Personal Finance

Life Insurance Q&A - w/ FAQ Section

  • Last Updated:
  • Aug 16th, 2017 3:44 pm
Newbie
Jan 1, 2007
50 posts
3 upvotes
Toronto
kenchau wrote:
Mar 8th, 2017 9:42 am
Does it make sense for parents to buy whole life insurance for their newborns, since premiums will be dirt cheap and their child will be set for life from a life insurance perspective?

Let's assume you get $300+K coverage or something to account for inflation by the time they get older.
Generally speaking, if one were to purchase whole life insurance the younger they start the better it is. So purchasing a WL policy on a new born will likely get you the cheapest rate possible (from a whole life policy point of view) while having the comfort of paying level premiums and a steady increase in cash value. As you know however, WL policies are more expensive in general so this puts your premium at a higher "bracket" so to speak from the get go.

Assuming Permanent insurance (Universal or Whole Life) is the only type of insurance they are looking to get, another option would be to get a quote on Universal Life with the option of (YRT to Level). This is basically to renew premium rates on an annual basis and eventually convert to a Level premium (Year to chosen by you & Advisor). This will provide a premium at a MUCH MUCH lower cost of insurance in the beginning years and then eventually switching back over to a level premium for the peace of mind. Technically speaking, your parents can put the difference in premium between the WL and UL policy, into the policy within the investment portion of the UL and have that portion grow for X number of years. Switch it over at X Year mark to Level and then just let the csv grow on its own.
E.g. If a WL policy for the newborn were to cost 500 dollars a year, versus the same coverage or a UL policy costs 200 a year. Your parents can still still put 500 into the UL policy (granted the policy has a maximum limit above 500). This way 300 dollars go towards investments. By the 10th year (when the kid is 10 years old), switch it over to a Level premium which should still be very affordable and continue to pay the Level premiums there after.

*Note: the numbers above are just examples and do not reflect actual cost of any policies*

You / your parents will need to look at the illustrations provided by their Advisor and determine what's the best plan suitable.
One thing to note is that WL is generally for those who don't like monitoring their funds and just want a piece of mind while UL is for those who want to be a little more involved with their investments.
Newbie
Jan 1, 2007
50 posts
3 upvotes
Toronto
Allaboutthedeals wrote:
Mar 8th, 2017 10:24 am
Hi,

Is this Teacherslife plan any good?

I have just read all the 140 post and still not sure what to do?

Age :
Wife 33
Me 34
4 year old.

Income :
Wife 50k Me: 72k

Mortgage 140 000
Already have Life insurance with work at X2 salary for both of us.
Have 100k in RRSP and TFSA
Live in Ontario
Hi Allaboutthedeals,

Are you asking if you and your wife should get additional life insurance coverage?

Without knowing the full picture, it's hard to say e.g. if you plan to have kids or leave a portion for any other dependents. I can only tell you based on the info you've provided.

Assuming RRSP / TFSA are reserved strictly for retirement and you are contributing annually, if all you're worried about is just the mortgage portion, then i believe it's "alright". Obviously there's room for improvement, your wife can purchase about 40k coverage to ensure if anything happens to her that the mortgage can be paid off.
However, from a Critical Illness or Disability Insurance point of view, it seems to be lacking. It's probably an area you'd want to look into.
Deal Addict
Apr 11, 2006
4516 posts
807 upvotes
Mississauga
postclean wrote:
Mar 8th, 2017 10:26 am
Generally speaking, if one were to purchase whole life insurance the younger they start the better it is. So purchasing a WL policy on a new born will likely get you the cheapest rate possible (from a whole life policy point of view) while having the comfort of paying level premiums and a steady increase in cash value. As you know however, WL policies are more expensive in general so this puts your premium at a higher "bracket" so to speak from the get go.

Assuming Permanent insurance (Universal or Whole Life) is the only type of insurance they are looking to get, another option would be to get a quote on Universal Life with the option of (YRT to Level). This is basically to renew premium rates on an annual basis and eventually convert to a Level premium (Year to chosen by you & Advisor). This will provide a premium at a MUCH MUCH lower cost of insurance in the beginning years and then eventually switching back over to a level premium for the peace of mind. Technically speaking, your parents can put the difference in premium between the WL and UL policy, into the policy within the investment portion of the UL and have that portion grow for X number of years. Switch it over at X Year mark to Level and then just let the csv grow on its own.
E.g. If a WL policy for the newborn were to cost 500 dollars a year, versus the same coverage or a UL policy costs 200 a year. Your parents can still still put 500 into the UL policy (granted the policy has a maximum limit above 500). This way 300 dollars go towards investments. By the 10th year (when the kid is 10 years old), switch it over to a Level premium which should still be very affordable and continue to pay the Level premiums there after.

