By Sheryl Smolkin

If you asked me how to go about buying life insurance, only two thoughts would come to mind: directly from a life insurance salesman or an online purchase. Therefore I was interested in a recent column on insureye which discussed the pros and cons of purchasing life insurance in several other ways.

Here are five of the most common ways of purchasing life insurance noted in the article you will likely encounter, plus I’ve added one of my own.

1. Captive Agents
   Buying through an insurance agent is the familiar way to buy life insurance. You talk to an agent who represents an insurance company, you get a quote and you purchase your policy.

   PROS

   CONS

   You might know an agent personally because somebody from your family has already dealt with him/her.

   Captive agents work for one company and can sell only the products of that company. If an agent’s compensation is linked to sales performance, he/she may try to sell you as much as possible. Captive agents often have pre-determined sales quotes. They cannot compare offers across different providers so you may lose out on policy features or a better price point that an independent broker can offer.

2. Banks
   Though banks were not significant vendors of insurance in the past, they currently sell a variety of insurance products. As required by law, their insurance business is separate from banking activities.

   PROS	CONS
   You know the brand and already trust the bank with your money.	Limited to the bank’s products and will not compare features, price against other offerings. May only offer simple products like term life. Do not also offer complimentary products like disability or critical illness insurance.

3. Insurance Brokers and Financial Planners
   Insurance brokers and financial planners typically offer products from multiple providers since they work for many companies and can compare rates and products across multiple providers.

   PROS	CONS
   Independent insurance brokers work for multiple companies and are less motivated to sell products from only one company. Find out how many companies the broker works with. Depending on your health, their knowledge of companies with special offerings for pre-existing conditions, poor health etc. may be more robust.	Not all brokers are created equal you’re your research and get references or opinions from past clients before you commit to a broker

4. Online aggregators
   Online platforms allow you to get life insurance quotes across multiple providers, and subsequently connect you with insurance providers or insurance brokers.

   PROS	CONS
   Available 24/7. You can easily compare different quotes and find out the best offer, or change your criteria to see how that affects the policy and the price. It is important to find out how many providers an aggregator works with since comparison across three companies is not the same as comparison against 30.	Lack of personal advice. Aggregator platforms offer online tools, but not all offer online chat or personal assistance. However, in most cases, aggregators connect customers to insurance brokers who can respond to any questions or concerns.

5. Direct Call
   In most cases, purchase of insurance consists of several steps: the initial quote, medical tests (including blood and urine), a questionnaire, and the policy purchase (potentially for an adjusted price that reflects your health condition). In some cases, you can purchase insurance directly via a telephone call, without any further interactions. Generally however, the product would be a guaranteed issue or simplified issue insurance policy. These products do not require medical tests.

   PROS

   CONS

   Easy and fast. You call, in some cases answer a few questions and you are done. That is much simpler than have a nurse visit your home, conduct your health check and take your fluids.

   Since there are almost no insurance checks, an insurer automatically assumes that you are a high-risk customer (e.g. pre-existing conditions) and thus will charge you more than other customers who agree to medical tests. A telephone call will get you only a limited amount of coverage e.g. $10,000 or $20,000. Do not expect coverage of $1,000,000 of coverage in guaranteed or simplified issue policies.

6. Group insurance
   If you are employed, some group life insurance may be offered as part of your employee benefit package. Since employer-paid life insurance premiums are a taxable benefit, you may be required to pay all or part of the premiums via payroll deduction. You may also be offered additional optional group life insurance for you and family members.

   PROS

   CONS

   Because group life insurance is easy and often fully or partially paid for by your employer, it’s a “no-brainer” for most people. An added advantage is that for the basic amount, no medical examination is required.

   Term insurance only. If you need coverage for an extended period, group insurance premiums are often more expensive than individual rates since group rates tend to increase annually or on an age-banded basis while individual life premiums remain the same for a specified period. If you leave your employer you must arrange new coverage. “Follow me” policies that do not require medical evidence are available from most carriers but they may be more expensive than comparable individual coverage.

For the pros and cons of optional group life insurance, see Should you buy extra life insurance at work?

However you choose to purchase life insurance, it is important to ensure your family is adequately covered. You can calculate how much life insurance you need here.

By Sheryl Smolkin

According to the 2014 Bridal Survey conducted by weddingbells.ca, in 2014 an estimated 162,056 weddings took place in Canada and 65% of them took place between June and September.

That means dozens of your friends and neighbours are probably trying to balance their wedding budgets, booking venues and “saying yes to the dress” as you read this blog. But how many of them are factoring in the impact their upcoming nuptials could have on their insurance or any previous estate planning?

The folks at the web site insureeye.com recently asked licensed life insurance broker Tamara Humphries for her opinion on what you need to know about life and health insurance if you are getting married. Here are a couple of interesting issues she raised:

1. Amount of coverage: Once you get married, and especially if you have or will be having children, you should consider increasing in your life insurance coverage. There are various life insurance calculators online including this one from Sun Life that will help you calculate how much you need. Your financial advisor can also assist you.
2. Group Benefits: Understand the life and health insurance plans both you and your partner have at work, and how benefits are coordinated. If one supplementary health plan is particularly good, you may wish to opt out of the other.
3. Changing your beneficiary: If your previous life insurance policy named, for example, your parents as beneficiaries, you may want to make your spouse the beneficiary instead. You can change this beneficiary designation at any time upon notice to your insurance company unless you have made the beneficiary designation irrevocable.
4. Family life insurance: As an alternative to two life insurance policies for each spouse, you can get one policy for both of you, which often results in lower premiums overall. This policy is often called family or joint-first-to-die (JFTD) policy. JFTD policies pay only at the first death. It is important to know if one spouse dies, the surviving spouse will not have life insurance. If you prefer to keep separate policies after the marriage and get the policies from the same provider, you might benefit from a multi-life discount.
5. Look for bundles: Bundles still work. If you or your spouse already have a home and/or auto insurance provider, there may be an option to get a bundle discount when adding a life insurance policy from the same company. Some insurers, called universal insurers, offer all insurance products – life, property and health insurance.

