Life insurance : advice?

[termerair]

Good day all!

Over the last few weeks, I have been shopping around for a life insurance to cover the unexpected (read death) and help my GF to pay for the house we recently purchased... I have a life insurance through my company (2 yr salary I believe) but we still want the extra peace of mind it brings to have a full coverage.

We are looking at a Term Insurance of 20 years for a total amount of 400k$. Initially we were told a premium of 550$/yr for both of us with AXA. My file has been reviewed and the insurance came back to us with a new price. They are willing to cover us for an extra 3$ per 1k$. The extra cost comes from the fact that I am a pilot (ATPL, 4000 hours). This translate into 550$ + 1200$ = 1750$ a year. This is highly unrealistic and way too much for us.

So now I looking for advices from you guys to see what kind of deal, if any, you have found regarding life insurance. Any tips will be much appreciated!

Thanks for your time!

T.

[turbo-prop]

Try PPIP.ca for me and my wife $54 a month for $300,000.

[180]

I'm interested in this question also.

Unfortunately I don't have an ATPL, Turbo Prop, and am therefore ineligible for the PPIP program.

Anyone else have any leads?

[arctic navigator]

What/where/type/etc are you flying 180? more detail the better... I might be able to get you going in the right direction if nothing else... termerair, Ive got 500k that is costing me somewhere around 75-100/month if i remember right... Its tied into a Universal Life policy which is a whole other story in itself though and is set up thru TransAmerica...

PM me if you want, I can try and get you going in the right direction.

[Connor M]

Slight sidetrack here. Have a look at any insurance policy you have, credit cards line of credit and mortgauge. Most of them will disqualify you if you have anything to do with airplanes. One of mine actually said that a condition resulting directly or indirectly from acting as a flight crew member was disqualifying. Of course all of this was after I need my insurance. Being "approved" only means you are approved to pay premiums. It doesn't actually mean they approve of paying a claim.

Also if your employer pays even one penny of a loss of income/disability plan it is taxable and therefore is considred income. So if you try to claim EI sick benefits you will lose out since most likely your employer sponsered plan will pay more than you are allowed to make on EI.

I guess what I am saying is make sure you are actually covered for what you think you are paying for.

[Troubleshot]

Connor is on the right track, make sure whatever coverage you get (from whomever) is underwritten, I cannot stress how important this is. This will ensure the insurance company up holds their end of the bargain and won't try and weasle out when it is time to pay up.

[eddyb123]

Check with your morgage lender, they usually ask if you want insurance, ours says if one of us dies the morgage is paid.

[seniorpumpkin]

First of all, I think term life insurance is a bit of a waste of money unless there is a good chance you will actually die. The payout is way way more and it can be a really good deal if you die, but it's kinda like playing the lottery, the chances of you dying and of there being a payout, are slim (hopefully).
You should look into whole life insurance. Whole life insurance is like an investment but if you die you get a bunch of extra money out of the deal. You pay premiums for like 10-20 or so years, then it switches and the insurance policy actually pays you dividends on your 'investment'. At any time while your signed up, you can cash in your insurance and get some of your money back, plus if you die, there is a substantial pay out.
The problem with whole life is that the premium-payout ratio is way different. So if you die your significant other won't 'win the lottery' but they'll have enough cash to deal with your dead ass, and live for a while without too many worries.
I have a whole life plan through London Life the freedom 55 people, they know I'm a pilot, and they're ok with it.
My two cents

[AuxBatOn]

Check with your morgage lender, they usually ask if you want insurance, ours says if one of us dies the morgage is paid.

Make sure you read the fine prints and that there is no exemption for pilots.

[yodan]

Termerair, you are correct; the quoted premium is somewhat unrealistic. If you qualify, PPIP specializes in insurance for aviators and may be able to provide you with reasonnable insurance.

