Assumption Life cracks 15 year term

by Glenn on April 2, 2012

For years I’ve been advising folks to pick 10 or 20 year term because they were far and away the most competitive products.  15 year term and 25 year term simply weren’t well priced.

All that has recently changed.   Assumption Life recently repriced their products and have made these products a viable option for those wanting something between 10 and 20 year term, or between 20 and 25 year term.

Here’s an example.  Male Nonsmoker age 50, Female Nonsmoker age 50, $500,000 each.  10 year term rates are at about $95/month viagra cheap online.  20 year term rates are at about $190/month.  Assumption Life’s 15 year term is $127.80.  At that price, it’s a viable option between 10 and 20 year term.  Up until recently, the least expensive 15 year term would’ve been $159/month.

Note that these numbers work best for ages about 45 and older.  At younger ages Assumption doesn’t seem to be overly competitive.

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Canadian Tire Life Insurance – a good buy?

by Glenn on March 8, 2012

As a Canadian, we’re required to love and support Canadian Tire, second only to the love of Tim Horton’s. Nevertheless, is their life insurance offering a good buy for us?

I recently reviewed their website and came to the conclusion that in fact, no, it’s not the best product for most Canadians. In the cases that I reviewed, Canadians have far better products available, far cheaper.

1) No medical exam. I think consumers don’t understand this. You may think that you can just call, and you instantly have a life insurance policy. That is not the case. There is no physical exam, however there is an extensive medical questionnaire. That medical questionnaire is reviewed and underwritten, and if they don’t like it, you get declined.

Any number of life insurance companies offer insurance policies that don’t require a physical exam at smaller amounts of insurance. Rather than sending a nurse out, answering a variety of questions is used instead.

In short, don’t confuse ‘no medical exam’ in this case as meaning ‘no underwritting’. There is underwriting and you can be declined.

If you’re likely to be declined, you should use a broker who is able to shop the market from a variety of companies to find one that is lenient for your specific condition.

2) It’s term insurance. Actually, it’s 5 year term. That means the premiums are level for 5 years, after which point they increase. They don’t appear to disclose on their website what happens after 5 years.

3) Premiums are inexpensive. Uh, no. Not even close – expensive is the word I’d be using. I ran a Male Nonsmoker age 47 for $250,000 recommended you read. Canadian tire premiums for 5 years: $65.75. RBC premiums for 10 years (not 5 – level for 10), $33.64. Yes, you’re reading that correctly – you can get insurance with rates that are level for 10 years, at half the price of CT Life’s policy which is only level for 5 years. It pays to shop around.

4) What happens in 5 years? No conversion. A typical term insurance policy you would select through a broker would normally have the abilty to convert your policy to permanent. While not an option you may expect to use, this is a serious fail safe clause should you become uninsurable. With CT Life’s 5 year policy, you’re locked in to their policy with premiums after 5 years that they’re not disclosing until you get the policy – and it expires completely at age 75. If you become uninsurable, you have no options. With a typical term life insurance policy you can switch your term policy to permanent, thereby locking in your premiums level for life – with no medical exam and at healthy rates.

5) Who you gonna call? If you purchase your life insurance through CT Online, who you gonna call when you have questions? Need to change your banking? Have a claim? Canadian Tire? Really? As an online broker myself, I have seen this criticism of my model before – but there’s a difference. I do business remotely, but I am still a physical life insurance broker you can call for service (I just don’t come out to your home for sales presentations). With brokers, including online brokers, you typically are able to get service directly from a professional involved in the life insurance business – not a call center.

In short, consumers have products with similiar underwriting, better features, and substantially lower premiums. While I love my Canadian Tire store as much as the next Canadian, CT Life’s product is a case of using a great brand name to market a sub-par life insurance product. Shop around, you’ll be better off.

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Empire, Wawanesa, Western all increase rates today

by Glenn on February 21, 2012

All three of Empire Life, Wawanesa Life, and Western Life have changed premiums on their Term to 100 products, effective today.

