Demutualization at Unity Life – why is it great news?

Unity Life of Canada joined the Foresters family in April 2008 and as of Jan 23 2012 changed their name to Foresters Life Insurance Company.

As we have reported earlier, policyholders of Unity Life of Canada have voted to sell the insurer in April to the "The Independent Order of Foresters", a fraternal benefit society.

Let me add some background and comments to clarify the situation at Unity Life.

Demutualization is the process of converting from a mutual company, owned by its policy holders, to a company with common shares, owned by its shareholders. In exchange for the value of their ownership rights policy holders choose between receiving shares of the company or the equivalent in cash.

This is great news for the 15,000 eligible Unity Life policyholders. They essentially keep their coverage intact and get a free windfall.

People who owned these policies voted overwhelmingly in favour of because it was in their best financial interests to do so. They will receive significant compensation ($3,300 on average) without relinquishing their policies or benefits. I was personally the benefactor of the Manulife demutualization – my father wisely purchased small Whole Life policies for me and my two brothers which translated into almost $7,000 worth of shares which have more than tripled in value.

The only real losers in the above announcement are the policyholders who died before the demutualization announcement. They will be ineligible for the payout and many of these policy holders held their policies for decades and were responsible for the building of the company.

AXA’s Term policies: Buy Built-in Benefits

AXA Canada’s Term 10 and Term 20 life insurance policies have a unique feature that many consumers are unaware of. AXA is the only life insurance company in Canada to offer a term insurance policy with a built-in Extreme Disability Benefit (EDB)—in some cases, the cost is less expensive than traditional term insurance policies.

The advantage of this coverage is that, not only is the insured’s family protected if he/she dies within the stated term, but the policy includes the added protection of the EDB. This feature can provide additional value to Canadians who live with long and often treacherous winter driving conditions.

The EDB pays out 50% of the policy amount (up to a maximum of $250,000) for individuals who suffer an extreme disability. An extreme disability claim requires the insured to have suffered a permanent disability and requires assistance with five of the seven functions of daily living.

There are definitely limitations with this coverage, and it should not be confused with traditional disability insurance (which covers a much wider range of disabilities). The extreme disability must occur before age 60, and this benefit reduces the death benefit claim dollar-for-dollar. Therefore, if someone with a $600,000 life insurance policy develops an extreme disability, and subsequently dies—the $250,000 EDB will be deducted from the $600,000 life insurance payout.

Below are examples of AXA’s Term 10 rates at $250,000 of coverage:

Insured.............Standard Rates.....Preferred Rates:
35-yr male N/S:...$21.13/month…......$16.43/month
45-yr male N/S:...$35.78/month…......$26.55/month
55-yr male N/S:...$80.10/month…......$57.66/month

RBC Insurance’s Professional and Quantum disability plans

RBC Insurance has four primary income replacement plans. Two of the plans are geared toward the professional market—the first is the Professional Series and their second plan is referred to as the Quantum Policy. The Professional Series is available with benefit amounts ranging from $450 to $25,000 per month. The plan is non-cancellable, meaning the insurance company cannot raise the rates or cancel the coverage. This is advantageous for the insured as they can always cancel or reduce the coverage, but RBC Insurance is bound by the terms of the contract regardless of a change in health.

The Quantum Policy is a lower-cost alternative for professionals and business owners. The policy is guaranteed renewable, meaning the insurance company can adjust the premiums or cancel the coverage on a class-wide basis. The policy has also a loss of earnings definition of disability, integration of benefits, and a focus on rehabilitation. The policy may also offer more flexibility in terms of underwriting.

Both the Professional and Quantum plans are available on a step rate basis. The initial premium is payable either to age 30 or five years after the date of issue, whichever is later. After the initial period, the premium increases to the ultimate level.

RBC Insurance also offers two plans targeted at blue-collar workers, farmers and middle-income earners. The policies offer less features and are available on a non-cancellable (i.e., RBC Insurance’s Foundation Series) and a cancellable basis (i.e., RBC Insurance’s Bridge Plan). Both these policies also have a step rate version.