However, although you are on the right track in wanting to protect your family, Artic Navigator's suggestion offers a more encompassing plan but all plans are tailor-made for each family/individual; therefore, it would be wise for you to meet with a financial advisor. I am also covered by a Universal Life policy from Transamerica and I have not been rated (Can't figure this one out yet) A "regular" premium is considered 100%. The underwriter reviews you file and determines your risk level; if you are considered a higher risk, you could be "rated" at (example) 250% which means that you take the "regular" premium (100%) and miltiply it by 250% and that becomes you annual premium...divide this by 12 and you have your monthly premium. This is my second career, I have flown over 8200 hrs, 58 different types of A/C and 4 type ratings and I pay a regular rate. Everyone is different.

I would NOT consider talking to your mortgage lender as suggested by Eddyb123 exactly because of the argument presented by Troubleshot. Mortgage insurance is not underwritten; it is simply an insurance certificate whereby should you pass away, the insurance company will go at length to prove that you were uninsurable. For more information on this, see the following links: http://www.cbc.ca/marketplace/in_denial/ and http://watch.ctv.ca/news/clip90894#clip90894 According to CBC Marketplace and individual life insurance policy may be preferable to a credit insurance.

If you need further assistance, you are welcome to pm me. Depending on where you live, I may be able to assist you with this myself.

[arctic navigator]

Everything yodan just said is 100% correct.

Mortgage insurance is a huge ripoff. Your premiums remain the same for the mortgage period even though the insurance benefit decreases to nothing, and if you do die, the insurer does everything in their power to prove the insured was uninsurable in the first place. I know of a guy that had a brain aneurysm and died sitting in his car at a red light. The insurance company claimed it was a pre-existing condition and denied the claim. Now how would anyone ever know that he had one that was about to blow, without major expensive invasive testing to find out. This, however, was left for his widow to fight trying to raise 2 young kids.

Whole Life policies are ok... Better than Term Life in the sense that they don't have an expiry date but more expensive... Universal Life combines insurance and investment to give you both when you need them... All three however have a time and a place... Find a financial advisor that you can trust and that will take the time to talk to you and find out what you need... If you walk into the office and they have a bunch of paperwork filled out and go sign here, here and here and give me a void cheque, get your ass up and walk out, because cookie cutter solutions don't work...

I was filling out the insurance paperwork for my policy, they had all kinds of additional information forms that needed to be filled out. Scuba Diving, Foreign Travel, Flying, Extreme Sports etc etc... They're trying to figure out if they insure you are you going to go Dive to 200' and end up killing yourself... As for flying, I asked earlier what are you flying and what are you doing. If you are ATP rated more than likely you're flying multi, if not turbine or jet, which has a lower accident rate than floats on the west coast (which is why PPIP gets the rates they do)... Big red flags are homebuilts and ultralights... They also want to know how much you fly or plan on flying, and may even ask where... Unless they have an exemption in your policy however, circumstances do change and they can't really deny your claim based on that... For example, if you're working flying a corporate jet out of YYZ now, get approved and insured based on not intending on flying single engine aircraft, and in 5 years you decide to buy a 172 on floats and crater it in somewhere, you should be covered... However, if you were working the same job, and building an RV6 in your garage, were approved and insured based on not intending on flying single engine aircraft, then were killed 6 months later in your RV6, the claim will likely be denied based on your application being untruthful...

As I said before, PM me with more info if you wish and I'll see if I can't get you going in the right direction...

[RatherBeFlying]

My first full-time job was experience rating for group insurance; then I moved on to programming their systems; so, know a bit about insurance.

1. Stay away from creditor insurance -- it's a total ripoff and a big profit centre for those underwriting it.

Occidental pioneered decreasing term for people paying off mortgages; that is a far better deal.

2. I am a fan of term insurance as you can get a bunch more coverage per premium dollar for those twenty or so years your children will need support. Once the kids have completed university and the mortgage is paid off, what do you need life insurance for? Well, there is stuff such as estate taxes, capital gains on sizeable assets such as cottages, businesses etc. that your estate planner will recommend whole life insurance for should you be lucky enough to have an estate worth worrying about.

3. Whole life policies are seriously loaded on the front end with fat commissions for the agent that sells you the policy; so, guess which one they want to sell you.

4. Disability is a bigger risk than death; so, use the savings of term over whole life to take out disability coverage. Disability waiver is highly recommended since if you become disabled, there's a good chance you will croak in the next 5-10 years, but won't have the bucks to pay the premiums.

