There’s no doubt, your home is likely the largest purchase you’ll ever make. If you arrange your mortgage through the bank, it is their responsibility to ask you if you want to insure your mortgage through them. While it’s easy to say yes, it’s a good idea to explore your options thoroughly first. Mortgage insurance is a good idea for some, but there could be a better option – life insurance. Let’s look at each closely and compare them for their drawbacks and their benefits.

Bank Mortgage Insurance vs. Life Insurance:

Who’s Selling the Product?

For the most part, the person who sells you mortgage insurance at the bank is an employee of that bank. They are trained to sell you the products and services they offer. They are not, however, trained in other options and will, therefore, not offer you a more suitable option. When it comes to insurance premiums, there are no discounts available based on your health or family history, and premiums are subject to PST.

Certified agents who have been trained in many products, on the other hand, sell life insurance products. This means that they are able to find the product that best fits you and your family. Whereas there are no discounts available through your bank, life insurance companies offer discounts based on your health and family history, and premiums are not taxable. Furthermore, you choose your own beneficiary, whereas when you go with the bank your mortgage lender is the beneficiary.

The Policy Details

When you choose bank-offered mortgage insurance, you cannot consolidate policies. That is, you have to keep your mortgage insurance policy separate from your other insurance policies. When you choose life insurance, however, you have the ability to consolidate a term life policy with other insurance coverage, which allows you to take advantage of a lower rate plan.

Life insurance is more flexible than bank-offered mortgage insurance as well. With life insurance, you are able to switch lenders and take your coverage with you if you move. If you choose, coverage can be arranged for the rest of your life. With bank-offered mortgage insurance, on the other hand, you cannot take your coverage with you, as it is limited to one specific property. Some bank-offered mortgage insurance policies have restrictions for people over 60 years of age.

The Coverage

Regardless of the mortgage amount outstanding, if you paid for $250,000 of life insurance coverage, then $250,000 will always be the lump sum payment amount. Your coverage, therefore, remains constant. With bank-offered mortgage insurance, your coverage value decreases as you make payments because it matches your outstanding mortgage balance. Your cover value, therefore, is the amount of coverage you paid for minus the mortgage principal payments you’ve made.

Renewal Options

With bank-offered mortgage insurance, you are not guaranteed renewal at the end of your mortgage term. Policy terms and your insurance provider can change as well, and you cannot be covered for life. You can buy life insurance policies, however, that extend 10, 20 and even 30 years, with guaranteed renewal at the end of the policy. Your policy terms do not change, and the policy premiums are guaranteed. What’s more, there are policies available to convert to a permanent policy. Finally, while your mortgage lender owns the certificate of insurance when you go through the bank, when you choose life insurance, you own the policy and the coverage.

The Winning Option

While it’s easy to accept bank-offered mortgage insurance, it’s not always the wisest course of action. Shop around, compare policies and make the most educated choice for you and your family. You might be surprised by what you find in term life insurance – and how open your options really are. 

Most people assume that estate planning is for the elderly, and for most people, it is. That is, your estate won’t be settled until after you pass, and most people’s lives tend to expire later on in life. But sadly, this isn’t the case for everyone. Some of us die long before our time, or become too ill to function. If you’re not prepared ahead of time, then you’ll have no control over where your assets go.

What happens if I don’t have a will?

I know, it’s a depressing subject, and most of us simply don’t want to talk about it. You don’t have to, but if you don’t then know that it may cause problems for those you leave behind.

Without a will, the province you live in gets to decide how your assets are distributed. Typically, the first $50,000 of value goes to the surviving spouse (if there is one). The rest is then divided up amongst your spouse and your children. If you don’t have a spouse or children, your assets then go to your parents. Since the court has to appoint a bonded administrator to serve as the executor, without a will, your loved ones won’t gain access to your assets quickly, plus it could cost them quite a bit to do so.

Types of wills

According to Investopedia, there are 3 kinds of wills in Canada:

• Last will and testament
• General durable power of attorney
• Living will (also called an advance healthcare directive)

Last Will and Testament

Why have a last will? The purpose of the last will is to provide instructions for the executor, the person you choose to distribute your assets. The last will is always read after the funeral, so you cannot include instructions on how you want your funeral to operate.

