Personal Finance

Life Insurance Q&A - w/ FAQ Section

  • Last Updated:
  • Mar 24th, 2017 7:21 pm
Sr. Member
Jan 8, 2006
826 posts
195 upvotes
lasallejai wrote:
Mar 8th, 2017 2:53 pm
Banks do underwriting when a claim is filed, "proper" life insurance companies do underwriting at the time of application.
And that's make all the difference per that documentary.
Newbie
Jan 1, 2007
48 posts
3 upvotes
Toronto
Allaboutthedeals wrote:
Mar 9th, 2017 7:17 pm
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?
If you're asking strictly on price-wise. The price looks about right for that coverage.
If you're asking whether that's good enough to replace mortgage insurance or for your financial goals, you'll need a licensed advisor to dig deeper to see if that's what's best for you.
The price you mentioned doesn't look like it includes disability / CI riders, something you might want to consider. If you have separate disability or CI policies that cover enough, that's a different story.
Sr. Member
User avatar
Apr 16, 2009
643 posts
64 upvotes
Vancouver
Hello everybody!

Looking into getting some insight into life insurance for the wife and I.

We're both 26, in decent shape, no smoking, have stable jobs (I work for the military, she works as an engineering consultant).

House in the near future, no kids in the near future.

Curious on people's thoughts on the insurance that SISIP provides. Is it a good product?

Thanks guys!
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Dec 27, 2009
2232 posts
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Ottawa, ON
DefconZero wrote:
Mar 10th, 2017 1:53 pm
Hello everybody!

Looking into getting some insight into life insurance for the wife and I.

We're both 26, in decent shape, no smoking, have stable jobs (I work for the military, she works as an engineering consultant).

House in the near future, no kids in the near future.

Curious on people's thoughts on the insurance that SISIP provides. Is it a good product?

Thanks guys!
I think it is a good product (hubby is in military, 47 years old - actually he retires next Monday). We are keeping the SISIP insurance after he retires.
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Sep 15, 2009
2706 posts
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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.
That depends on a number of factors. A) do you have the extra cash flow to dedicate towards something like this without impacting your own retirement and risk management goals? B) is it important to you that you protect your child's insurability (you can also do this with a child term rider on your own policy)? C) is it part of a long term plan? (i.e. the objective of child life insurance is traditional for what would be necessary to bury them and take time off work to grieve).

My wife and I bought both Whole Life and Critical Illness on our daughter after 30 days old. The CI is to protect our family financially (and to provide for uncovered treatments) should she fall ill as well as a 20 year paid up whole life policy that will insure she will have some level of guaranteed life coverage for when she has a family of her own. A lot can change in 30 years. We do not know what her health will be like and want to not only protect her, but her future family (our grand kids) as well.

Its important to note, that I myself (as part of a larger wealth management practice) sell life insurance, so it goes without saying that if I did not think it was a useful and important risk management tool (as well as tax and savings strategy), I wouldn't have it on myself, wife or daughter. Its not for everyone though.

Many folks on RFD scoff at permanent insurance, and I fully agree it is not for everyone and it is more often than not sold deceptively by fly by night salesman, but it can be a useful strategy for your child's future (insurability, paid up insurance, cash value)
Certified Financial Planner (CFP)

"Our goals can only be reached through a vehicle of a plan in which we fervently believe, and upon which we must vigorously act. There is no other route to success...."
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Sep 15, 2009
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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
When you say the teachers life plan, are you speaking of OTIP? If so, it is way overpriced compared to individually owned coverage.

If you are 34 and your wife is 33 with a 4 year old child, with your incomes, amount of mortgage outstanding and current work coverage, I would suggest you are likely under insured. While I know little about you, the cost of living in Ontario - in most regions, would be fairly tough given your individual after tax take home pays if one of you were to pass. If the worst was to happen, and if you plan to pay off the mortgage, continue to contribute to pensions (I assume teachers?) contribute to RRSPs and RESP's, etc along with the normal household bills, it would be difficult in my opinion without more life coverage.