*Note: the numbers above are just examples and do not reflect actual cost of any policies*

You / your parents will need to look at the illustrations provided by their Advisor and determine what's the best plan suitable.
One thing to note is that WL is generally for those who don't like monitoring their funds and just want a piece of mind while UL is for those who want to be a little more involved with their investments.
Thanks.

Personally, I am of the mindset that I want to keep insurance distinctly separate from investments. Furthermore, I just don't feel like the investment options you typically have access to, within a UL policy plan, are that great to begin with.

Also, I was asking "parents" as hypothetical. My parents are most certainly not expecting another child haha. But point taken. :)
Newbie
Mar 7, 2017
28 posts
Hi,

Thanks for the reply

Sorry I have 170K in mortgage

Yes I am asking if I should get additional coverage?
No more kids

I have HomeProtector® Insurance with My RBC Mortgage

Should I cancel my HomeProtector insurance and get insurance somewhere else?
postclean wrote:
Mar 8th, 2017 11:49 am
Hi Allaboutthedeals,

Are you asking if you and your wife should get additional life insurance coverage?

Without knowing the full picture, it's hard to say e.g. if you plan to have kids or leave a portion for any other dependents. I can only tell you based on the info you've provided.

Assuming RRSP / TFSA are reserved strictly for retirement and you are contributing annually, if all you're worried about is just the mortgage portion, then i believe it's "alright". Obviously there's room for improvement, your wife can purchase about 40k coverage to ensure if anything happens to her that the mortgage can be paid off.
However, from a Critical Illness or Disability Insurance point of view, it seems to be lacking. It's probably an area you'd want to look into.
Newbie
Jan 1, 2007
50 posts
3 upvotes
Toronto
kenchau wrote:
Mar 8th, 2017 12:17 pm
Thanks.

Personally, I am of the mindset that I want to keep insurance distinctly separate from investments. Furthermore, I just don't feel like the investment options you typically have access to, within a UL policy plan, are that great to begin with.

Also, I was asking "parents" as hypothetical. My parents are most certainly not expecting another child haha. But point taken. :)
Haha... I figured but you know... sometimes life happens. :)

Typically the investment options you have access to within a UL policy are seg funds which are essentially similar to mutual funds. I take it that you have other investment strategies in mind which is perfectly fine.

The example I provide is more of a comparison between WL and UL kind of like an apples to apples comparison. If you were willing to pay X amount, you could pay the same amount technically speaking but on a lower cost of insurance.
Just an option for you to consider.
However, if you don't like the investment options within a UL policy then that's a different story. :)
Newbie
Jan 1, 2007
50 posts
3 upvotes
Toronto
Allaboutthedeals wrote:
Mar 8th, 2017 12:41 pm
Hi,

Thanks for the reply

Sorry I have 170K in mortgage

Yes I am asking if I should get additional coverage?
No more kids

I have HomeProtector® Insurance with My RBC Mortgage

Should I cancel my HomeProtector insurance and get insurance somewhere else?
I'm not familiar with RBC products, but did you have to do underwriting (medical check) prior to being approved for the insurance? Do you know what their claims process is?
Typically Banks simplify the process by having you answer yes / no questionnaires about past health history and approve the mortgage insurance. When you submit a claim, they then look at your medical history to determine whether or not to approve the claim. There's a chance they will reject your claim due to pre-existing health conditions. I'm not saying RBC will do this, you'll need to inquire about their claims process in such scenarios.

Insurance companies perform underwriting first to determine your health and past history, adjust the premiums if necessary and then issue the policy. So they'll know what health condition an individual is at when they issue the policy. Essentially assessing their risk to take on an individual before they agree to it.

