The Top Five Shady Life Insurance Plans Being Sold

Posted on September 24, 2012 and updated March 21, 2018 in Brokers, Life Insurance Canada News 3 min read

1. Mortgage Insurance: Nearly everyone who buys a home is offered the chance to buy mortgage insurance along with the purchase, but no one considers insurance when they’ve just bought a home.
Instead, they likely think about their mortgage and their mortgage payment details. What they may not realize is that they could be costing themselves thousands of dollars. Mortgage insurance is supposed to cover your mortgage in the event of your death, but premiums can typically cost 30 per cent to 40 per cent more than term life insurance policies, and their coverage declines as your mortgage declines. Their coverage is also not portable if you move or switch banks, nor is it convertible. Mortgage insurance is also sold through post-claim underwriting, which could see the bank denying your claim at the very moment you need it most.

2. Accidental Death Life Insurance: Most Canadians are bombarded by life insurance companies approaching them to buy accidental death life insurance. Accidental death insurance is one of the highest profit-grossing products sold by life insurance companies in Canada. The reason for this is that fewer than 5 per cent of all life insurance claims paid are due to the insured suffering an accident. The percentage is even lower for older clients because your chances of dying by accident decrease as you age.

3. Blended Smoker and Non-Smoker Rates: Some life insurance suppliers offer blended smoker and non-smoker rates, which means that a smoker and a non-smoker will pay the same premium. These rates are a great deal for smokers but a very poor deal for non-smokers. Consider that a 50-year-old non-smoker would pay only $69.66 for $200,000 of Term 20 life insurance, whereas a smoker would pay $175.32 a month for the same plan. That’s $25,358.40 more that the non-smoker must pay over 20 years.

4. Buying Directly Versus Through a Life Insurance Broker: At first glance, buying directly seems like a better deal. After all, the commercials and ads seem innocent enough, (emphasizing that no sales person will call) but the bottom line is that in most instances, the consumer is ripped off. Consumers pay inflated prices rather than saving by buying directly. Direct insurance suppliers are essentially captive providers of life insurance, meaning they only sell their company’s products. Direct life insurance providers offer coverage that is often 30 per cent more expensive than equivalent coverage sold through a independent, licensed life insurance broker. Moreover, preferred rates and permanent policies are often not available.

5. Credit Card and Line of Credit Life Insurance: Similar to mortgage insurance, credit card and line of credit life insurance do not offer good value to consumers. The plans are directly linked to your debt and are not convertible. They are significant money-makers for the insurance provider, and the cost per thousand dollars of insurance is very high compared with equivalent life insurance coverage. An equivalent amount of Term Insurance protection usually provides a lower premium and much more flexibility if you pay off your line of credit and/or want to convert your coverage to a Permanent plan.

For more details on life insurance in Canada and to make sure you have not been sold a Shady Life Insurance policy contact us at 1-866-899-4849 or visit our Term Life Insurance Quote Page.

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George
George

How can I make sure my broker is working in my best interest. I found the my premium high but I don’t want to g throwgh the whole thing again.

LSM Insurance
LSM Insurance

Hi George, It never hurts to get a second opinion. Ask your friends or family if they have an insurance broker they have been dealing with for a while and are happy with and ask if he / she will give you a second opinion on what you purchased.

Ami Maishlish
Ami Maishlish

In that event, contact the insurance company directly. If you don’t know who the insurance company is, check your bank records to find out who you are paying the premiums to. It may also be a good idea to review your life insurance portfolio with a professional. You can either contac LSM whose sponsors this page or to go to http://www.winquote.net ,select Canadian products, then run a survey, and on the survey page click on the orange “Find Broker” button.

LSM Insurance
LSM Insurance

Good tips Ami. Carry you also want to check out our insurance company directory page https://lsminsurance.ca/canadian-life-insurance-companies.

You can get the coordinates of the different insurance companies in Canada.