Doctors demand action on private health insurance

Canadian Doctors for Medicare called on the federal and provincial governments to immediately take all necessary steps to stop the spread of private health insurance for medically necessary services in British Columbia.

"The recent exposé that Acure Health Corp is selling 'Medical Access Insurance' for services already covered under Medicare undermines the public health care system to the detriment of the vast majority of Canadians, and contravenes the Canada Health Act", said Dr. Danielle Martin, Chair of Canadian Doctors for Medicare.

"It is illegal in British Columbia to sell private duplicate insurance for services already covered by MSP. If it turns out that ACURE has been collecting illegal insurance premiums, the money should be returned to the consumers," said Dr. Martin.

You can read the whole press release here.

Equitable Life’s Term 10 and Term 20 Plans

Equitable Life’s Term 10 and Term 20 policies are available with face amounts as low as $50,000. Issue age limits are 18 to 75 years of age on their Term 10 plan, and 18 to 65 years of age on their Term 20 plan.

Equitable life offers preferred rates for those who qualify, on amounts over $250,000 for both smoker and non-smoker policies. The plans also have the following riders/benefits available as add-ons: accidental death benefit, guaranteed issue rider, waiver of premium rider, and children’s life insurance rider.

In addition to the tax-free death benefit paid out to the policyholder’s heirs, both plans have a built-in bereavement counselling benefit. This benefit automatically reimburses any counselling expenses to the beneficiary of the insured up to $500 per claim. The receipts must be submitted within a 12-month period of incurring the expense.

Another terrific feature in Equitable Life’s Term insurance line-up is its conversion credit. All term policies converted to a permanent (i.e., a level rate plan) qualify for a 25% credit of the last 12 months of premiums.

Below are examples of Equitable Life’s Term 10 rates at $250,000 of coverage:

Client................Standard Rates....Preferred Rates
35-yr male N/S:...$19.35/month….....$15.08/month
45-yr male N/S:...$33.53/month….....$26.33/month
55-yr male N/S:...$75.38/month….....$57.38/month

Empire strikes back with a universal Trilogy

Empire Life’s universal life plan, branded “Trilogy,” is one of the most flexible universal life plans in the industry. The policy allows you to cover up to five individuals under one policy—and with the average universal life policy fee at about $90 per year, this can add up to significant savings over the life of the policy.

Empire’s Trilogy plan is available to individuals from birth to age 85, and with face amounts as low as $10,000. The lower face amounts can be an attractive feature for seniors on a tight budget looking to cover final expenses. The plan has variety of investments options, including seven different guaranteed interest accounts and 23 index options.

A critical illness rider covering 21 illnesses, including loss of independence, is available. A unique feature is that the critical illness rider is available as an advance or an additional payout. The critical illness advance pays out all claims as an advance against the death benefit, but the cost is much lower; the critical illness addition pays out any claims separately and does not limit the death benefit in any way. Other optional riders include accidental death and dismemberment, disability waiver of premium, a children’s life rider, and a guaranteed insurability rider.

Similar to their term plans, Empire Life’s Trilogy plan does not offer preferred rates—so those in very good health and with good family health history may be paying more than they would with other insurance companies (although the number of carriers offering preferred rates on universal life insurance is far more limited than term insurance, and the discounts are much less significant).

The cost for a 45-year-old male non-smoker who applies for $250,000 of universal life level cost coverage would pay a minimum premium (i.e., the premium to keep the plan in force) would be $170.71 per month.

Canada Life’s Universal Life plan – one of the best around

Canada Life’s Universal Life plan is available with face amounts as low as $25,000, and issue ages from birth to age 85.

The plan allows you to choose between multiple Cost of Insurance (COI) options, including an increasing COI which allows the applicant to focus on cash accumulation in the early policy years.

They also have a level COI option which guarantees that your rates are fixed for life, and a quick pay COI option which allows for the COI charges to end after 10, 15 or 20 years. Their universal plan has a full host of guaranteed and market-based investment options.