In terms of cost wise, it's best to run a few quotes to determine which would be cheaper whether through an insurance company or through RBC's mortgage insurance.
As always, don't cancel until you have alternatives in place.
Sr. Member
Jan 8, 2006
895 posts
213 upvotes
postclean wrote:
Mar 8th, 2017 2:11 pm
Typically Banks simplify the process by having you answer yes / no questionnaires about past health history and approve the mortgage insurance. When you submit a claim, they then look at your medical history to determine whether or not to approve the claim. There's a chance they will reject your claim due to pre-existing health conditions.
There is excellent story on this check it out how Bank has scams many customer with such a scheme CBC Marketplace - In Denial - Mortgage Insurance Canada
Newbie
Mar 7, 2017
28 posts
Hi,
I am paying 38.50 weekly.
No Medical Check was asked. I think I am better off finding my own Life insurance for my and myself.
Should I get Term insurance for 30 year until I am 65?
postclean wrote:
Mar 8th, 2017 2:11 pm
I'm not familiar with RBC products, but did you have to do underwriting (medical check) prior to being approved for the insurance? Do you know what their claims process is?
Typically Banks simplify the process by having you answer yes / no questionnaires about past health history and approve the mortgage insurance. When you submit a claim, they then look at your medical history to determine whether or not to approve the claim. There's a chance they will reject your claim due to pre-existing health conditions. I'm not saying RBC will do this, you'll need to inquire about their claims process in such scenarios.

Insurance companies perform underwriting first to determine your health and past history, adjust the premiums if necessary and then issue the policy. So they'll know what health condition an individual is at when they issue the policy. Essentially assessing their risk to take on an individual before they agree to it.

In terms of cost wise, it's best to run a few quotes to determine which would be cheaper whether through an insurance company or through RBC's mortgage insurance.
As always, don't cancel until you have alternatives in place.
Newbie
Jan 1, 2007
50 posts
3 upvotes
Toronto
Allaboutthedeals wrote:
Mar 8th, 2017 4:12 pm
Hi,
I am paying 38.50 weekly.
No Medical Check was asked. I think I am better off finding my own Life insurance for my and myself.
Should I get Term insurance for 30 year until I am 65?
$38.50 weekly is about $2000 a year.
That sounds a bit overpriced if the coverage is only the decreasing balance of the mortgage.
There are many factors to what is the best course of action... My suggestion is to speak with your insurance advisor to discuss which type of cover would best suit your needs.
Member
Sep 23, 2013
217 posts
104 upvotes
Windsor, Ontario
Allaboutthedeals wrote:
Mar 8th, 2017 4:12 pm
Hi,
I am paying 38.50 weekly.
No Medical Check was asked. I think I am better off finding my own Life insurance for my and myself.
Should I get Term insurance for 30 year until I am 65?
When dealing with temporary insurance, you cover the length of the need. For example, if you have a mortgage that would be paid off in 9 years, you get a 10-year term to along the length of the mortgage. If you're raising children and they will depend on your paycheque for the next 20 years, get a 20-year term to coincide with it. As your insurance needs disappear or decrease, your life insurance should decrease with it or you can start converting it to permanent insurance if you start to enter the estate planning years.

Edit* PostClean is correct, you're paying quite a bit of money for that plan. Something doesn't make sense, I recommend finding a licensed life insurance advisor and talking to them.
Deal Addict
User avatar
Dec 27, 2009
3157 posts
1155 upvotes
Ottawa, ON
SteveDfsin wrote:
Mar 8th, 2017 8:33 pm
When dealing with temporary insurance, you cover the length of the need. For example, if you have a mortgage that would be paid off in 9 years, you get a 10-year term to along the length of the mortgage. If you're raising children and they will depend on your paycheque for the next 20 years, get a 20-year term to coincide with it. As your insurance needs disappear or decrease, your life insurance should decrease with it or you can start converting it to permanent insurance if you start to enter the estate planning years.

Edit* PostClean is correct, you're paying quite a bit of money for that plan. Something doesn't make sense, I recommend finding a licensed life insurance advisor and talking to them.
Is it mortgage life insurance? That tends to be very pricy (and a bad idea compared to regular term life insurance).
Newbie
Mar 7, 2017
28 posts
I was thinking of get a term insurance until I was 70. That means 36 year term. Got a quote online for about 38 $ a month (200k). What do you guys think?
Member
Sep 23, 2013
217 posts
104 upvotes
Windsor, Ontario
Chickinvic wrote:
Mar 8th, 2017 11:40 pm
Is it mortgage life insurance? That tends to be very pricy (and a bad idea compared to regular term life insurance).
I'm talking about independently owned life insurance. "Mortgage Life Insurance" is nothing but a marketing term, it's all just life insurance. The difference being, one type is attached to a loan, owned by the lender and is post-claim underwritten; the other is an independently owned contract that is underwritten before issue.

Top