Life Insurance
What is Life insurance?
Most Common Disaster: Universal Life Insurance - Beware
What is Life insurance?
Life insurance is complex. While there are laws that protect the insured, the contract is key. These contracts are sophisticated, one-sided, and densely worded with legal and insurance jargon. Most life insurance is sold by agents who only make money if they successfully convince you to pay up for two years.
Life insurance can be a sa
Life insurance is complex. While there are laws that protect the insured, the contract is key. These contracts are sophisticated, one-sided, and densely worded with legal and insurance jargon. Most life insurance is sold by agents who only make money if they successfully convince you to pay up for two years.
Life insurance can be a safeguard for individuals. Ideally, life insurance offers a monetary safety net for their families after a loved one's death.
This arrangement operates as a mutual agreement between an individual and an insurer. The individual agrees to pay ongoing premiums, and the insurer, in exchange, commits to delivering a specified amount of money, termed the death benefit, to the individual’s chosen beneficiaries after their demise.
Life insurance is often sold as an investment. As an investment, it is even more complicated. The problem with this type of investment is that the returns are low for most Canadians, and the fees paid to the life insurance agent are very high.
While insurance can be a great product, be careful to only get what you need, with great care to the details of the application and to the yearly need to service the policy, and that you truly understand what you are being sold.
Types of Life Insurance
Most Common Disaster: Universal Life Insurance - Beware
What is Life insurance?
Life insurance can be a safety net for your family’s finances. If you pass away, it ensures that your loved ones have money to help them manage without your income. Here’s a simple explanation of how different types of life insurance work:
- Term Life Insurance: This is like renting an apartment. You pay rent (premiums) for a certain period
Life insurance can be a safety net for your family’s finances. If you pass away, it ensures that your loved ones have money to help them manage without your income. Here’s a simple explanation of how different types of life insurance work:
- Term Life Insurance: This is like renting an apartment. You pay rent (premiums) for a certain period (term), like 10 or 20 years. If you move out (pass away) during that time, the landlord (insurance company) pays your family a sum of money. But if the lease ends and you’re still around, there’s no payout – the agreement ends.
- Whole Life Insurance: Think of this as buying a home. You pay a mortgage (premiums) for your whole life, and the house (insurance coverage) is always there. When you pass away, your family gets a payout, and there’s also a savings component that grows over time, which you can borrow against if needed. But for this, expect to pay. If you get sold the bells and whistles offered with whole life insurance, watch your costs sky rocket for, mostly, riders and endorsements that are not what they seem. It's all in the legal jargon, insurance jargon dense fine print.
- Universal Life Insurance: This one’s more like owning a flexible home. You still pay for it your whole life, but you can adjust payments and coverage as your needs change. It also has a savings element that grows, and you can use that money to pay premiums or leave it as part of the death benefit for your family. You pay for this flexibility. This is the most complex type of life insurance and the sales pitch rarely reflect your need to understand the details before you commit to what seems like "all things to all people."
ILife insurance is a plan you set up with an insurance company to provide money for your family after you’re gone, with different plans offering various levels of flexibility and benefits. A great idea, but one that should only be considered when you understand how complex your choices and decisions are.
Most Common Disaster: Universal Life Insurance - Beware
Most Common Disaster: Universal Life Insurance - Beware
Most Common Disaster: Universal Life Insurance - Beware
Universal Life insurance, a sophisticated and complex type, carries significant risks. The most perilous variant is known as 'yearly renewable term,' or 'annual renewable term.'
While Universal life insurance is said to be a flexible type of permanent life insurance, it can have some issues:
Universal Life insurance, a sophisticated and complex type, carries significant risks. The most perilous variant is known as 'yearly renewable term,' or 'annual renewable term.'
While Universal life insurance is said to be a flexible type of permanent life insurance, it can have some issues:
- Costly Premiums: It can be more expensive than other types of life insurance due to management fees and other charges.
- Increasing Cost of Premiums: With the Yearly Renewable Term payment option, after seven or so years, you are all likely to pay more for insurance than on guaranteed premium products. The cost keeps going up. For anyone with a long life, then absent a large amount of overpayment into the policy, this type of insurance is likely to crater, leaving you with a large financial hole and no insurance.
- Cash Value Growth: The savings component might not grow as expected, affecting the policy’s value and the death benefit. Watch the "illustrations" modelled interest rates or investment returns. If this is said to be more than 5%, year in and year out, then the illustration is a fantasy, not a tool to help you understand your outcome. A competent life insurance agent will show you wide returns variations using Monte Carlo simulations. If your agent is not showing you how this is a high-risk, potentially high-reward gamble, then take care. The fees paid for selling this type of insurance may be blinding the fairness and impartiality of your agent.
- Complexity: These policies can be complicated, making it hard for policyholders to understand all the features and potential outcomes. Complexity also makes it hard to service. Every year, your agent should tell you about the policies' performance, warn you of the risks, and ensure that the policy fully suits your needs.
- Market Dependence: The cash value’s growth is often tied to market performance, which will be unpredictable.