What are your monthly bills? discretionary and non discretionary? how much do you save a month? what comes off your paycheques for pensions, rrsps, health benefits, etc.

As I always recommend, go through a detailed needs assessment with a qualified advisor to figure out exactly what your family's unique needs are.
Certified Financial Planner (CFP)

"Our goals can only be reached through a vehicle of a plan in which we fervently believe, and upon which we must vigorously act. There is no other route to success...."
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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?
RBC's Home Protector plan - as with all mortgage life insurance is overpriced and generally a poor purchase. As mentioned throughout this thread, replacing this with individually owned coverage will not only be cheaper (much more in most cases), but the coverage is portable (not tied to your mortgage) and you do not run the risk of being rejected post claim, if indeed a thorough medical and underwriting did not place prior to issuing of the policy.
Certified Financial Planner (CFP)

"Our goals can only be reached through a vehicle of a plan in which we fervently believe, and upon which we must vigorously act. There is no other route to success...."
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Sep 15, 2009
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Allaboutthedeals wrote:
Mar 9th, 2017 7:17 pm
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?
Terms 70's are pretty rare and overall not the best priced. Do you really need coverage past retirement for income replacement purposes? If you do need coverage past age 65, it is more likely to me a permanent need and thus term insurance (unless T100) is not suitable. As a 34 year old, I would be looking at Term 30's and/or Term to 65. There is more competition there and prices are better in my opinion. If you are going to purchase a policy for that length of time make sure it is with a provider with pretty good conversion options in case a at any point down the road you want to change your coverage to permanent. Also, if your wife is also purchasing insurance, some companies offer multiple policy discounts for more than one policy - or a combined policy (2 coverage's on one contract)

By the way, often $250k is almost identical in cost to $200k - due to banding (price per $1000 drops at different levels). For example Manulife T65 is $34.50 for $200k, while the T65 for $250k is only $35.05.
Certified Financial Planner (CFP)

"Our goals can only be reached through a vehicle of a plan in which we fervently believe, and upon which we must vigorously act. There is no other route to success...."
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Sep 15, 2009
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DefconZero wrote:
Mar 10th, 2017 1:53 pm
Hello everybody!

Looking into getting some insight into life insurance for the wife and I.

We're both 26, in decent shape, no smoking, have stable jobs (I work for the military, she works as an engineering consultant).

House in the near future, no kids in the near future.

Curious on people's thoughts on the insurance that SISIP provides. Is it a good product?

Thanks guys!
Thank you for your service!

Whether you are active in danger zones (on the ground in high risk areas) or in an office setting in Canada will have a potential differing impact on rates and/or qualification. The key is to determine whether the military personnel have current or past deployment orders. Usually if they have never had deployment orders, nor have current ones, then they would underwrite them as any other occupation - typically that is.

If military personnel currently have active deployment orders, then they would likely be declined. If not, then the application would be accepted as it would another applicant.

With all that said, apart from the above, it is actually pretty poorly priced and is essentially a non-guaranteed Term 5 policy (increases every 5 years). If you are insurable for an individually owned policy, I would opt for that.
Certified Financial Planner (CFP)

"Our goals can only be reached through a vehicle of a plan in which we fervently believe, and upon which we must vigorously act. There is no other route to success...."
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Apr 16, 2009
643 posts
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Vancouver
wesboag wrote:
Mar 10th, 2017 5:43 pm
Thank you for your service!

Whether you are active in danger zones (on the ground in high risk areas) or in an office setting in Canada will have a potential differing impact on rates and/or qualification. The key is to determine whether the military personnel have current or past deployment orders. Usually if they have never had deployment orders, nor have current ones, then they would underwrite them as any other occupation - typically that is.

If military personnel currently have active deployment orders, then they would likely be declined. If not, then the application would be accepted as it would another applicant.

