Life Insurance –Questions and Answers you need to know.
Last night; during my weekly
volunteering at APC and the food bank, the subject of life insurance came up
and I realized that not everybody knows why it is important, who can sell
insurance and what would be considered good or appropriate coverage. As a
result I have written the following post in order to answer these questions and
shed light on what coverage is right and answered the questions you need to
know. Mr. Toma this post is for you.
Why we need life insurance?
To answer the question of why we need life insurance
at all we have to look at the reason behind the creation of life insurance and
where and when it should be applied. Life
insurance was originally designed to deal with the three predictable risks
which can occur in the course of a persons lifetime.
The first risk is that of premature death. Now we all have to agree that we know that people
pass away every day and that this is an unavoidable. However, when some one
passes on to early it can have a devastating affect on our families and put
undo stress and financial burdens on those we leave behind. Life insurance is a
product that can help individuals ensure that this burden is reduce or even
eliminated. For example if a husband and father were to die in his early
forties, he may be leaving behind the following for the surviving spouse to
deal with above and beyond the emotional component.
- Funeral Costs
- Outstanding Mortgage
- One income to cover the same expenses prior to death
- Required care giver to assist with taking care of the child
- Education financing for the child
- Less resources for planning the surviving spouses retirement
The second risk insurance address is that of
disability and sickness.
Disability
and sickness can both have severe consequences. These can range from a loss
of income due to inability to work, to medical expenses, to requiring lifetime
support and assistance. Using the same example above, let us imagine that the
father did not die but was in a car accident which rendered him paralyzed. I am
sure that we can agree that this is not a pleasant thing to think about,
however it is no outside the realm of possibility.
Much like the requirements in the last example we
would be leaving the wife with many new responsibilities and costs. Instead of
funeral costs, she would need to deal with the ongoing costs of caring for
someone who could not care for themselves and may even have to find a new
residence or do some major renovating to accommodate things such as a
wheelchair, appropriate bathroom facilities and also ongoing medical needs and
treatments.
Given all this added responsibilities it is easy to
see that there will be a great impact on the quality of life of the entire
family. Now imagine if there were no insurance coverage, no resources to fund
the medical costs, an inability to do the renovations, and perhaps the second
job the wife would need just to cover the every day expenses. We can quickly
see now the need for some sort of coverage to not only replace the missing
income but to also provide some on top of that for the additional
medical costs.
The last
predictable risk is
associated with old age. In
today's society, we typically equate old age with retirement. Retirement
generally means a loss of income, but this can be a very expensive time. Despite
the fact that we are living longer lives there is a great risk that we will be
affected by a debilitating disease which would require some sort of ongoing long term
care as a result.
We all would like to think and believe that if one of
our parents was afflicted by such an event that we would be able to care for
them, but this is not always the case. Alzheimer's and Dementia are two of the
biggest concerns for our aging population total and these to illnesses can be
difficult to deal with. Not everyone is equipped to handle such an event
despite our best intentions. In 2011 the Alzheimer’s
Society of Canada estimated that 14.9% of Canadians over the age of 65 were
afflicted in some way or form. Although we have excellent medical coverage in Ontario and Canada Ontario
As you can see from the above three predictable risks
insurance can play a key role ensuring not only our quality of life, but that
of our families and loved ones.
Who can sell life insurance?
The second question I would like to address is who
can sell life insurance?
As with most industries Life Insurance is regulated
at a Provincial level and individuals who sell these products are required to
have a valid license in the province that they are working in and operate under
the watchful eye of The
Financial Services Commission of Ontario. These licenses are issued only
after vigorous private and provincial educational and testing requirements are
met and have ongoing learning requirements.
Another mandatory requirement of a seller of these
products is Error’s
and Omission insurance coverage which protects the consumer against any
human error that may occur when purchasing insurance. So be sure to ask for
proof of these two things before dealing with anyone.
Now that we have dealt with the individuals, lets
move on to the carriers and companies who issue the insurance products them
selves.
The Office of the
Superintendent of Financial Institutions (OSFI) conducts regular reviews of
the reserves of insurers to make sure they are properly funded. OSFI is a
federal government body charged with regulating the solvency of all sorts of
financial services companies, such as banks and insurers.
In 1990, the insurance industry in Canada
In the event of a failure of an insurer, Assuris steps
in and makes every effort to make sure that beneficiaries who are owed benefits
get what they are supposed to. Basically, Assuris pays benefits during the
bankruptcy, when it is normally not possible for the bankrupt insurer to pay
any benefits.
Assuris works with other insurers, and organizations
such as the Canadian Life and Health Insurance
Association (CLHIA) to get other insurers to buy the business of the
bankrupt insurer. The insurer who ultimately ends up buying that business also
buys the responsibilities associated with those policies. Assuris makes certain
minimum promises, so that clients know that they will receive something no
matter what in the event of the failure of an insurer.
Insurance companies are also rated by a third party;
called AM Best, so that consumers can make
informed decisions as well as independent sellers such as me.
What coverage do I need?
This is one of the most
important questions to have an answer to as it will affect the bottom line for
you the customer and the amount of premiums you will have to pay.
I know that a lot of you
surf the web and love instant quotes, but when we are talking about decisions
that will have a major impact in your life should you really be doing a five
minute online transaction? The answer is no.
In order to ensure that you
have the right comprehensive coverage you should sit down with an agent and
prepare what is called a needs analysis. This process is very in-depth and
takes time and so it should. Consider life insurance like any other investment
you make and give it the due diligence it deserves. Every one has different
life styles and personal needs and your insurance likewise will need to be just
as diverse. Stage of life, martial status, estate planning and many other
factors are involved in putting the right coverage (s) in place. The best way
to ensure that your are properly covered is to work with an independent
broker who has access to many carriers and can help you develop your needs
analysis and find coverage best suited to your unique situation.
To learn more about the
advantages of dealing with a broker or to get helpful information and guides
visit www.protectingwhatmattersmost.com.
Edgar Schuchardt
416-806-5813
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