Best of all is that Canada Life’s universal life plan qualifies for their “Astra” program. This program gives a 50% reduction in premiums to all rated policyholders. A rated policy is one in which the insured is charged an extra risk premium for certain health or lifestyle issues.

The savings can be dramatic. As an example, take a 45-year-old male non-smoking diabetic who applies for $250,000 of universal life level cost coverage. Let’s assume the insured is rated plus 50% for his diabetes; the minimum premium (i.e., the premium to keep the plan in force) is $259.57 per month. With the Astra program, this same individual’s premiums drop to $176.45 per month. This can have a tremendous impact on the premiums paid over the life of the policy.

Canada Life’s universal life plan, which is one of the best in the industry, does have a surrender charge on all withdraws during the first 10 policy years.

AXA Canada’s blue-collar disability plan

AXA Canada offers a blue-collar individual disability plan with a monthly indemnity from $300 to $3,500. The waiting periods on their plan range from the first day on injury-only coverage, to the 120th day on their illness protection. Benefit periods range from six months to 60 months. On their injury-only coverage, the benefit period can be extended to the age of 65.

The plan offers add-ons such as a business overhead expense benefit, hospital allowance, and critical illness benefit. AXA’s disability plan offers a built-in return of premium benefit. If the insured is less than 46 years old at the time of issue, 50% of all premiums paid (less what the plan has paid out) go back to the policyholder. This benefit is paid out when the insured reaches 65 years of age. An enhanced return of premium of benefit feature can also be added, which will return 100% of the insured’s premiums at age 65 if a claim has not been made.

AXA’s disability plan has some attractive features, but is geared toward the blue-collar market. Professionals and business owners can get a higher quality and more competitively priced plan from other carriers like Manulife, Canada Life or RBC Insurance. This plan is also not appropriate for higher income earners, as the monthly benefit is limited to a maximum of $3,500. Another drawback is the illness benefit period, which is only available for a maximum of 60 months.

Brokers’ Business

As there is not much information available to newcomers in the life insurance business, I’ve decided to put together a short list of potential pitfalls and mistakes that aspiring professionals should learn to avoid. This sector offers plenty of opportunities, and there’s always possibility for more growth—those who will use the advice contained in the latest article, Critical Mistakes to Avoid in the Life Insurance Business, will have no obstacles in their path to success.

Our special section for brokers now contains ten articles written for aspiring insurance professionals.

Gain Momentum with Industrial Alliance Pacific

Industrial Alliance Pacific and its parent company Industrial Alliance Insurance and Financial Services Inc. has a disability insurance plan called Momentum. The base plan provides income replacement coverage from $500 to $4,000 per month in the event of a disability due to injury. The plan has three waiting period options—0 days, 30 days or 120 days, and a benefit period of 2 years or to age 60.

Riders can be added to extend coverage in the event of illness; business overhead protection and hospitalization riders are also available.

This plan has many limitations when compared with RBC Insurance, Canada Life and Manulife’s disability plans. The limitations are especially pronounced in the professional market—many professionals and other high-income earners require income protection in excess of $4,000 per month. The definition of disability is more restrictive with Industrial Alliance than that of its competitors, and certain riders, such as having the benefit increase with the cost of living or the ability to upgrade the plan without a medical, are not available.

Jack Bendahan’s Story

"Insurance is not my job, it's my passion", admits Senior Insurance Consultant Jack Bendahan, who has now decided to share with us a moving story of his. In this rather personal account of his parents' illnesses, Jack recalls the times when he found out what it meant to be vulnerable.

"Life's precious. Let's talk about it", suggests Jack. By the time you'll have read his story, you may agree with him.

AIG is now BMO:AIG – Joint Life Coverage with a Twist

In addition to having highly competitive rates on both their Term and Universal Life policies. AIG offers a unique twist to its Joint Universal Life coverage. Most insurance companies offer applicants the option of a Single or Joint Life Universal Life policies, but AIG takes this a step further by offering a Joint Last-to-Die Conversion Option.