Power of Attorney

What happens if you become incapable of managing your own affairs? If you still want some say in how your affairs are handled, then you can choose a person who can handle them for you, should you become incapacitated in some way. The person you choose will be given the power to handle your day-to-day tasks, including:

• Paying your bills & doing your banking
• Opening your mail
• Looking after any pets you may have
• Voting on your behalf
• Filing your taxes

What you need to know is that without a power of attorney your partner cannot legally do these things on your behalf.

Living Will

What happens if you are unable to communicate your wishes due to injury or medical treatment? According to Investopedia,

A living will gives healthcare/mental power of attorney to a person of your choice. It gives this person, acting as your agent or attorney-in-fact, the power to implement the medical treatment you wish to receive if you become unable to communicate your wishes. The document tells doctors, family members and the courts your wishes for life-support and medical procedures, if you were to become brain dead, unconscious, terminally ill, or otherwise unable to communicate your wishes.

Not only does a living will give you an opportunity to make the decisions you want for yourself, even when you can’t, it also takes the pressure off of your family.

When should I plan my estate?

There are no rules when it comes to estate planning. Since something could happen to you at any time, you should probably start thinking about planning your estate when you have something to plan. It doesn’t make sense to worry about what you’re going to leave to whom if you don’t have anything to leave. As for choosing your power of attorney and creating a living will, both can be done at anytime.

Who can help me plan my estate?

While having an estate plan is clearly better than having nothing at all, not all estate plans are created the same. There are some DIY options on the market, but they’re considered controversial by some. If you want to go the DIY route, just do a little search on Google and you’ll come up with all sorts of plans.

If you have a complex estate, however, or you want the security of knowing that everything will be properly taken care of, your best bet is to contact an estate lawyer. While the plans could set you back a pretty penny, they’re worth it, especially if you want peace of mind. Likewise, your life insurance broker can answer any questions that you may have.

So you’ve finally gotten down to “buy life insurance” on your life’s to-do list. But does your agent or broker sound like they’re speaking another language? Well, he or she is. But here’s the layperson’s guide to understanding some of the key – or confounding – terminology. First off, there are two basic types of life insurance, term and permanent.

Term insurance refers to a policy that covers you for a set period of time, say 10 or 20 years. These have lower initial premiums than a permanent policy – and the rates are fixed for the duration of the term – but won’t provide you with any coverage if you’re fortunate enough to live a long time.

A permanent (or whole) life policy is as permanent as you are: provided you continue paying your premiums, the policy will cover you until your eventual death. (Yes, like it or not, it will eventually happen.) Permanent policies also have an investment component.

Here are a few other key terms to understand:

Accidental death benefit
A fairly common rider on policies that pay out a higher claim if the insured person dies in an accident. Sounds good. But the reality is that the vast majority of people die of natural causes. As a result, you’ll likely pay more than you need to for it. (A prolonged but ultimately failed battle with a disease like cancer, for example, is likely to be more emotionally and financially draining to a family than the sudden loss of a loved one.)

Cash value
This is the amount – less any applicable fees – that you will receive if you decide to cancel a permanent or whole life policy prior to its expiry. Also know as the cash surrender value.

Convertibility
This is a type of term policy that can be converted to a permanent one, typically with without requiring a medical exam.

Critical illness insurance
This option provides lump-sum payments to an insured person diagnosed with a terminal ailment, while they are still living. Though it sounds like a bankroll for completing your bucket list, it’s intended to help cover uninsured medical expenses.

Disability benefit
A rider that provides a preset level of income in the event you suffer an injury that prevents you from returning to work, also called a living benefit. Some policies will even waive the monthly premiums in the event of a disability claim.

Renewable term
Some term policies can be renewed for additional periods, albeit for higher monthly premiums. There are limits to how many renewals you can make, with most plans expiring by age 80.

Rider
A catchall phrase for the various options you can add to a basic policy.

Settlement options
This is where you get to choose how the policy’s beneficiary will collect the payment: typically as a lump sum, regularly scheduled payments, or a combination of the two.

Don’t get bogged down by the terminology.  Do a bit of homework and in no time you’ll be speaking your insurance broker’s language.