5. Both spouses should have life and disability coverage. In case of divorce, a spouse receiving maintenance payments has an insurable interest in the earning capability of her/his meal ticket.

Insurance companies vary in their underwriting policies. Some do underwrite pilots as standard. Occidental was one such company as it had figured out that most pilots drop out of flying.

Shop around.

[yodan]

Unless they have an exemption in your policy however, circumstances do change and they can't really deny your claim based on that... For example, if you're working flying a corporate jet out of YYZ now, get approved and insured based on not intending on flying single engine aircraft, and in 5 years you decide to buy a 172 on floats and crater it in somewhere, you should be covered...

That is called the incontestability clause which is a 2 year period. After that you can basically do whatever you want...within reason.

and the mortgage is paid off

Not recommended. I know! We have always been taught by our parents to "pay off that damn mortgage" Quick example: Your house is estimated at $400K and you owe $200K = you have $200K doing N O T H I N G for you or your retirement. Since a big(ger) chunk of money grows faster than a smal(ler) chunk of money, take the $200K and invest it. That is a strategy used by wealthy people.

Whole life policies are seriously loaded on the front end with fat commissions for the agent that sells you the policy; so, guess which one they want to sell you.

That is why you go with an independant broker. The tradidional side of the industry works exactly like that and has given the industry a bad name. An independant broker gets paid by the company issuing the policy not from the client's pocket.
As I said, I have access to that information so pm me if you need it

[Edo]

Insurance can make your head hurt. The best advice as already mentioned is ditch the creditor insurance. What wasn't defined was what creditor insurance is. Its the stuff that you sign when getting a loan or mortgage. So many people take it that it does not go through underwriting. Just sign on the dotted line - one poster said if either me or the wife dies house paid. True but expensive. There sill be execptions but dont expect to get you hands on the fine print easily....

Look into term, insurance lock in for 10 or 20 years. Make sure they know you fly, there will be some sort of aviation questionnaire. Usually its so out of date it asks if you hold a senior commercial license!
Who cares if their form is out of date. I recently did the RBC one and underwriting said it was ok. They didnt like private pilots, due to currency problems and bombing pilots. DO NOT trust the advisor to know anything about aviation, mine said bombing guess it means military. Then I asked where waterbomber pilots would be classified......

So RBC will accept certain pilots, and I have heard BMO does as well.

[termerair]

Thanks for your inputs!

We have declined the mortgage insurance offered by the bank (for the reasons given above) and this is why we are looking at getting some other sort of protection. We have figured out that term insurance is what suits us the best. Probably a 20 year term.

PPIP seems to be an interesting option. I am just a bit worried that their limit is "only" 300k$.

Keep advices come in!

Cheers!

T.

[TG]

I know! We have always been taught by our parents to "pay off that damn mortgage" Quick example: Your house is estimated at $400K and you owe $200K = you have $200K doing N O T H I N G for you or your retirement. Since a big(ger) chunk of money grows faster than a smal(ler) chunk of money, take the $200K and invest it. That is a strategy used by wealthy people.

Wealthy people will do so.

The really really wealthy people won't. Real millionaires will leave their cash fructifying at for example (random numbers) 6% and take 4% loans to buy their Ferrari or new castles.
6 -4 = 2% of interests still pocketed. They will actually make money out of their loans.

Well, being a forum about pilots or engineers, I guess it doesn't matter except for Hedley

On the other side, I had a friend working into insurances and he told me once that life insurances was where they were making money.
Since statistically and in Canada, only 3% of the population will die from an accident (don't remember if he was including sickness into it making you passe away before the old age)
This numbers where back in the early 90's. If they were true, it might even be lower now.

Being a little gambler I'm with PPIP anyway.

[CLguy]

Termerair you made a wise choice. Mortgage and Whole Life Insurance Policies is just flushing money down the toilet. The sales pitches about paying your whole life policy for a few years then it will generate enough to cover the premiums, blah, blah, blah is all crap. They seem to forget to tell you about where you will stand when there is a huge market correction and everything you have accummulated is lost. We won't even get into RESP's!!

