Personal Finance

Life Insurance Q&A - w/ FAQ Section

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Jul 8, 2009
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Edmonton
SwivelHips wrote:
Jan 24th, 2013 11:31 pm
My friend is doing some new insurance and he and his wife disagree on whether he should have insurance on his life. If she dies, he'll be OK, as he earns a high income and would keep working. He thinks he should be the one who decides if she is insured but she says she's not comfy with her being uninsured. Why should she care? She'll be dead. Thoughts from the insurance dudes here or anyone else? They are in their late 50s if that matters. He's getting half a million on himself and prefers not to insure her.
I'll go against the grain here and will agree with your friend and disagree with some previous advice. I don't believe in buying insurance you don't need, and it doesn't seem like he needs insurance on the missus. If he feels he'd be fine, as described in your post, buy the insurance. Different point of view, I guess. But the contrary side has merit, if he'd be very adversely affected by her death.
Member
Sep 14, 2010
287 posts
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As I've said before on this site...there are "wants" and "needs" and each can be equally valid for purchasing insurance. An insurance "need" is defined as an "unmanageable financial risk" which (in the case of life insurance) is presented upon the death of a person. "Unmanageable" means that the risk can't be eliminated with your own resources...this creates the necessity for the coverage.

So, with that said....

The wife has a "want" for the coverage, but the husband has expressed that there is no "need". So at the end of the day, as long as there is no "need" for the coverage it's difficult push for it from the advisor's perspective. So the advisor should remain indifferent.
Member
Dec 15, 2008
484 posts
26 upvotes
Vancouver, BC
I was 20 years old when I purchased my Sun Life insurance. I didn't know much about the different types back then - it was my mom who signed me up. I'm 32 now but plan to marry around 36 and can use some advice if I may be better suited with different plan or insurer. Basically I pay $56 monthly since I was 20 years old, here's what it looks like. I really wonder which year its suppose to pay monthly for itself as my broker can only give me estimates depending on market conditions etc. $100,000 is enough for me to leave behind to future wife, kids.

- How does it compare to your plan? Am I getting a decent deal here?
- Do I have options to withdraw cash at some point? Reinvest? Open to suggestions :)

Issue Date: July 2001
Sun Classic Life: Face Amount $100,000
Insurance Purchased by Dividends: $5000
Monthly Premium: $56
Dividend Option: Paid Up Addition


Current Scenario
Total Cash Value: 884
Guaranteed Cash Value: 0
Guaranteed Death Benefit: 100000
Total Death Benefit: 107500

Adverse Scenario
Total Cash Value: 813
Total Death Benefit: 106899
Sr. Member
Aug 8, 2010
553 posts
497 upvotes
GTA
Recently Got quotes for My wife and Me for: Life and Disability insurance, looking for some feedback,
Regarding Life: I am thinking to just go with term and not whole life (as included below), thoughts?
Regarding Disability: Is it really beneficial to have riders- Own Occupation, Cost of living Benefit & Return of Premium ?
I rather not spend anymore than I need to.

Would appreciate input on the prices given and plans too,
Thanks

Edited to add: Do not have any mortgage atm (renting) and no kids atm. Looking to get a good deal now, while we are kinda young :)

Canada Life
Life insurance:
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Disabilty Insurance:
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Sep 15, 2009
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Vermit,

At your age, unless you really want it, there is no need for permanent coverage, especially since you make it quite clear that you don’t want to spend anymore than you have too. While I agree with the term coverage (20 year is good at your age), I don’t agree with buying a $35,000 pay 100 policy. I simply do not see the value. In my opinion, use the extra premium that you would have spent anyways on the WL coverage and instead purchase a Critical Illness policy. It should be able to fetch you about $50-$75k of level coverage with ROP. This way you have all your bases covered.

Since I don’t know anything about you, for your age $500k of term is appropriate for the average income earner. If your income is much higher than average, this may be too little coverage. What was your reasoning for the WL coverage? Was it your idea or whoever the rep was?

Canada Life in my opinion is one of the better insurance companies for numerous reasons so I like your choice in carrier.

As for the disability, this sort of insurance is quite complex and is the most uniquely customizable product. It allows you to customize it to your specific situation and needs. What do you do for a living? What’s your income? Etc etc. I know these are personal, so if you want PM.