I’m always a bit of a cynic when companies implement price ‘changes’. When they lower premiums, there are press releases, bands playing and fireworks. I didn’t see any of that happening this time, I think it’s safe to assume that by ‘price changes’, they mean price increases. That’s right – three of the more competitive companies in Canada have increased their term to 100 premiums all on the same day.

It’s a trend that I don’t see changing anytime in the future. If you’re thinking permanent insurance either now or in the future, now’s the time to lock in those rates for the rest of your life.

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Wawanesa Life’s Term 100 rates increasing

by Glenn on February 17, 2012

Wawanesa Life has just indicated that they will have a premium rate increase on their Term to 100 and their Universal Life insurance policies. This rate increase is effective Feb. 21, 2012.

Wawanesa is about the last in a long line of life insurance companies who have raised their Term 100 and Level Universal Life insurance rates over the course of the past year. Low interest rate environment particularly on long term money and lower lapse rates (fewer people cancelling means higher claims) has led to the entire marketplace shifting these premiums higher.

Seeing this happening, I locked in some permanent insurance on my own life last year, as well as purchasing some life insurance for my kids. I believe we’ll never see rates as low as these again – Canadians have been fairly unique in having access to these low cost fully guaranteed life insurance premiums. My kids don’t care right now, but once they have families and mortgages and all the rest of it, I expect they’ll be pleased with how low cost their policies are – and for the rest of their lives too. (Note: Buying larger amounts of life insurance on my children is a personal decision because I see a high value on life insurance. It is not something I would normally recommend for my clients. From a strictly financial perspective this isn’t ideal. It really only makes sense considered as a gift/legacy value.).

I expect that this rush to raise rate isn’t over. Rumours abound that the companies who have raised their premiums may consider doing another substantial premium increase over the next year or so. However if you are considering a permanent life insurance policy, I would advise you to start shopping now before the next potential price increase.

The good news, term life insurance premiums seem to be locked in with no change up or down in site. As term life insurance premiums are shorter term and have high lapse rates, they don’t suffer as much from the ravages of long term low interest rate environments and are more subject to competition.

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Be careful what advice you take on the internet – Is there a hidden agenda?

by Glenn on February 12, 2012

There’s a lot of self-proclaimed consumer advocates protecting wary consumers out there – but they don’t all know what they’re doing. Consumers need to be very careful about trusting even ‘trusted’ sources.

I recently found a post discussing life insurance on a Canadian financial forum, see this thread don’t believe this site.  A userid ‘brucecohen’ in that thread tells people that 20 year term is cheaper than 10 year term, and advises people to watch for renewability.  This was posted by a member that has over 8500 posts on the site.  I assume the poster is trusted by readers as a result.  Yet the information he gave in that thread was demonstratably wrong.

Since I’m in the business, I took the time to respond and counter the points made.  I pointed to a study I did that showed that in fact 10 year term is cheaper (not 20 year term as was mentioned in the thread) and went into a fair bit of detail as to why renewability doesn’t matter (and pointed to a Globe and Mail article showing the same conclusion).  In addition I pointed out what actually does matter instead of renewability.

The result?  My post was summarily deleted and I received an email implying I was spamming their site.  Huh?  They’ve removed my post which showed factual data proving the info on their site was wrong, and left the incorrect information to stand for their readers?  What’s the agenda there?

But it gets weirder.  Since my email response to them bounced, I looked up the ownership of the website and emailed the owner directly.  That person’s website coincidentally proclaims that they provide unbiased financial advice as a business.  And their response?  They have nothing to do with the ownership of the site.  At this point who’s behind that site and what their shenanigans are is beyond me, I’ve left it at that.

So we have a financial forum with incorrect information that ‘looks’ trusted.  Information countering the fallacies is summarily deleted.  The registered owner of the site provides ‘unbiased’ advice but disavows being the owner of the site.  And I assume Canadians are reading that site and believing it.

