Life Insurance is becoming a commodity. Unfortunately, it is now issued by some companies while paying little attention to important information.
When people contact us for help with their pre-existing insurance plans, we ask three questions:
- Why did you purchase the insurance – what do you expect the money will do for your family?
- How did you arrive at the amount of life insurance you purchased?
- Why did you just purchase a ten-year term policy for yourself and nothing for your spouse?
The answers we receive typically have a common thread. They expect the money will look after their family but they really do not know if it is enough or too much. They purchased the cheapest life insurance they could get (a ten-year term policy).
Does this sound familiar: When you purchased your home, were you pressured to get mortgage life insurance? When that was done, did you feel that your life insurance needs were completely covered?
Two factors are contributing to the lack of knowledgeable advice when people are considering the purchase of life insurance. There are fewer people entering the life insurance industry so that fewer people are being pursued by life insurance agents for an appointment. More people are treating life insurance as a commodity and just trying to find the cheapest rate for what they think is an adequate amount of insurance. They get quotes off the internet and end up at a bank or insurance company website where they are sold that company’s product for the amount they ask for. They get the ten-year term policy for the amount they figure they need.
Six Points to Consider Before Purchasing Life Insurance
The problem with this is that there is a difference between term products. If you are not talking with a well-trained life insurance broker you are not being exposed to the full range of options that are available to you. A few of the issues that come to mind from the discussions we have had with our clients are:
- A spouse should also have coverage.
- There is much more to life insurance than covering the mortgage. Having sufficient funds to provide for the loss of income when a partner dies is equally important.
- Many times, a ten-year term policy is not close to the best solution. Forty percent of the policies we sell are for 20 years because that is a far better solution once we have a conversation about the purpose of life insurance.
- When we sell a ten-year policy, we use companies that will permit the conversion to a 20-year policy in the first five years without a medical. This can effectively extend it to a 25-year policy without a medical. This option does not have a cost – you just have to choose the right company.
- Frequently we will use layering where part of the coverage is for ten years and part for 20, or possibly 30 years.
- One company has a very competitively priced policy that goes to age 65 which we combine with a 10 and or 20-year policy to provide coverage right through to retirement at an affordable price. This avoids the calls we get from people whose ten-year policy is coming up for renewal and they have had a serious medical issue and can no longer purchase a new policy. While there are guaranteed renewal rates in every ten-year term policy, they are frequently in the order of five times the previous ten-year rate.
At Insurance Direct Canada, our well-trained experienced brokers are not about the sale but about having conversations with you to help you get to the amount and kind of insurance that will look after you and your family into the future within your budget. It might not be perfect due to budget restrictions, but it will be as good as you can afford with a plan to grow the coverage as you can afford it.
