Life Insurance in Canada

You many believe that Canadian Tire is company that deals with furniture, tools and outdoor living, but it is life insurance. After making improvements their term life insurance scheme the home hardware firm rolled out their new plan. A marketing strategy was created by this firm whose underwriters are Canada Life. So now we will go through some of the small print of this kind of scheme. Applying for this policy is very simple. You have the choice of applying online, by phone or mail. You will be queried about your health. There are seven of these inquires. Answering ‘yes’ to any of the questions need more medical details and the possibility of a medical visit. The schemes face value is $250,000 with premium increases after the first five years. What’s the trouble? This all looks fine to me. Let’s consider this type of policy against Canada Life’s individual term life policy. If we examine a 40 year old male smoker. On the Canada Life policy the fees are $40 cheaper. The Canada Life plans are greatly less expensive. The versatility and customization of these types of schemes are not available on the Canadian Tire policies.The disadvantages to the Canadian Tire plan include curbed benefits of only $250,000 and a term of no greater than 5 years. A Canadian Tire Scheme also charges you PST. Joining plans or affixing a rider for additional benefits is an bonus of individual life plans. Exclusive advise from your broker which leads to a policy worked on your individual requirements are another advantage rather than a standard group policy which is offered by the Canadian Tire Term Life Insurance plans. So taking the contrast in cost, the benefits proposed, the fees charged and the inflexibility of the Tire Term policy, you will be better off with an Individual Life policy from your broker. To find out more about the Canadian Term Life Insurance, please refer to our more detailed article.

Photo source: Mikey G Ottawa

Regarding the commission payment for the insurance brokers, it doesn’t make a difference whether they are captive (working for only one company) or independent (for more companies), as all of them get their commission when an insurance policy is activated. Two advantages of working with a broker are that they can advise you on the best type and amount of coverage and they can search the market for the best premium. Of course, the agent receives his/her commission paid from the insurance company. Nevertheless, the media and consumer scepticism has done a lot to create misunderstanding. The main points regarding the payment process that are most commonly misunderstood will be described in the following paragraph.

“Life insurance commissions drive up the price of the policy.” Life insurance policies, whether sold by salaried employees or self-employed advisors, have distribution costs. The insurance company includes the price of distribution inside the price of their products. It usually doesn’t make any difference how the consumer buys the product. Some companies, for instance RBC Insurance or Manulife, charge the same premiums for the same life insurance sold via multiple distribution models. If you buy a $200,000 Term 10 policy from Manulife, you will always pay the same price - whether you get it via their call centre, website or use the services of an independent broker. “It is possible to negotiate the life insurance commissions.” That is not true, they are not. The situation is different from when you are buying a car or a house. Once again, the commissions are built into the distribution costs of the policy and cannot be changed.

“The commissions for Whole Life or Universal Life insurance are higher than for Term Life insurance.” In reality, the price of a life insurance policy influences the height of the commission for the agent - the higher the premium, the higher the commission. Whole and Universal policies have higher initial premiums than Term policies, but the Whole and Universal policies are bought once. Term policies increase in cost as the insured gets older, so they will buy multiple term policies over their lifetime. A commission is paid for each new policy, but what is crucial for the consumer is that each time he/she purchases a new policy, he/she is also older, so the policy price is therefore higher. The insurance rate also depends on the health status of the applicant - in case it has changed, the insurance rate will increase or the coverage won’t be available. For the applicants it is really crucial that they understand the difference between all the life insurance policies and that they know which one is the optimum choice for them. “The commissions paid by some insurance providers is better than from others.” It is true that one carrier might pay a slightly higher commission than another one, but the differences are only small. And the customer doesn’t need to care about this anyway, since the commissions are a fixed cost within the policy. It is however very important that your adviser has access to insurance from multiple carriers, as some of them, while independent, work only with two or three. Our advisors have access to 15 different life insurance carriers, ensuring you get the a best possible price.

Photo source: Tim Dorr

Stand up anybody who has ever collected anything in their lives. Most of people at some point started a collection of different things like toy cars, match boxes or bottle tops. Usually, after a certain period of time, these valued treasures have been put away or just disposed of.

For sure, there are those among us that have never given up this sometimes strange habit and have turned it into a lifelong passion There is, however, a certain kind of collectors, who have taken this passion to a higher level and have diversified their portfolios by investing in valuable coins or stamps.

So, who is the special insurance cover for? Consider this: normal household insurance is quite good enough if you just need to cover everyday items such as TV’s, computers and so on. However, collections of higher value need to be approached differently. In some situations, collections of low value might be covered, but if you need to claim from your insurer, more often than not this will end in failure. Most household policies normally only cover the material cost of lost or damaged property. It is relatively easy to claim for a damaged front door or smashed window, but try claiming for a priceless Blue Mauritius stamp.

Therefore, fellow collectors, what is the best approach to insurance if you collection is more valuable than your new car? Do you have nightmares, visualizing it being stolen? Fortunately, you won’t need to worry anymore. There are now special policies tailor made for these collections. AIG and Allianz are but two of many insurance companies that have specialist policies for valuable collections.

If you are a serious collector, then an ‘all risk’ policy would be your choice securing your collection against most imaginable risks, even nuke attack or ‘mysterious disappearance’. Mysterious disappearance cover is offered for in the Fireman’s Fund policy. Transportation and travelling shouldn’t be a worry as both are covered in all specialist policies.

Collections naturally increase in size and value over time and insurance companies tend to offer this in their policies as a way of appearing more customer friendly. New additions to your collection can be insured easily with a simple phonecall to your policy provider. If you are nervous about going to pick up a new addition, then a simple phone call to your insurer prior to going and your new investment is insured.

Obviously nothing can replace your cherished collection, should it be destroyed by fire or stolen by some hard-hearted thief.

Nevertheless, if you can be compensated financially for the full value of your investment, then the pain should be more bearable.