Allan
Writer for RateSupermarket.ca

You should get life insurance. Really, you need it.

Everyone tells you this. But the problem is, they never tell you which kind they’d recommend. In fact, there are a few types of life insurance products available on the market, and they fulfill different needs.

First up, we’re not talking about mortgage insurance, but it is a similar product. Mortgage insurance covers the cost of your home if one of the persons named on the policy dies. So, if you owe $200,000 on your house and your spouse dies, the insurance will pay off the house in total for you.

Great! But there are some flaws with this type of insurance. Mortgage insurance is underwritten at the time of death. Your insurance company can scrutinize your application and your medical history and refuse to pay out.

As well, while your premiums stay the same, the amount you owe on your house goes down over time. So, fifteen years into home ownership, you’re still paying the same premium and when your spouse dies, you get less money. Finally, that payment does not cover other costs such as the funeral, your kids’ education, income replacement and the other things you may have relied on your spouse for when he or she was alive.

So, we come back to the fact that you need real life insurance to truly cover yourself and your partners if something were to happen.

Term insurance

This type of life insurance is called term because it is sold for 5, 10 and 20 year periods of time only. When that time elapses, the policy simply ends. People buy term insurance to cover their needs during the busy, expensive years of life. When they have a mortgage, young kids and a spouse who needs supporting.

Many term insurance policies are renewable and convertible. Renewable policies can be extended time-wise, so you can change your mind in the future and purchase more years to cover the last few years of mortgage payments and the family while the kids are still in university. Your premiums may go up when you do this, however.

Term life is a great choice for many people because it’s the most affordable type of life insurance. Business partners, as well, often use term policies to cover each other to protect the business.

The flaws? Obviously, term insurance won’t cover you well into your senior years to pay for things like funeral expenses and leave your family a legacy. Also, Norm Gorrie, a Thunder Bay-based insurance agent, says term life policies can become void if you don’t pay the premiums regularly. After just 31 days, a missed payment will lead to a cancelled policy. It doesn’t happen often, but could when you’re travelling or there’s a problem with your automatic payment and you miss the notices from your bank and agent.

Whole life insurance

This much more expensive insurance will cover you until your death and provide for any final expenses and leave an inheritance for your family. As well, unlike any other type of insurance, your policy acts like a savings account. Once you build up a certain amount of equity in your account, for instance, you no longer have to make payments — they can be paid by the policy itself as a loan that is paid back when your policy is cashed in when you die. You can withdraw money from your account when you retire tax free (loans are tax free in Canada) and supplement your retirement income. As well, whole life policies pay dividends, so you can pocket that money or use it to pay your premiums every year.

The downside is that cost mentioned above. As well, the amount you’ll need when you die as a senior is much less than you’d need if you died in your mid 40s, when your family is heavily relying on your income.

A combination of products

Most insurance agents will suggest combining term and whole life insurance to get the most complete coverage. In fact, some insurance products are a mix of the two.

Bottom line: life insurance is complex and functions unlike any other insurance product. You’re best off working with an experienced agent to help you find the right product and coverage amount for you and your family.

Diane
Writer for RateSupermarket.ca

No one wants to think about death or debt, especially in combination. But unless you have something lined up, your death could be a financial burden to the ones you love most. If you have debt, it might be time to consider life insurance. Here are 10 insurance-related myths, debunked, to help you decide whether or not life insurance is right for you.

Myth #1: I’m young. I don’t need life insurance.

Your age isn’t really what’s important here. What’s important is whether or not you’ll be leaving anyone behind who would be worse off financially. Even if you have no dependents, someone will still be responsible for your student loan, and your car payments.

Myth #2: Life insurance is unnecessary if I don’t have kids.

True, there’s much less at risk if you don’t have children, but what about your partner? Chances are they rely on your income to a certain degree. Ask yourself, “Could my partner manage all of our current financial obligations alone?” Maybe, but probably not.

Myth #3: My employer provides coverage. I don’t need more.

Many larger companies offer their employees free life insurance; sometimes it even amounts to twice their salary. Even if you’re lucky enough to have such an employer, if you change careers you’ll lose that coverage. It may be difficult or even too late to purchase the coverage you need.

