In the land of life insurance, it’s important to be cautious and inoculate yourself against the traps that exist in the business. When it comes to your financial future, knowledge truly is power, so we hope that by exposing these rip-offs, you’ll become a more powerful and savy life insurance consumer.
1) Accidental Death Coverage
Often confused with traditional life insurance, insurance companies send so-called “special offers” to unsuspecting consumers who don’t realize that the chances of the plan paying out are very slim, since less than 5% of deaths are classified accidents. Meanwhile, insurance companies make huge profits off of these plans.
2) Non-convertible Term Policies
Often sold through alumni organizations and associations, these policies don’t allow the consumer to convert the policy without a medical, which can create a monster headache when the consumer wants to buy a permanent plan.
3) One-size-fits-all Solutions
Many brokers will try to sell all their clients the same type of life insurance because they either don’t understand how the different policies work, or they don’t have a complete product line. For example, I met with a client recently who wanted a life insurance policy to cover the taxes on his cottage. The broker who handled his auto and home insurance told him a term policy should be just what the doctor ordered. Imagine the client’s shock when I told him the cost would increase every ten years and the plan would expire when he turned 75. After thorough analysis, I was able to set him up with a permanent “last to die” policy with level premiums that would be paid up in a limited number of years. The plan paid out exactly when he needed the money.
4) Captive Agents
Often only offering insurance products from one company, frequently their product line is incomplete and they’re faced with company quotas.
5) Creditor Life Insurance
Sold by banks and credit card companies to under informed consumers, Creditor Life Insurance offers inferior coverage and much higher premiums than traditional insurance. See the following example below:
A 38-year-old male and 37-year-old female will pay 28 cents a month per thousand dollars of mortgage amount on a mortgage life insurance plan with CIBC. On a $500,000 mortgage, this translates to $140 per month. That same couple can apply with Transamerica Life for $500,000 of Individual Term 20 coverage for $98.55 a month; and if they qualify for preferred rates their premiums could be as low as $71.10 a month. That’s a savings of $9,948 to $16,536 over 20 years.
Not bad for a few minutes of research, see the savings for your own needs at our Instant Quote Page.
I have been approached by someone who says they want to purchase my life insurance policy and can pay me a percentage of the death benefit now (the benefit amount payable on the death of the covered person). Can I sell my policy?
Thanks in advance for your response, Cassandra