would be their premium for an equivalent insurance. Of course, the advisor didn't propose alternatives.... she probably (certainly) proposed the one with the highest premiums). Damn... And of course she didn't talked to us about joint coverage and/or 20 year term insurance. Instead, we have three separate whole life insurances (1 for me and 2 for my wife). And now we're stuck with this, or we'll have to pay a huge penalty. I really should have looked into this years ago...


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## MoneyGal (Apr 24, 2009)

La Maudite: go to your local library and get a copy of Moshe Milevsky's "Insurance Logic." (Or buy it, it wouldn't be the worst $20 you'd ever spent!)

This book explains, from a Canadian point of view, everything you'd like to know about risk management - including what risks to insure and why, how the various forms of insurance work, and how to determine what you need and how much.


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## La_Maudite (Apr 10, 2009)

MoneyGal said:


> La Maudite: go to your local library and get a copy of Moshe Milevsky's "Insurance Logic." (Or buy it, it wouldn't be the worst $20 you'd ever spent!)


I've ordered the book. Thanks for suggestion!

Carl


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## Serviss (Jul 15, 2009)

*Making the right decision*

Hello Arcaneind 

As a independent financial advisor myself I would suggest you ask your current financial advisor to show you a "life guide". This is a quote sheet we use when we run quotes for clients... we will input your age, sex and smoking status into a program that scans the whole Canadian Open Market... This way you can see exactly where the company "Canada Life" in this case falls compared to the others.

This is a key point when someone deals with a career type agency or specific company broker... in the case of "term 10" type contracts the policies from all the companies are very similar but in certain situations a term poilicy from one company may be more suitable even if it is a couple dollars more a month now... Example below.

A person similar to yourself is starting out, has a mortgage, a couple young children and is starting/growing a business. Term 10 will be a sound strategy for now. It is cost effective and it covers your need. The reality is it will not get you to the finish line and it will not allow for innovative corporate funded whole life strategies down the road. 

The point I am trying to make is if you went with say a RBC Term 10 policy because on the Life Guide it was the cheapest Term 10 on there and now you are wanting to get more creative. Your business is booming and your corporate cash flow is more than your lifestyle needs... you potentially are going to have to go back to the open market and re-apply again as RBC does not have a true participating whole life contract. Now when the life guide was done originally Great West Life had a cost effective quote of $2 more per month than RBC. The difference is, Great West Life still has a true participating whole life that is very effective for successful business owners... the $2 per month may be worth it.

If you would like more information or would like to see a full example of the concept I am referring to, please find more at: *www.serviss.ca*

Take care
Dustin - Kelowna Financial Advisor


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## pantograph (Apr 6, 2009)

http://www.term4sale.ca/


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## Retired at 31 (Apr 20, 2009)

Serviss said:


> Your business is booming and your corporate cash flow is more than your lifestyle needs... you potentially are going to have to go back to the open market and re-apply again as RBC does not have a true participating whole life contract. Now when the life guide was done originally Great West Life had a cost effective quote of $2 more per month than RBC. The difference is, Great West Life still has a true participating whole life that is very effective for successful business owners... the $2 per month may be worth it.
> 
> If you would like more information or would like to see a full example of the concept I am referring to, please find more at: *www.serviss.ca*


I couldn't find a full example. Sounds like it might be interesting, despite my spidey sense tingling and "whole life is bad" echoing in my head...


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