With all that said, apart from the above, it is actually pretty poorly priced and is essentially a non-guaranteed Term 5 policy (increases every 5 years). If you are insurable for an individually owned policy, I would opt for that.
This is exactly the answer I was looking for :). Thanks!

I have not been deployed, and will not be deployed before my release (16 months and counting!) therefore an individual policy for my wife and I seems to make the most sense.

What seems to be recommended these days company/planwise?

The biggest thing for my wife and I will be when we decide to get a mortgage. Otherwise we aren't planning on having kids (just dogs!), so won't need to worry about that.
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Jan 21, 2014
1501 posts
338 upvotes
Does it make sense for me to stop buying life insurance now? I started buying term life insurance 25 years ago with $350K policy initially and then raised to $500K after the first 10 years. I also have a group insurance I purchased from work ($500K). The reason I bought that much because I am the only one working and my daughter always wanted to study medicine when she was young. So I wanted to leave enough behind to help my family if something happened to me. Today, I am into a 5th year of 20 years term policy and it costs $1620/year for the $500K. I just realized I probably don't need this anymore. We have enough savings now so if something happens to me, my wife would still have enough money to live comfortably for the rest of her life. My daughter is already in med school with all tuition fees paid for by scholarships, so she doesn't need much of my help. Stopping the policy now will save me $24000K and I still have $500K from work (providing I am still employed). Am I doing the right thing stopping the insurance (even though we could afford it if we continue)?
Newbie
Jan 1, 2007
48 posts
3 upvotes
Toronto
mkl38s wrote:
Mar 12th, 2017 3:22 pm
Does it make sense for me to stop buying life insurance now? I started buying term life insurance 25 years ago with $350K policy initially and then raised to $500K after the first 10 years. I also have a group insurance I purchased from work ($500K). The reason I bought that much because I am the only one working and my daughter always wanted to study medicine when she was young. So I wanted to leave enough behind to help my family if something happened to me. Today, I am into a 5th year of 20 years term policy and it costs $1620/year for the $500K. I just realized I probably don't need this anymore. We have enough savings now so if something happens to me, my wife would still have enough money to live comfortably for the rest of her life. My daughter is already in med school with all tuition fees paid for by scholarships, so she doesn't need much of my help. Stopping the policy now will save me $24000K and I still have $500K from work (providing I am still employed). Am I doing the right thing stopping the insurance (even though we could afford it if we continue)?
Personally I don't recommend stopping life insurance... In the end it depends on what your goals are with life insurance.
To put it in perspective, it sounds like you still have 15 years remaining in your 20 year term. If anything were to happen within these 15 years, would the extra money make a huge difference? E.g. maybe it can help your daughter pay off her future mortgage? Will she be opening her own clinic? If she will be, machinery and equipment will cost a lot, perhaps the coverage might help her pay off potential loans used for equipment?

To look at it at another angle, let's assume you use the $1620 / year to invest, at a rate of 10% year over year (which isn't easy), by the 15th year, the amount you have in your account will be just about 90k.
Alternatively, if you dump a lump sum of 24k into an account and let it sit for 15 years at 10% year over year, by the 15th year, the amount you have in your account will be about 200k.

If anything were to happen to you within the next 15 years, the term life insurance would most likely be of much more benefit.
However, once the 15 years have passed, everything you've put into the term life insurance will be gone where in that case your investments would definitely excel.

The question is then, whether the $24000 (or less if you stop later on) is worth the extra coverage for the next 15 years?
In addition, does your term life insurance include any riders like critical illness or disability insurance? If it does, do you have coverage elsewhere? If it does have such riders and you don't have coverage for C.I. or Disability anywhere else, it might be beneficial to keep the coverage.
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Dec 27, 2009
2232 posts
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Ottawa, ON
mkl38s wrote:
Mar 12th, 2017 3:22 pm
Does it make sense for me to stop buying life insurance now? I started buying term life insurance 25 years ago with $350K policy initially and then raised to $500K after the first 10 years. I also have a group insurance I purchased from work ($500K). The reason I bought that much because I am the only one working and my daughter always wanted to study medicine when she was young. So I wanted to leave enough behind to help my family if something happened to me. Today, I am into a 5th year of 20 years term policy and it costs $1620/year for the $500K. I just realized I probably don't need this anymore. We have enough savings now so if something happens to me, my wife would still have enough money to live comfortably for the rest of her life. My daughter is already in med school with all tuition fees paid for by scholarships, so she doesn't need much of my help. Stopping the policy now will save me $24000K and I still have $500K from work (providing I am still employed). Am I doing the right thing stopping the insurance (even though we could afford it if we continue)?
I think you can very safely dump this policy. You don't need it anymore. It sounds like you are very well set. Plus, you still have the other $500K policy.

