In our role of Independent Advisors, representing a number of leading insurers, we have developed a criterion that we follow when selecting a specific product, as well as insurer that will issue your contract. These are the guidelines that we follow:
- The insurance carrier must have the expertise to underwrite your policy with the greatest probability of issuance under a "preferred" premium rating. With health style underwriting, quoted rates can be improved with favorable:
- Family History
- Vocation
- Healthy Lifestyle
- Initial and renewal rates must be competitive in the industry for similar Term products.
- Actuarial design of the product must be clearly defined with structural guarantees that directly impact the performance of your program.(Universal Life, Whole Life)
- If term insurance is chosen, the ability to convert to a cost-effective permanent product (i.e. Term to 100, Universal Life or Whole Life) with no evidence of insurability. The insurance carrier must have a sufficiently developed permanent products for conversion.
HEALTHSTYLE UNDERWRITING Healthstyle underwriting was introduced to the market place to meet the challenges of a very competitive industry. Healthstyle is a new; more refined underwriting process that recognizes each individual's unique health and lifestyle. Your healthstyle risk is determined by assessing specific factors to provide a more accurate prediction of life expectancy. Insurance costs for each client are based on this assessment; individuals with a longer life expectancy will receive significantly lower rates. Since the final premium structure is determined by the individual insurer, we have made a corporate decision to quote premiums that are indicative of someone that is in good health and by doing so we are not presenting unrealistic expectations of low premium structure. On average, 40-50 percent of our applications are awarded more favorable rates than what was originally quoted. We will inform you which insurers offer healthstyle underwriting, and where you have the possibility of obtaining lower premiums with good health history.
LONGEVITY OF NEED In addition to the above, the anticipated longevity of the need will play the largest role in your selection of the optimal contract. When you receive our report, we outline various product designs for your consideration. Further, as important as pricing will be in your final decision, the best value for coverage must also be fully taken into account and flexibility of this contract to meet your future needs. MARKET SURVEY There are two distinct groups of solutions: Three Term insurance options, and Two Permanent insurance solutions. We complete a survey of the marketplace to examine the pricing structure of top insurers and from that list together we choose the insurer which will provide you with the best value. "THE PENN STATE STUDY" on payout of large face value Term Policies In the spring of 1993, Penn State University completed a study regarding the fate of Term Insurance policies. This study reviewed 20,000,000 Term policies with aggregate face amounts of $4,000,000. Included were 5 Year, 10 Year, and 20-Year Term contracts valid to age 65. The study brought forward some very disturbing findings that you should be aware of:
- More than 90% of term policies are terminated or converted.
- 73% of all the term policies are terminated or converted within the first three years.
- 45% of term policies are terminated or converted within the first year.
- The average duration before termination or conversion is two years.
- Less than 1 term policy in 10 survives the period for which it was written.
- After 15-20 years of exposure, less than 1% of all Term policies are still in force.
- Only 1% of all Term policies pay out as a death claim.
Considering the findings of this study, the odds are 100 to 1 against Term Insurance surviving to do what it was designed to do. "INDUSTRY STANDARDS" on payout at death of Term Policies 
If you put higher ones into this calculation and focus only on the younger lives (which is where most term policies are sold), you really can get your claims rates down to only 1 or 2 per 1000 policies (i.e a probability of paying a death claim of 0.1% or 0.2%). If you throw into the analysis all of the term policies sold through banks to provide mortgage or loan insurance, the lapse rate increase dramatically and you get into the 1 or 2 per 1000 claims rates even at the older lives. Term insurance provides you with a good short term solution.
10 YEAR RENEWABLE & CONVERTIBLE TERM - While the 10-Year Term option offers the most cost effective initial premium, it increases every ten years, and expires at age 80/85 without value. This may be an optional product if your needs are of a temporary nature.
- Initial and renewal premiums are stipulated in the contract.
- Premiums on this program renew at an increased rate every 10 years, until the Policyholder attains the age of 80 or 85 at which time the contract terminates.
- The contract does allow for "conversion" where you, the insured is allowed to exchange the contract for one of a more permanent nature without having to provide evidence of good health.
20 YEAR RENEWABLE & CONVERTIBLE TERM TERM TO 100 Term to 100 is a non-participating permanent plan with guaranteed premium structures and a guaranteed death benefit. Premiums are payable to age 100 and there are no paid up values or cash values. WHOLE LIFE Whole Life products are permanent insurance plans that offer level coverage at a guaranteed level premium structure for the lifetime of the insured. There can be an increasing death benefit that is dependent on level of premium deposits and dividend performance. Insurers dividend performance is based on: mortality costs, return on investment and expenses on operation of corporation. Recent plan designs have improved the flexibility of this product primarily with additional premium deposits. The contract has the flexibility to use future dividends to pay ongoing premiums, but this not a lifetime guarantee, as dividends fluctuate. Dividends can also be applied to acquire additional increase in death benefit through Paid-Up dividend options. UNIVERSAL LIFE An Insurance Policy that combines not only the life insurance component, but also an investment portion that you can direct as well as utilize in future years. What Is Universal Life? Universal Life insurance is a form of life insurance that provides you lifetime coverage with flexibility to adjust the policy as your needs change. The cost of life insurance is fully guaranteed while the premium deposits can change from year to year or be skipped all together while the policy remains in force. This policy needs to be reviewed annually to take advantage of the various investment opportunities within the contract and through the chosen insurer.
With universal life, you choose the size of premium deposits (between minimum and maximum) and the payment period based on an assumed rate of return. In addition, the policyholder own the cash surrender value of the policy. You can choose from a wide range of investment options to invest in, including savings accounts, GICs and equity indexes.
Key Features of Universal Life Flexibility The flexibility of universal life allows you to choose the premium level and payment period best suited to your situation. The minimum premium payment level will be sufficient to provide coverage for life. Deposits in excess of the required minimum premium are credited to the investment account that you have selected. This separation of insurance and investment provides for flexible planning opportunities. For instance, the policyholder can forego paying premiums for a year or in some cases for the remaining life of the policy if there is sufficient cash built up in the policy to cover pure insurance cost within the plan.
Deposits into a Universal Life policy are done on a after tax basis but the cash value growth is tax deferred while inside the plan. There are limitations applied on the investment portion however, depending on a formula set by the Income Tax Act. Tax-deferred growth Universal Life policies may be especially attractive to investors who have used up the contribution room in their RRSPs and are looking for another method of tax-deferred investment growth. Although withdrawals are not tax-exempt, the policyholder can choose how much to withdraw and when, deferring taxation until retirement when marginal rates will probably be lower, the minimizing taxes. Through the leveraged concept, you are able to assign the policy to a financial institution and borrow against cash values which will enable you to use your money while living without tax consequences or disposition. On death, your loan is paid off and your beneficiary also receives balance of death benefit. If the cash value is not needed it will increase your death benefit which is paid out to your heirs on a tax free basis. Who Benefits Most Generally there are a number of clients who will obtain exceptional value within the Universal Life contract:
- A higher-income individual who needs insurance that will last the rest of their lives, who also have investments outside RRSPs on which they are paying taxes currently and may also wish to creditor proof those assets.
- A business owner, who wishes to utilize corporate after tax dollars to provide a corporate asset while also creating a life insurance program to meet corporate needs.
- Professional who has maximized his/her RRSP's and wishes to utilize a tax preferred accumulation vehicle while providing Estate protection for their family.
- A grandparent or parent who wishes to create a "Fund" for grandchildren or children.
- Charitable organization who is the beneficiary under the policy.
|