So, read and do your research.  But in the financial world in Canada, you’d be well advised to confirm stuff that hasn’t been backed up by facts – even if it comes from someone who seems trusted.

And for anyone that wants to see my response to the points of 20 year term being cheaper and renewability being important, here’s the content of my deleted post in response to user brucecohen:


Bruce Cohen Said:
Normally you can. But check all the fine print. If you’re buying 10-year term make sure that it’s renewable without evidence of medical insurability. Also, a good policy will commit now to the rate for the next 10-year term. Have you checked the cost of 20-year term? Sometimes it’s cheaper and you’d likely need almost 20 years to provide for your child.


InsureCan Said:
The idea of renewability is touted on the internet all the time, and it’s wrong – it hasn’t been correct advice in probably 15 years.  You may have read it online, now it gets posted it here like it’s sound financial information, and someone else will pick it up and read it like it is some sort of consumer advocacy tip and pass it along.

You do not care about renewability.

You care about conversion.  The ability to convert to a permanent policy is absolutely vital in any term policy you buy.

I can think of only one term product in Canada off the top of my head that isn’t guaranteed renewable. You’d have to work at it to buy a term policy that isn’t guaranteed renewable.

So pretty much everyone has renewability – it’s not a big deal.  Doesn’t matter, you’re never going to use it.  If you reach the end of the term and you don’t want insurance, cancel.  If you reach the end of the term and do want insurance, you are either healthy or not. If you are healthy, you are going to shop and buy a new policy. If you are not healthy, you are going to convert to permanent. You have to create an artificial construct to find a case where automatically renewing a current term policy makes sense.  Preet Banerjee summarized this in the Globe and Mail last year: http://www.theglobeandmail.com/globe-investor/personal-finance/preet-banerjee/how-to-minimize-your-life-insurance-premiums/article2220938/

What you’ve described was correct 15-20 years ago.  What I’ve described was false 15-20 years ago, but has been correct since then.  Which is why I find it absolutely bizarre that the idea of renewability is still being run around the web like it’s something to watch out for.

Secondly, 20 year term is not ‘sometimes cheaper’.  See http://www.insurecan.com/term-vs-whole-life and scroll down to the bottom of the page to the tables.  10 year term is cheaper (though only mildly) even over 20 years.  To be fair, up until last year I’d have said (and did say)  20 year term is cheaper than two 10 year term policies. I actually did say it a year or two ago, then realized I was saying stuff based on assumptions not fact – so I ran the numbers so I could base my comments on facts.  And now if you ask me, I do not say that 20 year term is cheaper than 10 year term – even though that’s still what you’ll read on the internet.  Again, the comparison of 20 year term being cheaper than 10 year term may have been valid 15-20 years ago, but is not correct information in today’s Canadian term marketplace.  That does not mean I’m recommending 10 year term over 20 year term – it does mean that I am not recommending 20 year term because it’s cheaper.  There are other reasons for 20 year term.

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Sun Life lowers dividends

by Glenn on February 10, 2012

Sun life recently announced that they are lowering their dividend scale for 2012-2013 (announcement).  Note that this is refererring to their dividends within their participating (typically whole life) insurance policies and has nothing to do with their stock dividends.

If you are a Sun Life policyholder (again, this does not affect Sun Life stocks directly) these dividends can drive quite a few features in your policy.  Dividends can affect your cash value, your amount of insurance and when/if your policy becomes paid up.

When these participating polices are sold to consumers, a projection is assumed for dividends over the life of the policy.  This projection that is being made is not normally overtly obvious to consumers. A decrease in dividends being paid that differs from what was assumed originally will affect your policy’s performance, to your detriment.

If you have a Sun Life policy, now would be a good time to call head office or your agent and ask for an illustration using the ‘current’ dividend scale to project your future values in your policy.  Better to find out now if you need to plan for contingencies than to find out in 10 years time when you’re 10 years older.

