What can a life insurance agent do for me?
I will admit to a bit of a love-hate relationship with life insurance. On the one hand, insurance is almost always appropriate to buy at some time in your life. On the other hand, as someone with a chronic health condition, kidney disease, I couldn’t buy it even when I wanted to. I am grateful that my former employers offered group insurance plans that allowed me to get some level of insurance when I had minor children for whom I was financially responsible.
Having said that, approximately 96% of life insurance applications are accepted as standard, meaning that the vast majority of applicants can get life insurance.
Agent versus Broker
If you go to Canada Life or Sun Life, to name two major life insurance firms, you are going to speak to an agent of one of those companies. The products that will be offered to you will be exclusively from those companies. On the other hand, if you go to a broker, you will be speaking to someone who can provide you with a policy from more than one insurer. The person you speak to will still likely be an agent, but they will be an agent of the broker.
Products available from a Life Insurance Agent
People who sell life insurance may choose to specialize in a particular field, but under the broad rubric of life insurance a few other categories are also available. There are different kinds of life insurance, first of all, but there are also different kinds of insurance for which a life licence is nevertheless required.
Life insurance, understood broadly, addresses the financial implications of the death of the insured person. Types of insurance include Term, Term to 100, Universal Life, and Whole Life and each type is applicable to a certain risk or group of risks that the person buying the insurance is seeking to offset.
Accident and Sickness Insurance
Accident and sickness insurance focuses on financial protection for individuals and their families in the event of a serious illness or injury. Included in this category are insurance for disability, critical illness, long-term care, and extended health. To qualify for disability insurance, you need to be employed (including self-employed) because the purpose of disability insurance is to replace lost income. Critical illness insurance is typically payable in the event of a diagnosis of a serious medical condition. The big three are cancer, heart attack, or stroke, although the list can expand to more than 20 diseases.
Segregated Funds and Annuities
This is the saving and investing part of the insurance world. Segregated funds are investment products sold by life insurance companies. Technically, they are individual insurance contracts that invest in underlying assets, such as mutual funds. They are insurance products in that they guarantee to protect all (100%) or a part (as low as 75%) of the invested principal. However, you have to hold the investment for a specified period, typically 10 years. Other benefits of this form of insurance are that you can name a beneficiary and you have potential creditor protection, which can be especially useful for business owners. Just like any insurance product, though, there is a premium for offloading your risk of loss to the insurance company; it comes in the form of higher fees, or in standard mutual fund language, higher Management Expense Ratios (MERs).
Annuities are also a form of investment that provides a guaranteed income. Some annuities are for only a certain term, but the type that most retirees want would provide guaranteed income for life. In return for this guarantee, you hand over a lump sum premium. You can either begin receiving payments from the annuity immediately or defer the payments to a specified period. There are several options to consider when buying an annuity. Among them are a guaranteed minimum of years and inflation protection. If you are married, you may wish the annuity to be joint, so that payments continue as long as there is a surviving spouse. Of course, all these result in either a higher premium or a lower payout.
I don’t need to see an agent: Digital options
If you would prefer to stay within the online world, I am aware of three online life insurance “fintech” firms: PolicyMe, Emma, and Bounc3. While PolicyMe and Emma focus exclusively on life insurance, Bounc3 has the self-employed as its target clientele and accommodates them by offering a broader range of insurance products: life insurance, critical illness insurance, disability insurance, and the health spending account.
Life insurance is regulated at both the federal and provincial levels, by both government bodies and self-regulatory organizations, so it is a bit confusing out there. Some only deal with insurance companies while others deal with insurance agents and their licences. The following provides some guidance if you need help following interaction with a life insurance agent or company.
This is the 140th blog post for Russ Writes, first published on 2022-03-21.
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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.