10 Factors to Get Best Term Life Insurance Policy
Term life insurance rates in recent years have become much more competitive in the Canadian marketplace. It is not uncommon to see policies written 10 plus years ago to be replaced with a more cost effective policy today (while maintaining the same face amount). As an independent life insurance advisor, I have access to the largest life insurance providers in the country. Often times, the difference in premium between the cheapest and even the 10th most expensive insurance provider is nominal. While premium is very important, there are other considerations to take into account. This leads me to recommend policies based on 10 factors as seen below:
1. Underwriting Requirements
Given most would rather (if given an option) avoid providing urine, blood and vitals for a life insurance application, one major factor of comparing carriers relates to underwriting requirements. Depending on the age and face amount of the policy, an applicant may qualify for this type of accelerated underwriting. Manulife Insurance for example allows those aged 45 and under to apply upto 1M of life insurance without a medical exam. Almost all carriers have some form of non-medical insurance.
2. Renewal Rates
Generally speaking, term life insurance in Canada renews contractually until age 85. For example, a 40 year old male, non-smoker approved with standard rates for Term 10 life insurance for 1M (valid for 10 years) would pay $54.90/month, $56.70/month and $55.86/month from Canada Life Insurance, Sun Life Insurance and Empire Life Insurance respectively. The premium in this policy would be valid for 10 years and at age 50 in this example would automatically renew into a new 10 year policy. The renewal premium would be $430.20/month, $446.85/month and $346.50/month for the 3 companies respectively. Hence over a 20 year period, although Empire Life in this example is slightly more expensive than the other 2 providers to begin, but could be significantly more cost effective over a longer term. Note, the going rate in the market place for a 50 year old under same circumstances (non-smoker, regular rates) would be significantly lower. For example, if all things remained equal a 50 year old, non-smoker applying for 1M of life insurance today would be $139.50/month using standard rates which is much lower than the renewal premiums provided. Also, some insurance providers have amended their policies to renew into yearly renewal term policies at the conclusion of this existing term. For example, at year 10, instead of renewing into another 10 year term, the policy would renew into a 1 year term policy which auto renews yearly.
3. Have Excellent Permanent Life Insurance Products
The reality is this is subjective and can change at any time as products change. With a term life insurance policy, generally the policy can be converted without medical evidence into a permanent life insurance product such as whole life or universal life insurance. While certain companies, such as RBC Insurance have decided to completely exit the permanent life insurance market (except in case of conversion, in which case product offering is limited), other providers are historically known to have an extremely strong and diverse product offering. In order to convert an existing term insurance policy without medical evidence, the policy must be converted with the existing life insurance company. For example, an applicant with a term life insurance policy with SSQ Insurance can only convert the policy to other permanent products offered by SSQ Insurance.
4. Have Better Preferred Rates
When applying for life insurance policies, generally rates quoted are “standard” rates offered by the insurance companies. However, those who are very healthy may qualify for “preferred” rates which can sometimes significantly lower premiums. In the above example (male, 40, non-smoker for 1M), using standard rates the top 3 quotes were approx $55/month. If an applicant qualifies for “preferred underwriting” with SSQ Insurance for example the rate would drop to $39.60/month, compared to $41.40/month from Canada Life and Empire Life and $40.95/month from Sun Life respectively.
5. More Likely to Offer Preferred Rates
While this again is subjective in nature, the reality is some companies have a lower threshold to qualify for “preferred” rates and are more likely to offer. Working with an experienced advisor helps you identify which companies are better suited to provide this offering.
6. Have Unique Value Added Features at No Additional Cost
In effort to remain as competitive as possible, companies sometimes provide unique value added features to their policies. SSQ Insurance for examples offers a total disability benefit with all term life insurance policies. Foresters Financial offers a monthly orphan benefit and free invites to member events. Manulife Insurance through their Vitality offering, provide a lifestyle benefit which can include such things as gift cards and Apple watches.
7. Have Unique Product Features for Future Benefit
Some insurance products allow a 10 year term policy to be converted without medical evidence within the first 5 years to a 20 year term policy. Others allow the policy to be partially converted at maturity of the term, with the remaining portion converted at existing rates for someone of that attainted age. For example, in the above example of 40 year old male, non-smoker, for 1M Manulife at maturity would allow 50K to be converted into a permanent policy and the remaining 950K to be converted into a 10 year term product at current market rates (as opposed to the contractually guaranteed rate which often times significantly higher)
8. Ask Less Questions Within Their Applications
Simplified Issue or Quick Issue products are life insurance applications with less invasive underwriting and questions within their applications. Canada Protection Plan for example offers a wide variety of products with limited questions and non-medical. Furthermore, the applications may have specific questions that can impact underwriting. In a previous blog post, we discussed impact of criminal history on life insurance applications. While one company will ask if the applicant has ever had any criminal history, Desjardins Insurance for example asks if the applicant has had any criminal history in the last 5 years. These questions/answers can sometimes make the difference between being approved or declined.
9. Have Better Customer Service
Also completely subjective, however based on experience certain companies have better hours, are easier to get a hold of, have excellent processes in place that make them better to deal with. This is always subject to change as companies go through up and downs, but customer service can be an important factor to consider, even if it is subjective.
10. Strength and History of Company
Perhaps, knowing Foresters Financial maintains an extremely high capital reserve against insolvency is extremely important to you. Or knowing that Canada Life has been paying policy dividends since 1848 is reassuring. Or recognizing brands such as Sun Life Insurance and Manulife gives peace of mind. Or knowing that Ivari is an insurance company owned by a company owned 100% by the Canada Pension Plan. Whatever the circumstances, history and strength of company can play a factor in choosing the right life insurance company to apply.
Working with a life insurance specialist can help you find the best solution to fit your particular situation.
We would be happy to provide further analysis for your family’s specific circumstances. Contact Protect Your Wealth today to learn more!
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