Myth #4: Life insurance is too expensive.

Actually, life insurance probably costs a lot less than you think. As average life expectancies continue to rise, the cost of life insurance decreases. Take the time to compare prices before you write insurance off as a waste of money.

Myth #5: All insurance policies provide the same coverage. The only difference is price.

All policies are not created equal. Read the fine print – they might have similar names, but chances are they are very different.

Myth #6: My health is poor. I could never get coverage.

Never assume that because your health is poor you won’t get coverage. There are companies out there that specialize in this type of coverage. Don’t be discouraged if you’ve been declined. Shop around. There’s something out there for you.

Myth #7: I probably won’t need it, so why waste my money?

You’re right. Chances are you won’t need it, especially if you’re still quite young. It’s unlikely that you’ll die in your younger, working years – that’s why insurance is so inexpensive then. Most people who purchase life insurance don’t expect that they’ll have to use it, but if they do, it’s there. You need to ask yourself whether of not a worst-case scenario would be catastrophic to your family. If the answer is yes, then life insurance could provide added security, protecting the ones you love.

Myth #8: The higher the price, the better the coverage.

For most people, term insurance, which is more inexpensive than whole life insurance, is actually the better choice. You buy term insurance for the amount of time you think you’ll need it – until your debts are paid off, your kids are in university, or you retire. Shop around – price doesn’t always make the policy.

Myth #9: In a single-income home, only the breadwinner needs coverage.

This might sound heartless, but the cost of ‘replacing’ your loved one probably isn’t cheap. You might think that the sole-provider is the only one who should be covered, but think about what ‘services’ the other provides. Likely, if you couldn’t fulfill those duties on your own, you’d have to hire someone to do them for you. The deceased homemaker’s duties, like cleaning and childcare, still cost money.

Myth #10: It’s such a hassle to get insurance.

The insurance man has a nasty habit of bringing out the worst in us. If you, like many others, are afraid of your insurance salesperson, there are answers. You can use simple online tools to compare prices, options and insurance needs. You can request a call back from a licensed insurance expert online. The hassle you feel applying is nothing compared to the hassle your loved ones will feel when trying to manage your debts. At the very least, shop around. You might be surprised by how little a sense of security actually costs.

Melanie
Writer for RateSupermarket.ca

When you have kids, there’s so much more to do. Of course, you have to take care of them, and that sure takes up a lot of time. But also, you need to get certain financial arrangements in order to ensure they’ll be taken care of properly for a long time.

First up is dealing with life insurance. I say it’s first, but in fact, most parents like me take a really long time to get this annoying task out of the way. My son just turned seven and we just got final approval on our policy a few weeks ago. Please tell me you’re not as disorganized as this!

Before the kids, especially when you’re young, you just don’t think about death, or worry about how others will survive once you go. Particularly if you’re a couple who both work, you just assume the survivor will get by. My husband and I relied entirely on mortgage insurance: if one of us died, the house would get paid off, and that’s really all we needed.

But mortgage insurance is associated with some problems: claims can be hard to make (there’s no medical exam before you apply and apparently many have been denied claims for lying — like not mentioning a casual doctors visit or a minor injury) and your premiums stay the same over the life of your mortgage but the value of the insurance goes down as you pay down the principal. As well, when you have kids, your mortgage is no longer your biggest cost. Childcare, clothes and food for wee ones takes up a big chunk of your budget and will be a huge issue of your die and leave your spouse to do it alone.

So, a more comprehensive product such as permanent or term life insurance is in order. Understanding life insurance is not a quick thing. Best to educate yourself on the types of insurance, figure out how much coverage you need using a calculator and compare insurance rates to get the best deal and the best product for you and your family.

The good news about life insurance is while, yes, someone does show up at your house and take blood. But the premiums, if you get them while you are still young and healthy, can be more affordable than mortgage insurance.

Also, you’d better get a will to make sure your assets go to the right person when you die. And get to them quickly: if you die without a will, your money can get frozen while things are sorted out, and your family may go without much needed money for months.

A will is also the place you stipulate who will raise the kids if you both should die. It’s not a pleasant business, and it’s easy to put this task off. But there are wills available online that make the task quick.