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AXA Life Insurance Canada sold to SSQ

by Glenn on September 26, 2011

SSQ buys AXA Life Insurance from Intact Insurance.

Intact Insurance has just announced the sale of AXA Life Insurance to SSQ. SSQ is a Canadian financial company headquartered in Quebec City.

This is part of the continued exit of AXA from Canada.  AXA is a large international insurance company headquartered in France, with US operations out of a huge building in Manhattan.  I’ve been to their US building during my last trip to NYC, their building is as dominant there as Met Life’s. AXA does not appear to be exiting the US.

When AXA decided to exit Canada, they sold their operations to Intact.  Intact is a large Canadian property and casualty company – these are the companies that sell home and auto insurance.  As Intact does not specialize in life insurance, they spun off AXA’s life insurance seperately – and they’ve now completed the spinoff of the life business over to SSQ, which does sell life insurance.

What’s the impact of current policyowners?  Probably no impact at all.  Maybe a change of address as to where you’re sending your payment.  But existing policies will remain unchanged; if you’re an existing AXA policyowner there’s no need to be concerned.

What’s the impact of future potential policyowners?  That’s more open for discussion. As a broker, I do not offer AXA products currently.  I have the ability to offer them and have many current clients with AXA, but their customer service and staff service are so horrible that they’ve actually cost me clients repeatedly.  I gather from others in the life insurance industry that they’ve experienced similiar problems and that I’m not alone in my decision to cease offering their products.

I suspect this problem is not lost on SSQ.  In the release that was sent to me, the industry professional that sent it bolded a note that said SSQ is committed to extremely strong customer and advisor service.  That same industry professional is well aware of the concerns I and others have had in the past concerning AXA’s service.

In the end, if SSQ takes over AXA’s business but not their staff, then I’ll be excited to start offering their services to my clients once again.  If SSQ simply keeps most of the existing AXA staff, then I will continue to recommend to my clients that they purchase their life insurance from someone other than them.

(Aside:  When AIG sold their Canadian operations to Bank of Montreal, BMO maiintained the AIG staff.  Actually, they kept just about everything – the products, the paperwork, the marketing staff, and the underwriters.  In that case it was a great idea – today advisors can call BMO and work with all the exceptional staff we had at the old AIG company.  In that case, keeping the staff was a great idea because they were known to be exceptional.  In the case of AXA, I believe many advisors will continue to be reluctant to deal with SSQ if they’re still dealing with the same staff as they were under AXA.)

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More Universal Life Thoughts

by Glenn on February 28, 2009

I’ve previously commented on Universal Life Insurance but wanted to expand on that a bit.

Universal life insurance in Canada belongs to the permanent insurance category. Typically you would consider universal life if you’re looking at life insurance needs for the rest of your life – forever. i.e. you know today you want the insurance when you’re 60,70,90 or 300 years old.

A universal life insurance policy consists of two aspects or features. The first one is the insurance cost. The second part is the investment component. Within these two components we have a myriad of options.

Lets look at the insurance portion to start. Note that we can treat the policy as just the insurance portion and completely ignore the investment part. And it’s a good idea to do that as the basis for your investigation. Let’s say you purchase $100,000 of Universal Life (UL). We’re going to be keeping the insurance in force for a good long time, so we need to know what the insurance premiums will look like over the duration of the policy.

There are two basic premium structures available; level and YRT. Level insurance costs means the premiums are set to never change – they’re level for life. No surprises now, or later in life when it comes to the underlying insurance costs. As an aside, we only ever recommend UL with level insurance costs.

YRT premiums, or Yearly Renewable Term, has premiums that go up every year. The premiums are based on your age, so they start out cheap when you’re younger but increase over time.

There are other options available with some companies where they mix these two (YRT for 20 years, then going to straight level) but that’s they all tend to be mixes of YRT and level.