- Surrender Charges: If you cancel the policy early, you might face high surrender fees1.
- Risk of Lapse: If the cash value doesn’t cover the insurance cost, the policy could lapse, leaving you without coverage.
It’s important for your life insurance agent to manage a universal life insurance policy carefully and review it regularly to ensure it meets your financial goals. Always consult with a financial advisor for personalized advice.
Insurance Providers: Your Advocates or Adversaries?
Instances of Potential Bad Faith by Insurance Companies:
Most Common Disaster: Universal Life Insurance - Beware
When filing an insurance claim, you naturally anticipate that your insurer will stand by you, providing the necessary coverage and financial support to recover from any damages incurred, particularly in the wake of a family member's death. .
Yet, there are instances where insurers may not be as accommodating. They may reject claims withou
When filing an insurance claim, you naturally anticipate that your insurer will stand by you, providing the necessary coverage and financial support to recover from any damages incurred, particularly in the wake of a family member's death. .
Yet, there are instances where insurers may not be as accommodating. They may reject claims without valid justification or offer compensation that falls short of what your policy stipulates.
If you encounter such a scenario, it’s important to know you’re not powerless. If your insurance provider fails to honour their payment obligations, legal recourse is available. You can sue for bad faith to secure the compensation rightfully owed to you under insurance law.
Instances of Potential Bad Faith by Insurance Companies:
Instances of Potential Bad Faith by Insurance Companies:
Instances of Potential Bad Faith by Insurance Companies:
Bad faith actions by an insurer can include:
- Not honouring a claim or delaying payment without any lawful basis
- Misrepresenting the extent of benefit
- Neglecting to conduct a proper investigation of your claim
- Asserting that they didn’t receive your claim form in a timely manner when they did
- Ignoring your communications about your claim
- Refusin
Bad faith actions by an insurer can include:
- Not honouring a claim or delaying payment without any lawful basis
- Misrepresenting the extent of benefit
- Neglecting to conduct a proper investigation of your claim
- Asserting that they didn’t receive your claim form in a timely manner when they did
- Ignoring your communications about your claim
- Refusing claims or complicating the collection process for policyholders
- Offering a settlement that is less than what your policy guarantees or what is reasonably due to you as the policyholder.
It’s crucial to note that not all perceived unfair actions by an insurance company constitute bad faith. For example, if an insurance representative has a legitimate reason for not fulfilling a claim (such as discovering evidence of drug use prior to an accident or facing excessive demands), this would not be considered bad faith.
Denied Claims
Instances of Potential Bad Faith by Insurance Companies:
Instances of Potential Bad Faith by Insurance Companies:
When a loved one left tried to take care of you through an insurance policy, the last thing you need is to fight with the life insurer. But it happens.
A denied claim is when an insurance company refuses to pay because it believes the insured or policy owner did something wrong. Examples include:
When a loved one left tried to take care of you through an insurance policy, the last thing you need is to fight with the life insurer. But it happens.
A denied claim is when an insurance company refuses to pay because it believes the insured or policy owner did something wrong. Examples include:
- Non-Disclosure: If the policyholder allegedly failed to disclose pre-existing medical conditions or risky hobbies at the time of purchase.
- Policy Lapse: If premiums are not paid, the policy may lapse, and coverage ceases.
- Exclusions: Certain causes of death, like suicide within the first two years of the policy, may not be covered.
- Misrepresentation: Allegedly providing inaccurate information on the application, like failing to disclose health status or habits.
- Contestability: If the death occurs during the contestability period, usually the first two years, the claim may be scrutinized and possibly denied.
- Documentation Issues: Failure to submit required documentation or errors in the paperwork.
We can help. The most common allegation is "fraud" (non-disclosure or misrepresentation) during the application for insurance. With work marshalling the relevant evidence within the context of the law and with advocacy, the insurer changes many of these denials. The result is the payment of the death benefit.
Strengthening Your Position Against Insurers’ Unfair Practices
Strengthening Your Position Against Insurers’ Unfair Practices
Strengthening Your Position Against Insurers’ Unfair Practices
To fortify your case against insurers who may not act in your best interest, consider the following steps:
- Document All Interactions: Maintain a comprehensive record of all communications with your insurance provider. This includes phone conversations, postal correspondences, emails, and text messages. Note the representative's identity a
To fortify your case against insurers who may not act in your best interest, consider the following steps:
- Document All Interactions: Maintain a comprehensive record of all communications with your insurance provider. This includes phone conversations, postal correspondences, emails, and text messages. Note the representative's identity and the time of contact.
- Consistent Communication Channels: Use the same method of communication for all your interactions with the insurer. If you initiate contact via email, continue to use email for subsequent updates. Similarly, if you start with phone calls, keep using their customer service line for all future communications.
- Engage a Specialized Lawyer: Consider hiring a lawyer specializing in life insurance disputes. A car accident, slip and fall, or property claim is a very different area of law than a life insurance claim. The lawyer can guide you through potentially pursuing legal action against an insurer. This may involve obtaining specific documents from the company and formally requesting that they fulfill their obligations to you as a client.