My parents saw no need for life insurance after a certain age. All the kids were grown, their house was long since paid off, and they both had decent pensions on top of money in the bank. Now that my dad has passed away, my mom also gets 60% of his pension. She has her own pension, my dad's survivor pension, Maximum CPP, and OAS. She also has a paid off house she could sell for at least $800K if she wanted to. What possible need would my parents have had for life insurance?
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Jan 21, 2014
1501 posts
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Thanks Chickinvic & Postclean. The purpose for the life insurance has changed and I just forgot about it. When we bought it 25 years ago, we had a mortgage (9.75%), a baby on the way and I also owed my family money for down payment and only 1 income. So I never regret paying for it all these years as there were a few occasion I was in/out of hospital with health issues. I always knew if something bad had happened, my family would have been taken care off. Now we have no mortgage and our savings are good enough for me to stop working now if I want. If I continue with the life insurance, I feel more like I am buying a lottery (for my life) - playing $1620 every year for 15 years and my family could win additional $500K if something happens to me. BTW, this personal policy has no C.I. nor disability. As for my group insurance, I will definitely continue till I retire or the company lets me go (could happen but unlikely unless things change dramatically). I know if I stop now, I won't be able to get this rate with my age if I want to go back and to be honest, I wouldn't invest $24K I save anyway as I have much more than that in my savings account now. I do have investments but we got burnt badly in 2000s, so we are now pretty conservative and if things continue the same way as the last few years, we still meet our end goal so we plan to stay the course
Newbie
Nov 8, 2015
32 posts
39 upvotes
Kapasiwin, AB
Hi

I've been gradually reading the posts to this Thread, which is numerous. So far I'm picking up some valuable information. I wanted some opinions on this particular strategy provided by my CFP/Insurance broker.

I am a 40 year old, married with 2 children under the age of 4. I am a healthcare provider who is incorporated. I have a modest RRSP saving ($100K), minimal TFSA. I have T10 $300K, T20 $600K along with CI and DI. He is proposing to convert $100K of the T10 into a permanent insurance (Equitable Life Equimax Estate Builder with PUA option) and transferring it into the corporation. He referred to it as a CIRP (corporate insurance retirement plan). Some of his reasons were as follows:

My current age - the premiums will only get higher
Using my corporation earned income to pay for the insurance is generally cheaper than using the dividends I transfer to myself to pay for it.
It has a guaranteed death benefit
Currently the dividend scale interest rate is 6.5% which can be higher than some GIC, and better to pay into this than trying to reduce your mortgage which can have an interest rate of 3%
It is a way to be able to borrow money from the insurance plan to fund corporation growth
I can use the borrowed money to fund retirement, or use it as an emergency fund, It can even replace my CI when the term on it runs out.

It seems to have a lot of benefits, but some of the issues I have so far are:
I have a guaranteed premium/year (about $3000). I have seen the "pay term and invest the difference" strategy. Essentially, I would be putting money into this rather than a growth oriented TFSA. Which one would be better?
I am confused about the need for estate planning
I know there will be a need to pay back at least the interest if any loan is taken out. Is there a risk that the money will be inaccessible in the future by me, or, if I die, my beneficiaries?
Are his reasons really as beneficial as they seem to be?

Any other opinions would be greatly appreciated. Thanks
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