Now lets look at the investment part. The way this works is any money put into the policy above and beyond the basic insurance and administration costs go into the investment part (or you can just pay the base insurance and admin costs and leave the investment part at $0). Let’s say your basic insurance premiums are $50 per month. If you pay $50, you have your life insurance and your investment sits at $0. If you pay $100 a month, the first $50 pays your insurance and the remaining $50 is put into the investment ‘bank account’ where it hopefully grows and earns interest.

What type of investment options are available? Well, these investment options look a lot like mutual funds. They’re not mutual funds but viewing them as such does give us a pretty good snapshot of what they do. And just like mutual funds, the world’s your oyster when it comes to investment options. All the insurance companies have their own myriad of investment options and some of them actually track well known mutual funds. Manulife for example has something in the range of 25 to 50 different investment options. Wawanesa conversely has a handful, most of them the standard index funds (if you’re an index fund kind of investor…and if you’re not you probably should be).

But! just lke mutual funds, these investments are typically not guaranteed. This ability for investments inside a UL policy to crash and burn just like the stock market or your mutual funds is the biggest risk I see. Be aware when reviewing a universal life insurance presentation that if it depends on some investment option, that quite likely that investment option is not guaranteed. If your investments track mutual fund A, and mutual fund A just crashed by 40%……then the investments inside your UL policy just dumped by 40% as well.

Another thing to consider is that some UL policies will offer some guaranteed investment. Something like a GIC type of rate would be common, maybe at 2 or 3%. But you only get those guaranteed rates of return if you actually invest in those GIC types of vehicles. If you invest in the equity based investments, you’ll not have those guarantees so if your illustration shows equity based investments with GIC type of rates, be careful.

The next thing to carefully consider when looking at investments inside a UL policy would be surrender charges. Some investment options require that your money stay inside the policy for a minimum amount of time. Withdrawing money back out from the policy prior to that time results in very heavy charges. I see no need to invest in a product like this when there are plenty of products available that don’t have these fees.

So what’s the benefit of the investment inside a UL policy? Very simply, money invested inside the policy grows on a tax sheltered basis. Just like an RRSP, if you earn $100 inside the policy you don’t have to pay taxes on it as long as the money stays in the policy. Unlike an RRSP, you don’t get a tax break on deposits (which means that RRSP’s are your first line of investment strategy whenever possible).

I’m going to write about some advantages in my next article, but for now, lets look at some pitfalls with universal life. (Note that I believe Universal Life is a great product. But you need to know what you’re getting and what the risks are). Lets say you want to build up a bunch of cash inside the policy for some reason later.

How to do that? Well, we want to shovel as much money into the investment portion as we can, as early as we can. Since we always have to pay at least the base insurance premiums we may decide to minimize those insurance premiums by going with YRT insurance costs. This gives us more money (since YRT premiums are initially lower than the level insurance premiums) to start putting into the investment portion. That early start we assume allows that investment to grow higher, faster. And if things go well, that’s exactly what will happen.

But things can go not so well. Let’s say you go with this strategy, but your investments later crash and burn (remember, the investment portion isn’t normally guaranteed). Now you’ve got poor investments and worse, you’ve got those high YRT premiums to pay since they get expensive later.

Consumers can and have ended up in similiar situations. Because we’re dealing with long durations, sometimes spanning decades, we may not realize the problems until many many years in the future. So it’s vital that you address all of this upfront when you purchase the policy. If you didn’t, now’s the time to pull out your UL policy and have another look at what you’ve got.

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Five common mistakes when buying life insurance

by Glenn on January 17, 2009

Here are perhaps the five most common mistakes consumers make when buying life insurance. Avoid them, and you’ll be better off (and have more money in your pocket).