Also important is to look ahead to the more cheerful business of your kids’ education. Establishing registered education savings plans (RESPs) early on is an easy and effective way to save for college or university.

First of all, you need to apply for a social insurance number (SIN) for your child. Once that’s done, you can simply visit a bank or go through an investment advisor to set up a plan. Most organizations suggest you put a set amount in each month, and a good advisor will put your kid’s money in a plan geared towards his or her year of high school graduation to maximize gains now and minimize risk closer to when college or university should begin.

One great argument for putting money away in an RESP is free money. The federal and most provincial governments have grants that top up your contributions year after year.

Most financial experts warn against dumping a lot of money into RESPs when you have other obligations: it’s equally important to pay down your mortgage, invest in tax-beneficial registered retirement savings plans (RRSPs) and tax free savings accounts (TFSAs). Keep a smart balance between your family’s financial goals. Kids can work while they’re in school! Also, encourage grandparents to make donations in lieu of gifts and put in a small monthly or even end-of-year payment that’s in keeping with your budget.

Kids take up a lot of time and they do cost us money. But raising a family can also encourage us to get our finances in order — and that’s always a good thing.

Diane
Writer for RateSupermarket.ca

Congratulations – your new mortgage contract has been signed.

After the task of researching mortgage rates, speaking to a mortgage expert, weighing the options for fixed versus variable, length of term and payment schedules, gathering the appropriate documents and negotiating the details, you can now sit-back relax and forget about your debt for another 3-5 years.

Well, not exactly. Don’t start brushing your new mortgage under the rug just yet. There is one more very important piece to the mortgage puzzle that should not be forgotten – mortgage insurance.

After your mortgage has been approved, you should consider protecting yourself against the event that you are unable to make your payments. It’s natural not to want to think about this, but if something were to happen, you and your family will be glad you did.

To navigate the tricky world of mortgage insurance, we’re talking to Craig Ferguson, a licensed insurance broker with over 20 years of experience. He has a wealth of knowledge and hates to see Canadian consumers get taken advantage of by insurance agents selling unnecessary or overpriced products. We like his style.

RSM: Thanks for talking with us Craig. Why don’t you start off by telling us about the difference between default insurance and mortgage insurance?

Craig: When it comes to insurance, the terms alone can be confusing enough! Mortgage loan insurance or mortgage default insurance is typically required by lenders when you are buying a home or looking for mortgage refinancing and have less than a 20% down payment based on the property’s value. Mortgage insurance is typically offered by your bank or lender and it’s a form of mortgage protection if you are unable to pay your mortgage.

The bottom line is both products protect the lender, not the borrower’s family. There are other products out there, such as mortgage life insurance coverage that can better protect the borrower.

RSM: Can you tell us a bit more about the specific downfalls of mortgage insurance?

Craig: Well, I think there are 3 main points to cover here. Firstly, it’s expensive; second, you may need to re-qualify more often then you think; and finally, the application form leaves room for errors that could have serious consequences. Let’s look at each of theses issues in turn.

Mortgage insurance is expensive for a variety of reasons, one being the potential length of risk. If a plan covers 25 years versus say ten, the risk to the insurer is greater, and is reflected in a much higher cost. Given that the most common amortization period for a first time mortgage is 25 years, most people will take out a mortgage insurance plan that covers that period of time. It may seem great to have a 25 year plan, but reality does not match theory.

For the second point, the argument often made for mortgage insurance is that it will cover the outstanding mortgage balance for the duration of the mortgage. But this may not be the case.

In today’s economic climate, the odds of staying with one lender and/or one mortgage are unlikely. When a mortgage loan is paid off, renegotiated or refinanced, the mortgage insurance terminates at that point, and the borrower is faced with the challenge of re-qualifying for the coverage again. This is the case even if they were to stay with the same lender!

This presents the issue of increasing rates upon mortgage refinancing, and no protection if health issues make re-qualifying a problem.

And the final issue, since mortgage insurance is designed as an “easy application” product, it may only have six to ten very loaded health questions. Should the applicant answer “no” by mistake, when he/she should have answered “yes”, it could result in a claim being denied. And, this is why you hear of so many stories of mortgage insurance not paying out.

RSM: So what should consumers do in order to protect their mortgage?