Own occupation is more important when it comes to highly specified roles such as dentists and surgeons who’s hands are their biggest liability. Own occupation would allow them to work at another job of their choice and continue to receive their benefit if for example they developed a tremor in their hands and could no longer practice their specified occupation. Does this apply to you? Definitions are extremely important when it comes to proper disability planning. Make sure your agent is well versed in your particular occupational as well as personal needs.

I usually use cost of living adjustments with younger clients as if they were to become disabled in the near future they very well could have 20 or 30 years left of income replacement. If payments are not indexed to inflation/CPI, the end result could be a huge decrease in purchasing power down the road. If the client is older, this may be waived at the discretion of the client.

Return of premium is questionable and again depends on the benefit you seek from it. In many cases the return on investment is quite good if you look at it from a cost benefit level with regards to the added premium you have to pay for it and what sort of return you could expect from a “guaranteed” investment. This again is very specific to your goals.

The last thing I would definitely add would be FEPO or future income protection which allows you to increase your benefit down the road. You will want something like this if you expect your income to continue to rise in the future.
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"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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Jan 8, 2009
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GTA
Agreed to what Wesaboag has said above.

I don't know what the occupations are, but the disability rate seems a bit high. There are other options available so I would research that more.

Return of premium can make sense with 100% option.

Good luck!
Insurance & Financial Advisor

All posts on this forum are for information purpose only and can't replace your policy contract. Please contact your own broker, agent or company before acting on my suggestions. There is more to insurance than just price!
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Jan 8, 2009
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exhaust wrote:
Feb 9th, 2013 11:25 pm
I was 20 years old when I purchased my Sun Life insurance. I didn't know much about the different types back then - it was my mom who signed me up. I'm 32 now but plan to marry around 36 and can use some advice if I may be better suited with different plan or insurer. Basically I pay $56 monthly since I was 20 years old, here's what it looks like. I really wonder which year its suppose to pay monthly for itself as my broker can only give me estimates depending on market conditions etc. $100,000 is enough for me to leave behind to future wife, kids.

- How does it compare to your plan? Am I getting a decent deal here?
- Do I have options to withdraw cash at some point? Reinvest? Open to suggestions :)

Issue Date: July 2001
Sun Classic Life: Face Amount $100,000
Insurance Purchased by Dividends: $5000
Monthly Premium: $56
Dividend Option: Paid Up Addition


Current Scenario
Total Cash Value: 884
Guaranteed Cash Value: 0
Guaranteed Death Benefit: 100000
Total Death Benefit: 107500

Adverse Scenario
Total Cash Value: 813
Total Death Benefit: 106899
Is this Pay till 65- for life, etc?

There isn't much cash value in your plan even though you have paid that premium for 12 years so your/your broker's "investment choice" have not made any money.

It's not too late to review your options again.
Insurance & Financial Advisor

All posts on this forum are for information purpose only and can't replace your policy contract. Please contact your own broker, agent or company before acting on my suggestions. There is more to insurance than just price!
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Sep 15, 2009
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Insurance-Broker wrote:
Feb 15th, 2013 8:47 pm
Agreed to what Wesaboag has said above.

I don't know what the occupations are, but the disability rate seems a bit high. There are other options available so I would research that more.

Return of premium can make sense with 100% option.

Good luck!
OP's rates may seem higher because he is not in the best occupational class like his wife. He is a class 3. You would be hard pressed to get product close to Canada Lifes DI from another carrier.

I have never seen a Disability ROP option of 100% from any carrier. I don't believe they exist. CI yes, Disability No.