Remember you are buying insurance not some investment and it will cost you some money. If you are the bread winner then only you need the insurance so if something was to happen to you your family will be ok. If your wife is a stay a home mom why would you pay premiums on her since if something was to happen to her you would still be the bread winner. As your family ages and the monthly costs subside cut back on the amount of insurance you carry. If your wife is also a working and the family is depended on her income as well to survive then she should also have a Term Policy. There are people who want you to believe that if you die your family should win the lottery and of course they are more than willing to selling you that policy. That is not what insurance is about. It is to make sure your young family will be ok once the monthly income stops. Remember to ask questions and read the fine print.

Never and I mean never pay to insure your children.

[yodan]

The sales pitches about paying your whole life policy for a few years then it will generate enough to cover the premiums, blah, blah, blah is all crap.

Actually, you are referring to cash surrender value in a whole life or Universal Life policy and usually serves as an investment; in hard times, it serves to pay for your premium until the money runs out.

They seem to forget to tell you about where you will stand when there is a huge market correction and everything you have accummulated is lost.

The purpose of investing is to STAY invested which is something many Canadians don't do. They wait for f***ing Oprah to say its time to invest rather than listen to their financial advisor and buy when prices are high...then when the markets go down, they get all depressed and (you guessed it) sell when the markets are low. However, if you ask them when they should buy/sell, they will answer correctly...buy low/sell high. Any serious investor knows that you must STAY invested for a minimum of 10 years.

If your wife is a stay a home mom why would you pay premiums on her since if something was to happen to her you would still be the bread winner

You will probably be shot by angry wives and financial advisors!!! The intent here is that it allows for grieving time and funeral expenses (Government only covers $2500 for funerals) and if you have any kids, it allows to cover expenses for a nanny or someone to look after your kids.

As your family ages and the monthly costs subside cut back on the amount of insurance you carry.

.
Yep! agreed.

That is not what insurance is about. It is to make sure your young family will be ok once the monthly income stops.

The rule of thumb is the face value of the policy should be 10 times the breadwinner's annual salary + any debts/liabilities.

Never and I mean never pay to insure your children.

I understand people have issues about "making money" on their children's life. This is NOT what it was intended for. Equitable Life Insurance of Canada offers a policy with an option called Flixible Insurability Guarantee whereby for as little as $50/mo you can insure your child and (example) at age 18, 25, 30, 35 and 40 (5 option periods of your choice) you have the option to increase the face value of the policy WITHOUT having to qualify medically!!! The (not so much anymore) child builds up cash surrender value in the policy and cashes it in say at age 30 as a downpayment on a house. The parent can at any time after age 18 tell the "kid" payments are now yours!! Better than an RESP would you agree?

Why am I passionate about this? Because my 2nd daughter was diagnosed with cancer at age 22 and I did not have a life insurance policy for her. She will never be insurable again. With that policy, she would still be insured.

[Joe Blow Schmo]

I find whole/universal life policies to be a major waste of money. You'd do far better taking the money you would be using for whole life premiums and investing it yourself. About 30% of your monthly premiums are pure profit for the insurance company.

If you need life insurance I'd go with term life. You could also look at a life/critical illness policy that pays out if you die or are diagnosed with any one of a list of serious illnesses.

[RatherBeFlying]

If you are the bread winner then only you need the insurance so if something was to happen to you your family will be ok. If your wife is a stay a home mom why would you pay premiums on her since if something was to happen to her you would still be the bread winner.

If you lose your stay at home wife when the kids are young, you will be needing childcare and housekeeping plus you will likely be buying the easy cook meals instead of making from scratch -- that could be be $2000+/month easy for 10-15 years.

Some employers offer $10,000 life insurance for children which is basically funeral expense coverage.

If there is a history of early cancer in either side of the family, especially childhood cancers or other nasty pathologies, yes, it would be very smart to find some way to have guaranteed insurability for when the child becomes an adult.

[yodan]

I find whole/universal life policies to be a major waste of money. You'd do far better taking the money you would be using for whole life premiums and investing it yourself. About 30% of your monthly premiums are pure profit for the insurance company.