Craig: A product that addresses all of the fallbacks of mortgage insurance is life insurance. This can be a cheaper alternative to mortgage insurance and offer additional benefits.

RSM: What are the benefits of life insurance?

Craig: The main benefit of life insurance is money when needed. It’s as simple as that. Other benefits include:

That’s just to name a few.

RSM: At what stage should someone look at protecting their mortgage? And how much coverage should they look to purchase?

Craig: This question is a good one, but shouldn’t it really be: at what stage should a person look to ensure protection of his or her family? It’s often a myth to assume a paid off mortgage results in easy street.

For example, let’s say we have a husband and wife, both working, and pulling in equal shares of income (not uncommon in today’s society). Let’s assume net after tax income is $5,000 per month.

Say their mortgage payment is $1000 per month, representing only 20% of the family’s net income. But usually, at the end of that month, there is little left over (again, not uncommon in today’s society). This would suggest that the loss of a loved one representing 50% of the family’s money each month would not be satisfied with the removal of only $1000 of total expenses. Where’s the other $1,500 coming from?

There’s a reason the banks operate on debt ratios – they understand that there are greater expenses than a mortgage that a family needs to consider. The banks and lenders act responsibly, but do we as borrowers think the same way?

You could look at covering the mortgage, or you could look at how much insurance is really needed. Most often, term insurance is a low cost way to not only save money over the cost of mortgage insurance through the lender, but the best bang for your buck to ensure your families lifestyle is protected.

And the time for this is really “yesterday”.

RSM: What is the difference between whole and term life insurance? And which option is best?

Craig: Whole Life insurance is designed to provide coverage for life, with, usually a guaranteed premium, but that is not always the case. Term insurance, provides coverage for set periods with a guaranteed premium (say for 10 or 20 years), and a guaranteed renewal premium at a higher rate. But, most term plans are flexible because they also allow for “conversion” to a whole life plan without providing a health check at that time. The rate will then be the rates for the age at conversion to the permanent (whole life) plan.

Which should you choose? It really boils down to need first, solution second.

For example, a doctor has at his disposal a prescription pad, and can order any drug he chooses for a given patient. Do all patients get prescribed the same drugs? Of course not.

The doctor should first assess the patient’s health, determine where it hurts, and look to provide a long-term goal to address the health issues.

Similarly, the insurance broker must assess the financial risk of the client. He must determine the amount of life insurance needed to cover off a good percentage of income over time (usually to retirement), and also consider pension fulfillment needs, which we should discuss more, perhaps in another session.

People without drug coverage need to pay out of their own pocket, and doctors usually make decisions on what to prescribe based on ability of the patient to pay the bill. The same consideration should be made for life insurance.

First, the amount of insurance to protect the client should be determined, and only then should the affordability of the plan type be addressed.

In my experience, based on need, clients that have mortgages, families and several years to retirement, should look at the lower cost, higher payout of term life insurance. And in most cases a ten year term is a good option.

RSM: So a ten year term policy is the best option?

Craig: It is important to understand that insurance needs change as life changes. For that reason, the average life insurance plan, whether bought as whole life or term tends to change every 5 to 7 years.

The extra premium paid to the insurer during that period (if the term was longer than what you held the plan for) would be lost. So the best option is to buy the plan that best represents the closest term before your needs change.

If you’ve had a whole life plan or say a 20 year term plan and have changed to another plan of insurance then you are a case in point. The additional premiums that you paid could have gone towards paying down your mortgage.

RSM: What health checks are required for life insurance coverage?

Craig: When you apply for a personal life insurance plan, the insurance company will ensure your health is good by conducting a form of checks and balances. They will often order a doctor’s report if there are any grey areas and also cross-reference the answers to the application. Depending on age and amount applied for, there will be a nurse called to perform other tests and ask questions related to health history. Additional health or avocation questionnaires will also be used to paint the proper picture. The process is relatively painless yet thorough in ensuring full disclosure.

The insurer is more likely to challenge the applicant up front for health conditions that may not even be known to the applicant, but in doing so, this ensures that at claim time there is little to be challenged. Often the insurer will suggest results are sent to the family doctor to be discussed and dealt with. A mini-physical is a complimentary byproduct for those that refuse to visit the doctor regularly.

