Life Insurance tips / experiences / thoughts

[Slava]

Originally Posted by DoubleF

Well, someone is going to get an ass kicking from me if they continue telling me I overpay for life insurance because I had a burger and vodka the night before the physical.

And yeah, I was under the impression most brokers will refuse to name someone below the age of 18 as the benefactor, but it would be good to know why none the less.

Well its just misinformation. Having a cheeseburger and fries for dinner and then having your blood sample completed that night shouldn't cause your cholesterol to register as high just based on that. If you eat that every night for years you likely won't be surprised to hear that it might have an impact (and yet again, let me just disclaim that I'm not a doctor and that science might disagree with the actual impacts of long-term red meat consumption or whatever!)

Also, understand that insurers know that we're real people doing "normal" things and living "normal" lives. If you are in a place where you inhale second-hand smoke the day before your exam, unless its an enormous amount, you're not going to be rated as a smoker. If you are, you can challenge that and explain the situation. If you have never heard that you have high blood pressure or high cholesterol and suddenly the readings are off the chart then you can try to explain yourself or give a credible explanation of why that could be the case (and white-coat syndrome is a potential explanation for high blood pressure).

[CroFlames]

Since this is the de facto ask Slava questions thread:

If you are controlling BP with medication, do insurers just look at you as a normal applicant, or would rates still be higher despite your controlled BP?

[pseudoreality]

I am going to give an alternative point of view. Keep in mind this is my personal opinion and not the recommendation of any kind of licensed professional. I don't think life insurance is the best choice for most people. For most people, I believe its better to just take the money you would have put towards life insurance and put it into a balanced (60/40), diversified portfolio (ETFs, not high-fee mutual funds) in the priority order of TSFA/RRSP/non-registered accounts. Keep your debt in check, have a good will and talk with your wife about what might happen. If you do that, you will be able to manage with the unlikely situation of something happening to either or both of you, while at same time investing in your future.

Again, this is just my opinion and what my family chooses to do. If you or your wife are not very employable and you live the high life on consumer debt, then maybe you need life insurance.

[Slava]

Originally Posted by CroFlames

Since this is the de facto ask Slava questions thread:

If you are controlling BP with medication, do insurers just look at you as a normal applicant, or would rates still be higher despite your controlled BP?

Basically yes, depending on how long you have been on the medication and how stable it is. In a lot of cases though, you can get a "standard" offer for coverage.

Originally Posted by pseudoreality

I am going to give an alternative point of view. Keep in mind this is my personal opinion and not the recommendation of any kind of licensed professional. I don't think life insurance is the best choice for most people. For most people, I believe its better to just take the money you would have put towards life insurance and put it into a balanced (60/40), diversified portfolio (ETFs, not high-fee mutual funds) in the priority order of TSFA/RRSP/non-registered accounts. Keep your debt in check, have a good will and talk with your wife about what might happen. If you do that, you will be able to manage with the unlikely situation of something happening to either or both of you, while at same time investing in your future.

Again, this is just my opinion and what my family chooses to do. If you or your wife are not very employable and you live the high life on consumer debt, then maybe you need life insurance.

Well this has a lot of really specific things to consider with it. If you have kids/not, if you have specific things that you would like to have happen in the event of your death (paying off the house, not having to work for a period of time, making a donation to a particular organization, etc.) There are also a multitude of estate planning concepts and concerns that people have that go far beyond life insurance, but where life insurance is just a good, viable option to pay taxes on death and that sort of thing. This doesn't even get into some of the tax planning that insurance policies allow for, it's just a super quick overview.

I would also say that some of these considerations would be made substantially easier if we knew exactly when we were going to die and things like that. If you knew you were going to die in the shorter term, you buy the insurance every single time, because you know what you'll pay and what you'll receive.

[CroFlames]

Originally Posted by pseudoreality

I am going to give an alternative point of view. Keep in mind this is my personal opinion and not the recommendation of any kind of licensed professional. I don't think life insurance is the best choice for most people. For most people, I believe its better to just take the money you would have put towards life insurance and put it into a balanced (60/40), diversified portfolio (ETFs, not high-fee mutual funds) in the priority order of TSFA/RRSP/non-registered accounts. Keep your debt in check, have a good will and talk with your wife about what might happen. If you do that, you will be able to manage with the unlikely situation of something happening to either or both of you, while at same time investing in your future.

Again, this is just my opinion and what my family chooses to do. If you or your wife are not very employable and you live the high life on consumer debt, then maybe you need life insurance.

Strongly disagree with that.

You should be doing all those things you talked about (investing) anyway. Those investments are there for if/when you grow old and want to retire in comfort.

Let's say you unexpectedly die at 35 with two small kids and a wife. Surely by that age all your investments combined wouldn't be enough to pay off your mortgage, car, final expenses, PLUS raise your kids until age 18.

If you were contributing a small (relatively speaking) monthly amount to a term life insurance plan, your wife and dependents would be able to live comfortably until they are old enough from your insurance payout, and your regular retirement investments would come to fruition later in their lives. I would like to know that my family is taken care of, should the worst happen.

[tvp2003]

^^^ Yeah, it was somewhat humbling to learn that life insurance wasn't really to insure my life, but to insure my income stream for my family/kids if a kick the bucket early...

At the very least, a cheap term life insurance policy is better than getting an insurance policy on your mortgage (assuming of course you didn't pay cash for your house like the vast majority of CP).

[DoubleF]

Originally Posted by pseudoreality

I am going to give an alternative point of view. Keep in mind this is my personal opinion and not the recommendation of any kind of licensed professional. I don't think life insurance is the best choice for most people. For most people, I believe its better to just take the money you would have put towards life insurance and put it into a balanced (60/40), diversified portfolio (ETFs, not high-fee mutual funds) in the priority order of TSFA/RRSP/non-registered accounts. Keep your debt in check, have a good will and talk with your wife about what might happen. If you do that, you will be able to manage with the unlikely situation of something happening to either or both of you, while at same time investing in your future.

Again, this is just my opinion and what my family chooses to do. If you or your wife are not very employable and you live the high life on consumer debt, then maybe you need life insurance.

I sorta get where you're coming from, but I also don't think you're understanding the context for which life insurance can come into play. Life insurance is but one facet of both long term planning as well as financial planning.

Buying life insurance doesn't mean you don't put any money into investing. Term life insurance in the most unfortunate circumstances gives a return not comparable to any conventional investment methods both in percentage of gains and the fact it's tax free. That's not even discussing its other abilities such as bypassing an estate freeze if set up in a certain way. The funny thing is, is that you mention diversification. Whole insurance is actually a way to diversify.

Ignoring whole life insurance, term life insurance IMO can be viewed in two ways. One, making one of the riskiest bets on the stock market you can ever make. You lose all your money for that one small chance to make it big when it is needed most. Or two, paying someone to get peace of mind. In some senses, based on the crime rates in Canada, IMO like paying an alarm company or travel insurance. Money down the toilet if nothing happens, but worth more than the money paid by a super huge margin if something does happen.

Furthermore, term life insurance can be purchased during the period of time when you are highest in debt, like having a mortgage. Things happen and you don't want your family to be left holding the bag, do you? Lose you AND lose the place where they made happy memories with you? Nah. Once you pay off the debt and have it "in check" then stop the term insurance and enjoy that extra cash again.

Another argument I have with people is that they think it's the worst waste of money ever because they won't be around to receive the funds. Life insurance in some senses (whole life for me anyways) is about betting I will live longer than the statistical models say. If I kick the bucket earlier, I still get far more money than I pay in. But that money isn't for me. It's a legacy fund. Although I believe my broker told me I can rack up all sorts of debt and expect my policy to pay for it...

I understand the confusion though. Term and whole insurance in many instances are as opposite in terms of their financial uses as can be. The only time they actually seem to be similar is when acquiring term insurance to go with your whole insurance because your mortgage isn't covered completely by whole insurance (if you have it).


I have whole life insurance. My parents felt I had too much cash after starting work and set me up with a broker to "use up my cash". I thought it was dumb, but did it anyways and I'm glad I did. It's a medium that sucked up my cash and forced me to "save". My guaranteed cash value and paid up value begin accumulating this year. It's very fascinating stuff ( insurance fascinating?). I mean hours of self research doesn't bet hours of conversation with someone in the know.



TL;DR I think you have some good financial habits. I think if you spend time to sit down with someone knowledgeable like Slava and learn about insurance, you might be able to further diversify yourself in your finances.

[Slava]

One thing I wanted to mention about life insurance that I think is overlooked is what it means to the beneficiary. I know its a financial contract and all of that, but really what it often gives the beneficiary is the time to grieve and deal with the loss of a loved one. Having seen these situations more times than I would prefer, I have seen people in both situations; ones where they had the luxury of time away from things like work and other obligations because they were properly insured, and people who didn't have the same luxury. I think that is a large part of what you're buying for your loved ones; too often we focus purely on the money, taxes and debts, and too often there is pressure to "get over" the emotional toll.

[bizaro86]

For those who aren't buying life insurance with little kids, what's the plan for where you and your spouse both die at the same time, say in a car accident?

I felt the same way in some ways, and wanted to buy joint second to die insurance, which only pays out I'd you both die. But it turns out that isn't much cheaper, so I bought term contracts for each of us from slava.

As an FYI for those checking, I shopped around fairly extensively and his pricing was as good or better than anywhere else.

[GGG]

Your dead what does it matter

Just kidding, I do buy significantly less insurance then what would replace my incom in its entirety until my Wife would retire. My thought was have the mortgage paid off plus enough to cover about 50% of my after income until my kids are 18.

Enough that no one will struggle and the premium becomes low enough not to be that noticeable.

[MoneyGuy]

Originally Posted by GP_Matt

I planned to up my coverage through work although haven't actually filled out the forms yet. If that doesn't work out I will give you or MoneyGuy (to support Edmonton) a call.

Thanks

Originally Posted by Slava

...

Supporting Edmonton in any capacity is a questionable decision, although MoneyGuy is a good guy and advisor.

Lol, last year we would have needed all the support we could get. Things have changed, however.

[MoneyGuy]

Originally Posted by pseudoreality

I am going to give an alternative point of view. Keep in mind this is my personal opinion and not the recommendation of any kind of licensed professional. I don't think life insurance is the best choice for most people. For most people, I believe its better to just take the money you would have put towards life insurance and put it into a balanced (60/40), diversified portfolio (ETFs, not high-fee mutual funds) in the priority order of TSFA/RRSP/non-registered accounts. Keep your debt in check, have a good will and talk with your wife about what might happen. If you do that, you will be able to manage with the unlikely situation of something happening to either or both of you, while at same time investing in your future.

Again, this is just my opinion and what my family chooses to do. If you or your wife are not very employable and you live the high life on consumer debt, then maybe you need life insurance.

Bad advice. What is you die six months after you start this questionable plan? Once you're self insured then fine, but that will take a very, very long time. Until then have insurance.

[troutman]

In a divorce settlement with children it is common that the parent required to pay child support, will also have to take out a sufficient life insurance policy to continue that support in the event of death.

[BigNumbers]

I pay ~$40 a month for a $2MM policy through my professional association. Check and see if you have such options. Slava gave me some great advice, but at the end of the day nothing could beat the rates and terms I received from my professional association's self-administered (and GWL-backed).

Any profits the association makes off of the premiums less payouts is returned annually to us in the form of lower premiums the next year (I think my premiums were $60, but I got a $20 refund of the prior years premiums that offset it to make it $40). So that backstopped plan is working nicely for us!

[BigNumbers]

I need a good will for my wife and I, along with a testamentary trust for my kids. Where should I go?

[GreenLantern]

One thing my wife and I took into consideration with life insurance is your career path. You might have great coverage with your work now, but will you be there in ten years? Your premiums start jumping big time post 40, so if you got approved now at 33 and then left that job at 42 trying to get private insurance through Slava would probably be a lot more of a headache.

We did a good chunk through private, then max out the work amount that doesn't require the physical for both of us.

[Slava]

Originally Posted by GreenLantern

One thing my wife and I took into consideration with life insurance is your career path. You might have great coverage with your work now, but will you be there in ten years? Your premiums start jumping big time post 40, so if you got approved now at 33 and then left that job at 42 trying to get private insurance through Slava would probably be a lot more of a headache.

We did a good chunk through private, then max out the work amount that doesn't require the physical for both of us.

Yeah, overall that is sound thinking. A lot of the plans through groups are fine and they're super cheap while you're there. But upon leaving, if you want to keep the policy the rates are not good. They basically rate you as a smoker (regardless of the situation) and let you keep the policy, but definitely pay for that luxury.

It's true that the association plans are tough to compete with in terms of price as Big Numbers says. You do want to make sure that you are comparing apples to apples though. Some are offering a 5-year term to age 70. So it starts off super cheap and increases every 5 years. By the time it's "too expensive" the gamble is that you won't qualify or want to qualify due to health issues or just plain not wanting to, so you keep the policy. Definitely there are exceptions to this and and not all plans operate that way, but you just want to be careful.

Group coverages in general (disability and critical illness are somewhat notorious) often aren't quite the same as your own stand-alone policy. You just want to be careful and take a couple minutes to understand the differences and make a good decision.

[Slava]

Originally Posted by BigNumbers

I need a good will for my wife and I, along with a testamentary trust for my kids. Where should I go?

PM Troutman!

[pseudoreality]

Originally Posted by MoneyGuy

Bad advice. What is you die six months after you start this questionable plan? Once you're self insured then fine, but that will take a very, very long time. Until then have insurance.

Well, I did not start my "questionable plan" of long-term financial planning and risk analysis six months ago. I started as soon as I entered the workforce after university. My wife and kids won't end up in the poor house in the highly unlikely something happens to me and we will be better off in the much more likely scenario of me sticking around for a number of years. Between my pension payout and our investments, there are over eight years of my after tax income. After that, she can either move to a cheaper house or find a man that will never live up to me in the eyes of my children. If both of us die, my recently empty-nested sister and her husband will take the kids (and money). This idea that I should be insured to pay out the mortgage and all family expences until the kids are 18 is silly. I don't see why death should be like winning a lottery. My wife is more educated than me and works. She got squirly after a year of materinity leave. She's not going to want to never work again if I die.

[Slava]

Originally Posted by pseudoreality

Well, I did not start my "questionable plan" of long-term financial planning and risk analysis six months ago. I started as soon as I entered the workforce after university. My wife and kids won't end up in the poor house in the highly unlikely something happens to me and we will be better off in the much more likely scenario of me sticking around for a number of years. Between my pension payout and our investments, there are over eight years of my after tax income. After that, she can either move to a cheaper house or find a man that will never live up to me in the eyes of my children. If both of us die, my recently empty-nested sister and her husband will take the kids (and money). This idea that I should be insured to pay out the mortgage and all family expences until the kids are 18 is silly. I don't see why death should be like winning a lottery. My wife is more educated than me and works. She got squirly after a year of materinity leave. She's not going to want to never work again if I die.

Yeah, it's not that it can't work. You had the same risks (and still do) and have chosen to self-insure. This is just anecdotal though, and it worked for you. Its somewhat akin to not buying insurance on your house and just assuming the risk that if it burns down you will rebuild it and therefore don't need fire coverage. It can work, obviously, and in your case it did.

I don't see a lot of people planning to have every expense covered until the kids are 18, by the way. Instead what it gives people (amongst other things) is an option. You can hold the investments if you die and the timing to sell them isn't ideal; you can buy another house and hold yours if the timing to sell it isn't ideal. It's not about leaving your beneficiaries so they never have to worry about money again. It's about leaving some money so they don't have to worry about these things until they're ready. For some people that is fast, and for others its literally a year or two. I honestly don't know which category I'll fall into; so in the worst case scenario I want to be prepared for the worst case.