comparing apples to apples with DI is difficult as products vary greatly in their 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...."
Sr. Member
Aug 8, 2010
553 posts
497 upvotes
GTA
Thanks wesboag,
wesboag wrote:
Feb 15th, 2013 7:12 pm
Vermit,
instead purchase a Critical Illness policy. It should be able to fetch you about $50-$75k of level coverage with ROP. This way you have all your bases covered.
Does CI cover some of what is already covered in Disability? Can I get away with Disability for now, until I have more cash flow?
What was your reasoning for the WL coverage? Was it your idea or whoever the rep was?
This was the rep's idea. But I am most probably going to just stick with the 20 yr term and no WL or just a minimum...
Own occupation is more important when it comes to highly specified roles such as dentists and surgeons who’s hands are their biggest liability. Own occupation would allow them to work at another job of their choice and continue to receive their benefit if for example they developed a tremor in their hands and could no longer practice their specified occupation. Does this apply to you?
I am a Graphic Designer and my wife is a software programmer, The rep was talking about how "own occupation" will allow me to work at home (freelance) while receiving disability. Not sure how this works...
Return of premium is questionable and again depends on the benefit you seek from it. In many cases the return on investment is quite good if you look at it from a cost benefit level with regards to the added premium you have to pay for it and what sort of return you could expect from a “guaranteed” investment. This again is very specific to your goals.
I'm finding "Return of premium" quite expensive ($33 + $43) and not sure if its worth it.
The last thing I would definitely add would be FEPO or future income protection which allows you to increase your benefit down the road. You will want something like this if you expect your income to continue to rise in the future.
Howmuch extra can I expect to pay for this?

Thanks
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wesboag wrote:
Feb 15th, 2013 9:06 pm
I have never seen a Disability ROP option of 100% from any carrier. I don't believe they exist. CI yes, Disability No.
Why so confident? Let me know if you want to purchase one.

It's available for age 45 and under at issue.
Insurance & Financial Advisor

All posts on this forum are for information purpose only and can't replace your policy contract. Please contact your own broker, agent or company before acting on my suggestions. There is more to insurance than just price!
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Jan 8, 2009
784 posts
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See response in bold!
vermit25 wrote:
Feb 15th, 2013 11:39 pm
Thanks wesboag,

Does CI cover some of what is already covered in Disability? Can I get away with Disability for now, until I have more cash flow?

Not really. CI pays a lump sump amount for one of the covered illnesses.

Disability insurance pays monthly income, in the event you get disabled due to injury or illness(if illness is selected as well). For self-employed individuals, disability protection should be your FIRST priority and Life/CI should come after.



I'm finding "Return of premium" quite expensive ($33 + $43) and not sure if its worth it.


It is when you have the option of 100% retun.

Insurance & Financial Advisor

All posts on this forum are for information purpose only and can't replace your policy contract. Please contact your own broker, agent or company before acting on my suggestions. There is more to insurance than just price!
Member
Dec 15, 2008
484 posts
26 upvotes
Vancouver, BC
Insurance-Broker wrote:
Feb 15th, 2013 8:57 pm
Is this Pay till 65- for life, etc?

There isn't much cash value in your plan even though you have paid that premium for 12 years so your/your broker's "investment choice" have not made any money.

It's not too late to review your options again.

From my understanding there comes a point where the plan itself pays the monthly premium depending on market conditions. So this is term life type of insurance I have right? That's what I need from this RFD forum another investment choice based on the above scenario thanks!
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vermit25 wrote:
Feb 15th, 2013 11:39 pm
Thanks wesboag,

Does CI cover some of what is already covered in Disability? Can I get away with Disability for now, until I have more cash flow?


This was the rep's idea. But I am most probably going to just stick with the 20 yr term and no WL or just a minimum...


I am a Graphic Designer and my wife is a software programmer, The rep was talking about how "own occupation" will allow me to work at home (freelance) while receiving disability. Not sure how this works...


I'm finding "Return of premium" quite expensive ($33 + $43) and not sure if its worth it.


Howmuch extra can I expect to pay for this?

Thanks
No problem.

No CI does not cover what DI covers. As Insurace-Broker mentioned, while DI provides a monthly benefit while you are unable to work, CI pays you a lump sum if you are diagnosed with a life threatening illness or suffer a catastrophic accident such that it leaves you paralyzed, blind, etc. The premise behind CI is that one will use this payment for such things as medication/treatment not covered by your provincial or private health care, time off work to recover, etc, though it can be used for anything you want. The fact that it is more likely for someone to survive a life threatening illness in today's medical world, then die from it makes this sort of coverage extremely important in my opinion as the financial costs can be quite large.