Also keep in mind that when you get married, (see Public Legal Education Association of Saskatchewan) unless you indicate in your Will that you are making the Will in contemplation of the marriage or a spousal relationship, your entire Will is cancelled. This general rule does not apply where an individual makes a Will while living in a spousal relationship and later marries that spouse.

Ending a spousal relationship can also revoke or cancel your Will or parts of it. For example, if you name your spouse as your Executor or leave part of your estate to your spouse, those parts of your Will are revoked or cancelled after you divorce, or after 24 months of separation in the case of other spousal relationships, unless you expressly say otherwise in your Will.

In Alberta and British Columbia, however, new laws state that marriage, or the entrance into an adult interdependent partnership (common-law relationship) does not automatically revoke a Will.

Since the laws across the country are no longer consistent, deciding which laws apply if the person married in one province and died in another, can be unclear. Further, if a person marries or dies outside of Canada, the decision as to which law applies becomes even more complicated. To avoid such difficulties, it is best to enter into a Will and revoke the old one upon marriage, or when entering into a common-law relationship.

By Sheryl Smolkin

This week there were several interesting blogs about life insurance I’d like to share with you.

On Brighter Life, Kevin Press discusses Understanding life insurance. First of all he gives basic information regarding term, permanent and universal health insurance. But for Kevin, the question was never “term or permanent.” It was, “How much term and how much permanent?”

Robb Engen from Boomer & Echo outlines The 4 Best Strategies for Successful Life Insurance Applications including preliminary inquiries, multiple applications, a covering letter and an insurance broker who is knowledgeable and up to date.

In a Toronto Star column I wrote about Eight red flags when you apply for life insurance. If your application reveals you have or had a serious or life-threatening illness the insurer may charge you higher premiums or postpone coverage for specific conditions until you can show the condition has stabilized. Or, the insurer may refuse to cover you. However, you still may be a good candidate for a “simplified issue” policy.

In an archived article Retire Happy blogger Jim Yih tackles the question, Do you need life insurance in retirement? Several of the situations where he says life insurance makes sense for retirees are to:

• Pay off debt
• Cover taxes at death
• Cover final expenses like funeral expenses
• Provide income for dependants
• Leave a larger estate
• Equalize your estate
• Business continuation
• Provide for charities

And finally this week, thanks go to Dan on Our Big Fat Wallet who introduced his readers to The Secret Pension Plan: Saskatchewan Pension Plan. He gives a great summary of the main features of the program.

He says the Saskatchewan Pension Plan is great for anyone looking to invest but not quite comfortable with DIY investing. It’s also useful for the self-employed who have no desire to handle their own investments. The costs of the plan are low and they offer lots of flexibility. You can also get potentially-lucrative cash back rewards for all contributions if you make them on your credit card.

Many employers also offer this easy-to-administer pension plans as an employee benefit. You can get more information on the Saskatchewan Pension Plan here.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

Suppose your employer pays for group term life insurance equal to one times your salary. You also have the opportunity to buy more. How do you know how much additional life insurance you need and whether buying it at work or independently makes the most sense?

The following basic calculation can help you assess your insurance needs:

Insurance coverage required = total outstanding debts + funeral costs + education funding for children + (annual cash flow needed by the survivor to remain debt free x number of years cash flow is required).

You can also plug more detailed numbers into this online calculator. Once you know how much insurance you need, you have to consider the pros and cons of additional group term life vs individual coverage.

While employer-paid premiums for your basic coverage are typically lower than individual life, you may be surprised to learn that this does not necessarily apply to employee-paid additional optional group life insurance. That’s because you will have to undergo a medical examination in both cases, and your age and health status could drive up the cost of optional group life to the same or higher levels than individual life.

Furthermore, if you need coverage for an extended period, group insurance is often more expensive than individual rates since group rates tend to increase annually or on an age-banded basis while individual life premiums remain the same for a specified period.

Even when you compare individual polices to group rates, if you look at the total cost over the needed coverage period group plans rarely come out ahead. Although an individual policy may be slightly more expensive, the value of the policy is greater because the employee owns it outright and premiums are guaranteed for a specific period – say 10, 20 or 30 years.

It is also important to recognize that unlike optional group life, individual policies can offer preferred rates to people who are in good health and have an excellent family health history. In these circumstances, it may be a smart decision to buy up on individual term insurance instead of adding optional group life coverage.

Conversion of optional group life insurance can also be a problem if you change jobs or are out of work. Some group policies allow you to convert the coverage into an individual policy within 30 days of leaving the company without medical underwriting.

However, because no medical underwriting is required, group conversions are typically priced higher than standard rates.  Also, some group policies only allow employees to convert the insurance to a permanent policy, which is more expensive than individual term coverage and may not be what you need.

So do the math. You can compare quotes for individual term life on this website and then figure out what topping up your basic employer paid group insurance plan will cost you over an extended period. You may discover that individual life insurance will be cheaper in the long run as you age, even if you change jobs or poor plan experience drives up rates under your employer’s plan.

Also see: 

Group vs Individual Insurance By Cecilia Tsang

Group vs Individual Insurance By Chantal Marr

Individual Life Insurance vs. Group Life Insurance