That is because no one has explained to you the concept of universal life (I wouldn't bother with whole life; that's an old product). There are 2 sides to UL: the investment side and the insurance side. Nothing is for free nor would YOU work for free. The same goes for insurance companies. Assuming a $250/mo premium; you will have your Cost Of Insurance (COI). That pays for you actual insurance policy. Let's say your COI is $50/mo; therefore $200/mo goes to the investment side of the policy. That does NOT equate to 30% profit for the insurance company. Furthermore, show me someone who is disciplined enough to actually invest separately; very low percentage. In addition to the fact that most who claim picking their own stocks are amateurs. The simplest and most effective form of investment is a professionally managed portfolio. (Again no one works for free) There are Management Expense Ratios (MER) but you have professionals looking after your money.

Term has its place but it's like renting = no equity. At least in a UL has "equity" built into it = Cash Surrender Value (CSV)


Nothing frosts me more than people spewing off at the mouth about something they don't know. Here is a book...yes a book! (Imagine that) It is called "The 10 Secrets Revenue Canada Doesn't Want You To Know" by David Roth (p99 - 107) Can you handle reading8 pages? really it's a paperback...you can do it!!! It talks about insurance tax shelters; that is a UL

I will admit that the "traditional" side of the industry has NOT helped the public. And don't get me started with B A N K S. They are most certainly NOT our friends...any one's friend!

[seniorpumpkin]

Thank you Yodan! I was beginning to think that maybe I was flushing money down the toilet with my policy.

[RatherBeFlying]

The whole life policies have two components: risk and fund building. At some point, say 65, the fund is sufficient to cover your risk of death without any more premiums; i.e. it becomes a paid up policy.

So a whole life can be described as a decreasing term to 65 plus a layaway plan for a paid up at 65 policy. The term portion decreases as the CSV accumulates. When you make it to 65, the CSV is the paid up at 65 premium.

Paid up policies also contain risk and investment portions. The CSV has to increase because your mortality increases each year.

If you're really big in numbers, you can investigate actuarial formulae. Pass the exams and some insurance company will want to give you a nice office. I got put into computer programming after running off actuarial tables for joint life valuations in Fortran. Oh yes, I flunked my second exam (Probability and Statistics). There were eight more. Accountants and acturaries have all the fun.

If you make it to 100, your beneficiaries collect the face amount.

[gowest]

Good comments Yodan / RatherbeFlying,

Most people don't understand the benefits of a Universal life:

-the UL is a powerful tax shelter: no creditor can ever access it
-it allows to create both a tax sheltered estate and a tax "free" or tax efficient investment that you can use in your retirement...

long story short, UL's provide great tax saving strategies and Investment if they are over-funded (CRA allows only a certain % of deposit/ year depending of the face value of the policy).

BUT, it is a terrible product for people under-funding it (what most Canadian do...) where most of the premium goes to the COI and not the the investment...

going for term insurance is like "renting" a capital for a certain period of time while going for whole life/UL is like buying the capital back.

As for Termerair, term20 shouldn't cost you more than 50$/mth for you and your GF for a $400K coverage

I know that TransAmerica and Equitable life don't rate pilots as long as you don't do float flying and crop dusting.

Regards

PS: read chapter 8 in the excellent book by David Voth "the 10 secrets revenue Canada doesn't want you to know." he explains the tax benefit of a UL.

cheers

[CLguy]

For those of you who now have all your insurance needs taken care of, it's time to think childrens education. You now have the kids insured to the max, your stay at home wife is now worth more dead than alive and you have settled into the automatic withdrawl plan on your own lucrative policy that once the account is completely cleaned out, it will continue to pay its own way forever because that is what you were told. Well lets hope there is a few more bucks left over at the end of the month so you can rest comfortably knowing your kids education will be taken care of. Well that is what your advisor has you believing and he certainly has your best interest at heart and doesn't really concern himself with the fees and commissions he will be receiving from the lame duck he has sold you.

Maybe you should read this before you make a move http://www.cbc.ca/money/story/2010/09/0 ... resps.html