People often confuse the benefits of DI with CI although they are quite different. For example, developing a life threatening cancer and going through chemotherapy does not necessarily mean you are technically "disabled" so your disability policy will not pay out. On the other hand, a CI policy would. It's all about filling the gaps in coverage.

If you can't afford a level CI policy with riders such as return of premium, then there is always term coverage until you can afford the higher premiums. It's better to cover your bases first, than worry about product as there is always a way to customize coverage to ones budget. You can always convert later.

I'm not sure of the reps reasoning for discussing WL at this stage with you and your wife, but I'd recommend otherwise. This is the sort of coverage you can employ down the road when it fits your budget. Cover your bases first.

With regards to own occupation, that's up to you, but the way your rep explained it is misleading, unless of course you are just regurgitating it differently. Own occupation allows you to seek other employment if you cannot indefinitely perform the duties of your current/own occupation. For example, if a surgeon developed a tremor in his hand, he wouldn't be able to continue with his own current occupation, but could perform something else he was qualified for. In this example he would be able to seek employment as a medical professor, while still collecting his disability payments. Under the regular or any occupation definitions, he would lose his disability payments in the previous example.

If return of premium isn't important to you, then it can be dropped. Although the return on investment is good for your ages, if that money is better spent elsewhere (I.e CI) than perhaps that's the way to go. This is really situational specific. In my opinion, the future income protection is much more important, especially if you think your income will rise drastically in the future. For you, a FEPO option of $3000-$5000/month benefit would cost you around $100 annually for this feature. Well worth it in my opinion.
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Insurance-Broker wrote:
Feb 17th, 2013 12:03 am
Why so confident? Let me know if you want to purchase one.

It's available for age 45 and under at issue.
I have disability coverage thanks. Which company is this with? The only one I know of is AXA and I would not recommend this company for a product so important as disability coverage. We aren't talking about a simple term 10 life insurance policy here. Plus this policy is meant for "blue collar" workers, not professionals. The structure of the policies are not suited to someone in a specialized field such as graphic design. The policy holder has to purchase the "enhanced ROP" rider which is much more costly than the common 50% ROP option available with the most reputable companies. While with the ROP feature on traditional policies that allows for 50% ROP, if a claim is made, the policy holder may still get some premiums back so as long as they are under a certain amount. AXA's policies on the other hand do not allow this. A simple claim, regardless of length would cause the policy holder to lose out on the full ROP. This would suck terribly if the holder was in their years close to retirement and expecting this full ROP. In other words, 1 month of disability payments could wipe out your total benefit.

Other downfalls are the limited 60 months benefit period and a cap of $3500 benefit.
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...."
Newbie
Feb 17, 2013
33 posts
7 upvotes
I need some help with life insurance. My wife and I went to the bank today to get more information and now we're a bit confused. I talked to an agent on the phone before today's meeting and got some quotes for 20 year term life with Manulife. I've always read in financial books to go with term insurance rather than universal. Today we met another agent and he went over whole life insurance with us for the majority of the meeting.

Some basic information
Me - age 30, $80k annually, non-smoker
Wife - age 31, $30k annually, non-smoker
No debt, no kids but we're planning to start a family in the next year or so.
Getting life insurance mostly to get peace of mind and because all these personal finance books say so.

I previously determined with the agent on the phone that I need about $600k insurance while my wife needs about $100k. For 20 years term it's about $45 per month for the both of us.

Today the other agent went through whole life insurance option with Equitable (never heard of them before). Basically we'd each get a 20 year whole life insurance for $50k. We'd then tag on 20 year term insurance for $550k and $50k. The premium is around $240 a month for the both of us. The agent was telling us that whole life insurance is great because it's an investment vehicle as well. Equitable currently pays around 6% in dividend return each year. The dividend yield rate can and will get adjusted each year. Looking at the investment breakdown, ~60% of the fund is invested in bond with 50% of the bond investments in A rated bonds. If the interest rate stays this low I have doubt how this 6% rate can be kept up. I'm guessing most likely the rate will start going down.

I'm a bit confused over this. $45 vs $240 per month is quite significant. Both of us do maximize our RRSP and TFSA each year. Does it make sense to have another investing vehicle through whole life insurance? Or should we simply get term insurance and invest the differences?
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