On Friday, Mark and I discussed insurance and estate planning basics.
There's a plethora of life insurance options on the market, but three main types:
1. Term insurance. This insurance is the least expensive of all, but the payment greatly increases at the end of each term and is usually bought to protect against a short-term need, such as covering the mortgage or other debts in the event of death. The premium rate is protected for a "term" of say 10 or 20 years. At the expiry of that term, the insurance rate jumps substantially, so, if the need for insurance is for life, then one of the other options might be more suitable. Also, many term plans require an individual to re-qualify health-wise, which also makes this plan less attractive for protecting long-term estate needs.
2. T100 - this is a variance of the standard term. Here, the policy fee would cost more than straight Term, but provide a guaranteed rate for life. It's less expensive than a "whole" life insurance policy, but still quite a bit costlier than Term 10 for example.
3. Whole life. These policies used to be the only option on the market many years ago. You might have heard the "buy Term and invest the rest" phrase years ago. However, whole life can be a viable option for the right individual. The premium cost factors in an investment element as well which can be a benefit later in the policy life.
There's no right or wrong insurance option on the market, but whether that product suits your specific needs - such as, how much coverage do you need, what's your age, health, and how long do you need it to be in place?
I've found a number of great insurance calculators that will let you play around with the costs of different types of plans and amounts. Check out my site at www.kelleykeehn.com and click on the CBC logo for more information.
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2 comments:
Wow, one of the better posts on insurance I have seen for a while!
Here is some other ideas your readers may like...(when looking for term) which fits a "short term"
need but is not always the best.
MISTAKE: Failing to buy enough insurance while you are still healthy.
MISCONCEPTION: Cheapest is the best.
That term policy premium might be cheap in year one. But most term policies renew at regular intervals (every 10,20 years) and the renewal premium rises at each interval because it reflects your new age.
Here is a few more from my site
www.rightinsurance.ca
MISCONCEPTION: Buying through the internet is cheaper (no commissions to be paid)
Insurance comparison services on the internet say “buy direct and save money”. The fact is, you cannot receive a discount in the price of life insurance by avoiding a life insurance agent. Sales charges and costs (such as commissions) are built into the premium that you pay for any life insurance policy that you buy. You will be paying those built-in charges regardless of where you buy the insurance. Finding and using a local life insurance agent will not cost you more than dealing with someone in another city or province by telephone or mail.
MISCONCEPTION: Association insurance has cheaper rates.
Associations include organizations such as universities, credit card companies and consumer groups like CAA. Sometimes association rates are cheaper but in many cases the rates go up every five years. Associations are like groups where several insureds are lumped together and pay a premium relative to the group being covered. Even where limited medical questions are asked, the premiums reflect the inability for the insurance company to fully assess individuals and the group like rates is charged. Association groups also may offer very limited conversion opportunities. Therefore if you cancel your credit card or if you are no longer a CAA member you coverage is cancelled.
As a smart consumer, obtain an individual insurance quote and compare the products for price, renewal options and conversion options.
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