Very important to the integrity of the process, there is less likelihood that the applicant’s answers alone will form the basis for the contract. That is the protection you want, trust me! I like to call it being put through the ringer for your own good. The technical term is called pre-claims underwriting.

Creditor/mortgage insurance is riskier because the process looks more closely at you only at claim time. The term is aptly named post-claims underwriting. It’s unfair to challenge insurability after the fact. Despite the fact that premiums have been paid in good faith, the coverage your family relies on may be at risk of not being there.

RSM: What types of questions do you recommend consumers ask an insurance agent before they make a purchase?

Craig: The first and most important is to ensure the agent can justify the reason for the amount of insurance suggested.

Second, did the agent take into account other insurance already in force, and make recommendations as to why they should be kept, or why they should be discontinued.

Third, and this is off topic but an important part of insurance planning, did the agent consider what would happen if you live? In other words, what if you were to become disabled? Is the agent concerned with ensuring your income will continue in all circumstances, disability or death?

If you’ve found a good insurance agent, you should expect to pull out all of your insurance documents including employee benefit books and pension statements.

Insurance selling should be in direct proportion to insurance planning.

RSM: Thanks for your insights Craig!

Next time, RateSupermarket.ca will talk to Craig about insurance requirements for the self employed.

Craig Ferguson Insurance Services has been providing Individual & Group Insurance solutions since 1991.

I’m terribly sorry to break it to you like that, but facts are facts. There is a very good chance you are not going to get out of this lifetime alive.

And nobody knows how or when their time will come. Some live long, healthy, wonderful lives, slipping away while in a peaceful sleep, while others suffer more unexpected deaths.

The only control we truly have is what we leave behind, whether we’re 32 or 102 when we cash in our chips.

That’s why life insurance is such an important part of life planning, especially in your early years of adulthood, when debt load is often the highest – when you are most likely to have high university, credit card, vehicle and mortgage debt.

If you die unexpectedly, you are not off the hook for the debt you have piled up over your lifetime. If you have a spouse or dependents, the responsible thing to do is to purchase life insurance to ease the burden on your grieving family, because at such a tragic time the last thing your loved ones need to be doing is worrying about how the mortgage is going to get paid.

There are two ways to determine how much you want your life insurance policy to be for, said Chris Karram, a life insurance broker with SAFEBRIDGE Financial Group.

“The first is more of the old school way of doing things, and simply involves defining how much income one would want to replace for their family, if something happened to either spouse,” Mr. Karram told RateSupermarket.ca.

Once that number is clear, simply work backwards to determine how much capital is required to provide that kind of income for life, assuming a reasonable return of 5% to 6% annually. That figure then becomes the amount of life insurance you need.

The second way, Mr. Karram said, is to do a complete ‘financial needs analysis’.

“This process is a little more involved and will look at issues beyond just your income,” Mr. Karram said.

“You will need to know how much debt is currently outstanding, how much you’d like to put away for your child’s education, whether you’d like to give a gift to charity or family, and so on,” he said.

Doing the financial needs analysis allows you to define exactly how long you would like your income to last after you’re gone. If you feel your benefactors will only require 10 years of your salary to live comfortably, then purchase accordingly.

The financial needs analysis is quickly becoming the norm in the life insurance industry because people want to make sure their loved ones have a guaranteed, specific amount of income that will not only pay off their short- and long-term debt, but also set them and their family up for a pre-determined length of time.

The process to obtaining life insurance is fairly straight-forward. Once initial contact is made with a broker, and early details are ironed out, an application process – which normally includes a short health exam – will begin. Being completely honest when applying for life insurance is absolutely key, Mr. Karram said.

“Very few people are ever declined outright for coverage, but misleading or lying on an application can, and most often will, lead to a claim being denied in the future,” he said.

So if you’re a smoker, tell your broker. If genetic heart disease runs in your family, check that box on your form. If you don’t, your family may pay the price if your lifestyle or heritage catches up to you.

Otherwise, there are few risks to life insurance, Mr. Karram added. If you provide the insurance company with proper – and true – information, your policy will cover you for just about anything and anywhere. But criminals need not apply – most life insurance companies will not pay “if the insured is killed in the commission of a criminal activity”, Mr. Karram said.