Carry
Carry

Thanks., My agent is no longer with the company. How do I get a copy of my policy all I have is the spreadsheet. Is there a change of some sort, if so how much.

Ami Maishlish
Ami Maishlish

Carey, Do you have the policy or just the “spread sheet”? If you purchased the policy, the agent should have delivered the policy documents to you immediately upon issue. The policy documents should contain the premium schedule and should contain the wording to indicate whether or not the renewal premiums are guaranteed. If you cannot find the policy documents, then I urge you to contact the agent AND the insurance company immediately to request that these be supplied to you. A “spread sheet”, on its own, is not an insurance contract. The policy documents govern. While you are at it,… Read more »

Carry
Carry

Ami, How do I know if the renewal premium is accurate. I have an old spreadsheet from the agent but it does not say if that if that renewal premium is guaranteed. It says the premium renewal and is circled but I can’t see word guaranteed reneal.

Ami Maishlish
Ami Maishlish

Carry, you ask “Are all Term policies renewable…” In responding to this question and in order to fully respond to it, I’ll assume that you are a consumer, not an insurance agent or insurance broker. My apologies if I assumed incorrectly on that. Now, to the response, first to the word “renewable”. That word can in fact have two or more interpretations to a member of the general public: a. Is the policy guaranteed renewable from year to year? b. Is the policy guaranteed renewable upon the end of the (or each) level premium period? Then, of course there is… Read more »

LSM Insurance
LSM Insurance

Ami. you make a good point on guaranteed renewal premiums. This is a challenge with many association based Term plans.

Carry
Carry

Are all Term policies renewable I want to make suyre my company cant cancel my coverage

LSM Insurance
LSM Insurance

Thanks Carry. Most but not all Term policies are renewable you would have to check with your insurance carrier. The renewal premiums are significantly higher than the initial premium.

Ami Maishlish
Ami Maishlish

Ted H, you asked: “My sister-in-law who has been after me for years to cancel my Whole Life plan and replace it with a Term plan. What do you think? Is Whole Life Insurance a ripoff?” Ted, this question and related “debate” has been ongoing at least as far back as my experience with life insurance – and that experience goes back over 40 years. One of the best sources for a general – I stress “general” response to that question comes directly from the insurance companies. In saying that, I refer to what the insurance companies have been doing,… Read more »

Amy
Amy

When you’re 50, 55, 60, or over, then life insurance is more important than ever.Though it may look grim, knowing which policy is right for your will help you save on over 50 years old life insurance.Over 50 years old life insurance will often be more expensive than insurance for younger clients. An increase in age makes a client more of a risk for the company, a risk that can be covered with increased premiums. A whole life insurance policy is perfect to cover any individual. Senior may find procuring a whole life policy to be more difficult, but it… Read more »

LSM Insurance
LSM Insurance

Excellent points Ami – thanks for sharing.

Ami Maishlish
Ami Maishlish

Chantal, this is well put, particularly the 4th example “Buying Direct Versus Through a Life Insurance Broker”. In nearly all cases, a LifeGuide equipped broker can deliver significantly better value, lower overall costs, as well as a contract that is better suited for the buyer’s need and circumstance. This is so not only in comparison with the offerings of so called “direct sellers” but also in comparison with the figures shown at many of the so called online term life insurance shopping sites. Moreover, the validity of the contract attesting coverage depends to a large extent on the accuracy and… Read more »

LSM Insurance
LSM Insurance

Thanks for the note. Whole Life Insurance is an effective way to solve Permanent life insurance needs.

It’s probably a very good thing you didn’t cancel your policy Whole Life and other Guaranteed Permanent Life rates have been rising in response to historically low interest rates. Moreover, your policy was taken out when you were younger so the rates were lower to begin with.

Ted H
Ted H

My sister-in-law who has been after me for years to cancel my Whole Life plan and replace it with a Term plan. What do you think? Is Whole Life Insurance a ripoff?