Premiums rising on permanent life insurance but not for term
Jonathan Chevreau January 7, 2011 – 3:22 pm
Nicola Wealth Management
John Nicola
Life insurance premiums are starting to rise on certain types of policies, says John Nicola, chairman and CEO of Vancouver-based Nicola Wealth Management.
In a client memo this week, Nicola said this is the “beginning of a trend.” Two of Canada’s largest life insurance companies [Sun Life and Manulife] recently announced they were hiking rates on one type of guaranteed insurance by as much as 22%. It’s only a “matter of time before other companies make similar announcements,” Nicola says.
In fact, rate increases have been expected for many years because of low interest rates. “Only stiff competition prevented them from rising before,” Nicola says. Most affected are Term-100 and Level Cost of Insurance (LCOI) plans within Universal Life policies.
The larger increases are happening for younger policy holders or for joint-last-to-die policies. The latter is where death benefits are paid when the second spouse dies: coverage often used to fund estate tax liabilities.
Premiums will rise unless interest rates move much higher and stay high
Their premiums up till now have been low and competitive, Nicola says, so much so that the life insurance companies were actually losing money on them. They had traditionally counted on a certain number of policy holders letting their policies lapse before they died, which helped subsidize premiums for those that hung in for the duration.
Even though increasing life expectancies normally would be expected to lower insurance premiums over time, current Term-100 premiums already assume improved life expectancy.
According to the actuaries Nicola has consulted, insurance companies would need to hike premiums by up to 50% in order to make a reasonable profit. With interest rates at record lows, the companies are being forced to scrutinize the rate of return generated by all their lines of business. Premiums will likely continue to rise unless interest rates increase significantly and for an extended period of time, Nicola says.
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Medical Insurance Imposed for Travel to Cuba
As you know, the Cuban government recently advised that beginning May 1, 2010, visitors entering Cuba will be required to buy health insurance.
At this time, Cuba does not have a published list of recognized insurance providers, nor do we have confirmation that a list will be provided. The latest information from Cuba indicates that travellers coming to the island should take out travel medical insurance at the home country of departure. Upon demand after their arrival, travellers shall present an insurance policy, insurance certificate or travelling assistance card valid for travel medical insurance for their total duration of stay in Cuba. Please be sure that your clients travel with their Confirmation of Coverage document and that they have it available upon their arrival in Cuba. This document identifies their effective date of coverage and departure date, the insurance product purchased and displays Assured Assistance Inc. as the emergency medical provider.
Now more than ever, the RBC Insurance® travel medical coverage is critical to ensuring your clients can travel with confidence.
RBC Insurance has extensive experience in working with Asistur, the Cuban government’s assistance agency, to assist and settle claims for your valued clients travelling to Cuba.
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Majority of parents underinsured, poll finds
By EI Staff
Majority of parents with life insurance do not believe they have enough insurance to cover the costs of raising a child Monday, January 25, 2010
By IE Staff
The majority of Canadian parents do not have enough life insurance to cover the costs of raising their children, suggests a new poll conducted for TD Insurance.
The TD survey shows that while 42% of Canadian parents believe it will cost more than $200,000 to raise a child to the age of 18, the majority of parents with life insurance do not believe they have enough insurance to cover these costs.
“The poll findings show that most parents are underinsured,” says Dave Minor, vice president, TD Insurance. “One of our goals is to help Canadians think about what it takes to maintain their family’s lifestyle in the event the unexpected happens.”
Many Canadian parents face an even greater issue than being underinsured — they have no insurance at all. The survey found that 21% of Canadian parents do not have life insurance.
“ Life insurance is a hard topic for parents to talk about; no one wants to think about not being around to raise their kids,” says Minor. “Just like everything else we do to protect our children, we need to consider the worst case scenario and plan for it.”
How expensive is it to raise Canada’s kids?
Raising children is an expensive undertaking, according to parents of kids under 18. Forty-two per cent say that raising a child to the age of 18 in Canada will cost them more than $200,000, 31% believe that cost is between $100,000 and $200,000 and 27% say it is less than $100,000.
When asked about the costs to attend a Canadian university, including living expenses, the majority of parents estimate that in 15 years it will cost between $25,000 and $50,000 a year to send a child away to school.
The majority of parents don’t think the are putting enough money away for their children’s future. A worrying 8 out of 10 parents say they are not saving enough: 8% say they spend more money each month than they earn; 30% are living paycheque to paycheque with nothing left to save; and 41% say they are saving a little, but not enough. Only 13% are saving about 10% of their earnings each month and just 9% say they save more than 10%.
How many parents have life insurance?
Seventy-nine per cent of parents surveyed say they have life insurance, either through their workplace benefits program or through purchasing a life insurance policy. Fifty-five percent of those with life insurance do not believe the policy will leave enough money to support their children to the age of 18.
“It’s also important to consider life insurance for stay-at-home parents, not just those in the workforce,” says Minor. “If something happens to the stay-at-home parent, the cost of child care can have a big impact on maintaining a family’s lifestyle.”
Of the 21% of parents who do not have any life insurance, 56% say they feel like they probably should have it, 36% say they cannot afford it and 9% say they do not believe it is necessary.
From Dec. 10-17, 2009, Vision Critical – Angus Reid Public Opinion conducted the TD Insurance Parents and Finances survey among 1,006 Canadian parents between the ages of 25 and 45 with children under 18. The margin of error is 3.1%.
IE
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In Denial
Mortgage insurance: Not always a sure thing
Originally broadcast Feb. 6, 2008 — If you have a mortgage on your home, chances are good you also have mortgage insurance. The idea is that if you should become seriously ill or die before paying off the mortgage, the coverage will kick in and pay it off for you. It’s meant to offer peace of mind and to reassure you that your family will be able to stay in your home if anything should happen to you.
The reality falls a little short of that. In this week’s Marketplace investigation, we meet two families who bought the coverage and thought they were protected, only to have their claims denied when they became sick or died. In each case, the insurer said the applicant person had lied on their initial application form.
It turns out a routine test at the doctor could be reason to deny your claim, if you don’t mention it. Had a cuff inflated on your bicep? That counts as being tested for high blood pressure.
As Erica Johnson reports, the bank staffers selling mortgage insurance are unlicenced and rarely trained to explain the details and legalities of those insurance products. The result is people who pay premiums and think they are covered, only to realize later that they are not.
Click Here to watch the video from CBC.