“For most people that shouldn’t be an issue. Otherwise, how you die is not as important as long as the insurance company had all of the relevant information they needed prior to their approval of your new policy.”

Life insurance provides a tremendous amount of flexibility and options, which is why it can seem so confusing to some, Mr. Karram said. Depending on what kind of policy you own, you can – on occasion – opt to take a premium holiday depending on how long you have owned the policy. This is not an option available on all policies, so be sure to confirm with your advisor if that is something that exists with your specific policy.

“If you happen to miss a premium payment due to insufficient funds or something else, you generally have 30 days to make that payment back to the insurance company and maintain the current ‘in force’ status of your policy,” the SAFEBRIDGE Financial Group broker said.

“If you are unable to do so, your policy will lapse on Day 31, however you will have a six month window to ‘reinstate’ your policy with the identical terms from when you set it up.”

This relates to your death benefit, premium, policy date and beneficiaries. The catch here is that you will be asked to make up the premiums missed as far back as six months, which can be a daunting task for some, Mr. Karram added.

Nobody likes to think about death. We all envision ourselves enjoying our twilight years to the fullest, but unfortunately, the unforeseen happens every day. Research a life insurance policy that works for you, contact a broker and protect yourself and your family should the unthinkable happen.
]]> http://www.ratesupermarket.ca/blog/life-insurance-because-youre-not-immortal/feed/ 0 http://www.ratesupermarket.ca/blog/ratesupermarketca-now-compares-term-life-insurance-products/ http://www.ratesupermarket.ca/blog/ratesupermarketca-now-compares-term-life-insurance-products/#comments Tue, 17 Mar 2009 15:39:28 +0000 RateSupermarket.ca http://www.ratesupermarket.ca/articles/?p=196
READ MORE]]> March 17, 2009 – Today, RateSupermarket.ca, Canada’s mortgage rate comparison website, launched a new Life Insurance comparison engine. Similar to the very popular Mortgage Rate and Credit Card comparison tools, the life insurance feature allows Canadians to easily compare various life insurance products including term life insurance, mortgage life insurance and whole life insurance.  Rates are offered by all of the major insurers and visitors can choose to compare quotes instantly or arrange a call back from a licensed life insurance specialist at their convenience.

Life insurance quotes are offered by more than 25 insurers including the following companies:

• AIG Life Insurance Company of Canada
• AXA Insurance
• Co-operators Life Insurance Company
• CUMIS Life Insurance Company
• Equitable Life Insurance Company of Canada
• RBC Life Insurance Company
• Sun Life Assurance Company of Canada
• The Canadian Life Assurance Company
• Western Life Assurance Company

This product launch is a great addition to the RateSupermarket.ca offer.  When customers are troling the site in search for the best mortgage rates, they can also compare life insurance quotes at the same time.  So when the mortgage lender approaches them with a cost for mortgage or creditor insurance, they can make sure they’re getting the best deal.

RateSupermarket.ca founder, Kelvin Mangaroo, comments, “We are trying to make it easier for Canadians to compare financial rates to ensure they are getting the best deals out there.  The Life Insurance comparison tool brings us one step closer in achieving that goal.”

“Life insurance is a valuable asset to have and can provide fantastic piece-of-mind, but sometimes finding the right product isn’t always easy.  Our comparison tool is simple to use and the ‘arrange a call back’ option lets you speak to someone when it’s convenient for you.”

Among all of this hype and the endless amount of advice coming from the government, specialty advisors and websites, I would like to add an action to your ‘Manage your Finances to do’ list.

Take another look at your life insurance policy. When you took out the policy years ago, you probably thought the coverage would be sufficient enough so that in the unfortunate event of your death, your loved ones could maintain their quality of life without having to sell off any major assets (i.e. the family home). This might not be the case any longer.

So when you’re taking a look at your new financial situation, don’t forget to reassess your life insurance policy. You could increase the payout for a short period of time and then when our economic situation improves, which God helping it will be soon, you can merely decrease the payout or leave your loved ones with a little bonus.

“Compare life insurance quotes now with our new life insurance quote engine.