  1. Failing to shop around on price. Agents and brokers all have their own favourite companies they promote and sell. But does company matter? For most of us, and for most types of life insurance coverage, either the least expensive company or close to the least expensive is going to be as good as (or better) than other more expensive companies. If your broker isn’t recommending the least expensive life insurance company, you can run quotes on this site (see the life insurance quotes system in the top right of this page).
  2. Buying the wrong type of insurance. Do your research on the available types of insurance. Most consumers should be looking at some form of term life insurance. Purchasing whole life or some other form of permanent insurance when term life insurance is better suited means you’re going to spend a lot more money on life insurance. Conversely, for the smaller percentage of people who either need or prefer permanent insurance, buying term life insurance instead of something like universal life insurance means we’ll be out a lot of money over the long term.
  3. Failing to purchase term life insurance without the conversion privilege. This is probably the least frequently discussed feature on Canadian life insurance today – and it’s one of the most important….AND it’s available for free on most (but not all!) term life insurance policies in Canada. It’s an airbag for your life insurance policy, insurance for your insurance policy, your back door out of a term policy if everything’s gone wrong. Many won’t use this feature ever, but if you need it, it’s everything. It’s free, make sure your term policy has this before purchasing (and make sure it’s ‘term to permanent’ conversion, not term to term).
  4. Not getting everything guaranteed. In today’s life insurance marketplace, you should be able to guarantee just about everything. That includes future premiums (and not just the internal premiums, but the actual premiums you pay). For example if you want to have your life insurance policy premiums paid up or go to 0, you can do this on a fully guaranteed basis. Or you can get a fancy investment based calculation that may look good, but is not guaranteed. Purchasing a life insurance product that is not completely guaranteed is completely at odds with the insurance concept. And in today’s insurance marketplace, there’s little need to do so.
  5. Buying too little insurance. This typically goes hand in hand with purchasing the wrong type – get the wrong type of insurance and the only way to make it affordable is to buy too little. In addition, most consumers seriously undervalue how much life insurance they need to provide their dependents an income over a long period of time (say long enough to get the kids out of the house). If you’re spending your entire $50,000 of paycheque each year keeping the household together, how long do you think $250,000 is going to last when you’re not around? 5-6 years? That’s not long enough if you’ve got young kids. You can use the how much life insurance do I need calculator to get some estimates.

Pay close attention to those 5 tips and you’ll be a lot closer to ensuring you’re keeping your hard earned dollars in your own pockets.

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Should I switch to seg funds from mutual funds?

by Glenn on January 15, 2009

In the current investment climate, the guarantees inherent with a seg fund can start looking attractive to many people. So should you switch your investments from mutual funds over to seg funds?

The initial response to that would be yes – if you are willing to pay a slightly higher management fee in return for the guarantees we get with seg funds. But there’s at least one thing to consider before doing this – when should you make the switch?

We know that seg funds have minimum guarantees on your deposits (which would include your initial transfer). What isn’t normally guaranteed directly is your growth.

Now let’s assume that your investments will recover from their current abysmal level. Note that the markets generally correct or come back in fast spurts – over the course of a day or so, not over months. You’ll wake up one morning and it’ll be mostly back.

Let’s say you had $100,000 last year in mutual funds. Right now you’ve got $60,000. We expect it will return to $100,000 at some point in the future (that’s a basic underlying principle of the markets).

Now if you make the switch to seg funds now, your guarantees will be based on the $60,000. When the markets return, the growth of $40,000 isn’t generally speaking included in the guarantees.

However if you wait until your mutual funds return to $100,000 and then transfer over to a seg fund, your guarantees in the seg fund will be based on $100,000.

What to do? There’s no general answer to this as it depends on whether you believe your mutual funds will come back given your current investments, it also depends on some of the insurance companies’ seg guarantees. And the length of time you have until your maturity date should be considered as well – can you wait for your mutual funds to recover?

Like many things in the markets what we should do is the opposite of what we want to do. The best time guarantee-wise to move from a mutual fund to a seg fund is when markets are high, to lock in those guarantees. However the time most people want to trade off the higher fees for the guarantees is when the markets are low.

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