My partner and I are in our early thirties, and we have kids. We’re thinking about getting Term 30 life insurance for $1 million. A broker from one insurance company provided us with a quote of $190 per month for separate policies, is this a good price?
You may need $1 millon right now, but do you feel that will stay constant? In 20 years, hopefully, your mortgage has been significantly paid down or even paid off. If you have kids, hopefully, they are no longer financially relying on you in 20 years. Lastly, retirement may be just around the corner, so you may only need income replacement for a few years.
What choices can you suggest to us?
One option is a layered strategy. If you really want a Term 30, you can maybe take $500k of Term 30 and add $500k of Term 20. That gives you $1 million now, and it will drop down to $500k after 20 years, when your needs may be lower. This should bring also the cost down.
Alternatively, if there is a chance that your needs will go up over the next few years (maybe you expect a significant increase in pay, or take on a larger mortgage in the future), buying additional coverage down the road will be more likely.
It may also be much more cost-effective to replace than buying a second policy. For example: in 5 years you need $500k more, you may be financially better off to simply purchase a $1.5 million Term 25 at that time compared to keeping your Term 30 and adding a new $500k Term 25. If that is very likely to happen, it is uncertain if Term 30 is the best option right now. I may lean more towards Term 10, with the option to extend the coverage… just in case your health changes.
Why Term 10?
I am personally not a huge fan of Term 30 for the full amount of coverage, and you may end up paying more than you needed to. On the other hand, most Term 10 plans offer the contractual right to extend coverage within the first 5 years (7 years for Canada Life). This means you can keep the cost low right now with Term 10, and then switch to a Term 20 (or longer depending on carrier) without any medical underwriting after 5 years. This would give you 25 years of coverage (or longer)! Your age and future pricing will determine how much sense this makes.
Also, there is a risk if you don’t make the switch in 5 years which can cause concern… so better make sure you have a trustworthy broker who will be there to remind you to do so.
How do we know what type of advisors to trust and who we should try to avoid?
- only pushing one product
- do not perform a needs assessment
- only trying to sell you insurance as an investment
- only selling policies that are extremely simple to apply for
- captive to their company and can only sell their products
- using jargon that is confusing to you
- won’t answer your questions in writing
- willing to lie for you on an application
- new advisors in the industry who are not working with a mentor
Many understand the benefit of having coverage, they are just skeptical of the companies and those who sell it. Some advisors are definitely better than others. When it comes to the actual insurance companies, it’s all about the wording of the policy. Some contracts are better than others, and I definitely lean towards offering the stronger contracts that best protect my clients whenever possible. If you decide to work with me (SecurePlan), I will ensure that you understand the contractual provisions before making any decisions.
Why trust SecurePlan?
We at SecurePlan believe that trust needs to be earned. In my business, it has always been my objective to educate my clients on their options. While I may make recommendations along the way, I never pressure anyone to make a decision. As a broker, I have access to all the different insurance carriers across Canada. It’s my job to identify best possible solutions for your situation and help you compare your options.
It’s not just about trust, but also expertise and experience. Even if a broker is working with integrity, their lack of industry experience can do you more harm than good. You can be confident that there are not many brokers that have the same level of expertise as myself when it comes to life insurance and living benefits (disability/critical illness).
If you have any insurance related questions or concerns, please do not hesitate to get in touch with me. I’m here to help!
The first step is that we have a phone call and get to know each other a bit. I wouldn’t mind asking you some questions to better understand your situation to see if I am in a position to help you or not. Here is a link to my Online Calendar: