Would you feel you were receiving excellent medical care if your doctor wrote five prescriptions or fewer in the previous year? Would you ever think of using a real estate agent who only had five or fewer transactions in the previous year? Would you call a plumber who put in five or fewer tap sets in a year? Chances are you would not, because “volume” speaks to professional knowledge and, perhaps, competence. Surprisingly, however, a recent study showed more than half of life insurance advisors sold fewer than five policies in the previous year. Scary? You bet! In this month dedicated to financial literacy, let’s take a look at some of the things you should know about life insurance and how it’s sold.
First off, a recent survey of life insurance agents conducted by the Financial Services Commission of Ontario showed that for 2015-16, more than half of the advisors it reviewed sold five policies or fewer in the previous year. This puts a burden of responsibility on the policy prospect or policy owner to understand life insurance in light of personal needs. That’s because advisors who aren’t selling policies are not staying on top of client needs, are not staying up to date with new policies, or are focused elsewhere.
If you have a policy, when was the last time you reviewed it with the agent who sold you the policy? This should happen annually to check that changes in your life have not made the policy type or coverage inappropriate. Even if you do not have changes, perhaps your advisor has new information for you in respect of your existing or new policy. Call and ask for a meeting.
Who’s in charge?
If you have not had the benefit of an annual or occasional review and it has been some time since you heard from your advisor, you may find the advisor who sold you the policy no longer works for the firm you dealt with. There is a lot of turnover in the industry, and a lot of movement of advisors between firms. You can try going to the manager of the firm, and if that is unsuccessful, contact the issuer of the policy. There may be difficulty getting the attention to which you are entitled, because the commission on your policy was paid to the advisor/agent who sold it. Therefore, there is little financial incentive for a new advisor to pick up the reigns.
A good starting point is to think about the reasons you bought the policy in the first place and whether those reasons still hold true. A life insurance policy can be ended at any time. This is your choice, but if you make that choice, be very sure you will not change your mind. If you cancel the policy and have second thoughts, you could apply within two years to have it reinstated, and you will be required to prove your health is good. You will also have to catch up on unpaid premiums and interest on those premiums. If you cancel and do not reinstate the policy and subsequently re-apply for a new policy, its premiums will be higher because you are older.
Term insurance becomes increasingly expensive with age. It may be appropriate to consider a form of permanent insurance before you reach an age at which the permanent insurance may become too expensive.
Also, you should be aware that life insurance can be acquired in different types of policies. For instance, a critical illness policy provides a benefit when a life-threatening health condition occurs.
Is the amount of insurance right for your circumstances? To answer this question, you again have to think about the factors that drove your initial decisions for the policy and its coverage amount. Perhaps you have new reasons to change coverage – if so, assign a dollar value to those needs and determine whether this is a short-term need (in which case a term policy might suffice) or lifelong (when a permanent policy is required).
There have recently been tax changes to life insurance. If you do not have an advisor or agent who can provide insight to these changes, then go to the issuer of the policy, e.g., Manulife, Sun Life, Empire Life, etc., to ask whether these tax changes affect you.
Reviewing who you have designated as a policy beneficiary should also be part of the annual review. Make sure that the beneficiary you have named is correct and that the policy proceeds you have allocated to the beneficiary are correct.
Trying to find answers and information on life insurance can be challenging. If you have complaints about your life insurance company or agent, you should contact the Ombudservice for Life and Health Insurance (www.olhi.ca). OLHI is a national complaint resolution and information service for consumers of Canadian life and health insurance products and services. It is an independent, not-for-profit organization established and funded by the industry.
For consumer information, the Canadian Life and Health Insurance Industry Association (www.clhia.ca) provides consumer guides and information booklets.
Courtesy Fundata Canada Inc. © 2016.Susan Yates is president of the Centre for Life Insurance and Financial Education (clifece.ca).This article is not intended as personalized advice.