The rider provides applicants with the flexibility to convert a single life or Joint First-to-Die policy to a Joint Last-to-Die plan without evidence of insurability. This option can selected any time after the 5th policy year. One caveat this rider can not be offered if the second life to be insured is rated 200% of more. Policy ratings are given when applicants have certain health or lifestyle issues that make them an added risk. A rating of 200% would be double the standard rate.

Let’s look at a young couple – Ted and Jane. They are 35 year old professionals with two small kids. They decide they like the idea of having a permanent policy which will never increase in cost. So they apply for $250,000 of AIG’s Joint First-to-Die Universal Life policy with a level cost of insurance. They add the Last-to-Die conversion rider for a cost of a $150 a year. Thirty years down the road Ted and Jane’s children are fully grown and the cottage they inherited from Jane’s father has increased sharply in value. Jane and Ted want to pass on the cottage to their children when the die but they are very cognizant of the fact this will create a large tax liability for their children.

The solution – Jane and Ted exercise the Joint Last-to-Die conversion option on their Joint Universal Life policy. This allows Jane and Ted to substantially lower their monthly premium because the conversion is based on their original ages and the option can be exercised without a medical – good news for Ted who had a heart attack 4 years ago. But best all of all the policy will now pay out $250,000 tax free on the death of the second spouse giving their children the cash necessary to offset the taxes on the family cottage.

Multiple Options with Co-operators’ Universal Life

The Co-operators was founded in 1945 when a group of Saskatchewan wheat farmers decided to pool their collective resources to start insurance co-operative. The company has made great strides over the past 60 years, and has a significant presence in the Canadian property and casualty market.

All Co-operators insurance products are sold through a captive sales force (i.e., their sales team is limited to selling Co-operators life insurance products). Insurance products sold by captive agents tend to have higher costs because unlike an independent broker, they are unable to shop the market for the best rate; the insurance provider knows this, and prices their plans accordingly. Another reason for the higher premiums is that companies with a captive sales force tends to have more management layers and higher distribution costs, which are passed on to the consumer.

Co-operators’ universal life plan has multiple investment options, flexible premiums and level or increasing death benefits. One major flaw with their universal life plan is that the company does not offer a level cost of insurance option (COI). A level COI structure ensures the risk charge remains at a guaranteed level to age 100. The majority of Canada’s life insurance providers offer a level COI structure; this is a crucial option for applicants that want cost certainty.

Unity Life policyholders accept sale to Foresters

Unity Life of Canada joined the Foresters family in April 2008 and as of Jan 23 2012 changed their name to Foresters Life Insurance Company.

Policyholders of Unity Life of Canada have voted to sell the insurer in April to the "The Independent Order of Foresters", a fraternal benefit society, The Toronto Star reported.

Some 15,000 holders of the Mississauga company's 192,000 active insurance policies will get an average of $3,300 in cash payments.

According to The Star article, more than 98.9 per cent of policyholders who voted were in favour of converting from a mutual company to become a subsidiary of Foresters. Several other major insurers have converted to shareholder companies over the past decade.

Foresters of Toronto has 735,000 members in North America and $5.4 billion in assets. It sponsored Unity's demutualization and will keep its brand name, which has been in use since Toronto Mutual Life Insurance Co. and Western Life Assurance Co. joined in 2002.

Unity president Tony Poole said Foresters will give his team more financial backing and products, The Star article concludes.

Canada Life – Two Needs, One Discount

Canada Life’s Dual Solutions premium reduction allows clients to satisfy two separate needs and receive a 5% discount on each product. Depending on the size of the policies, this can translate into significant savings.

Critical illness insurance pays out a lump sum tax-free payout if the insured is diagnosed with one of the listed illness—this money can be used to cover one-time out-of-pocket expenses, such as home renovations or medical treatments outside of Canada.

Disability insurance is used as an ongoing income replacement vehicle. Separate needs often require separate solutions, and the Dual Solutions premium reduction makes solving this need more affordable.

There are certain exclusions:

• Premium reduction is only available if both policies are taken out simultaneously

• It is not available on critical illness conversions

• It is not available on disability future insurability options

• It is not available with any other premium reduction programs