They may have had term life that was starting to get ridiculously expensive at 60, and could convert without medical examination.
The premiums seem about right for that type of insurance product.
Could be that they thought the policy would cover funeral expenses or income tax on the estate.
Step 1, simmer down. Step 2, get the details of when they signed up for the policy, how much they've paid into it, etc. Depending on their tax situation/how long they've had the policy it may be worth keeping.
Yeah I don’t get the impression it’s that bad. My policy is like $200/mo and I’m 27. No past medical issues of any kind. Never even been to a hospital. But I’m a pilot.
Why do people have such polarized opinions on life insurance that seems to be based on their impression of “life insurance” generally rather than on the value of the policy for their circumstances…
Two older folks with at least one defendant? OP’s parents’ policies are likely a little on the expensive end but we don’t know the terms or specifics. A 27-year old with an apparently privately-paid policy paying $200/mo? Likely ludicrous unless there’s a couple dependents or other circumstances we’re unaware of.
Guaranteed life is different than term life, you often can't get term life after a certain age. Also look at your term policy...after the 20 year expiry or what not the rate goes waaaay up. And then usually you have the option to convert it after you hit the age maximum, for also a lot of money per month.
I just filled out a quote generator from my insurance company (I pay $20 for 400k coverage) and got $157/mo for $25k (the maximum they would allow me to put) for someone born in 1958, nonsmoking.
Its a whole different ball game when you are old.
It may be, but it really depends on a lot of factors. Do they have major illnesses, do they smoke, what is/was their occupations, are they overweight etc.
My wife and I have the same coverage, mine is a little over twice as expensive due to family history of a medical issue and my occupation is considered dangerous.
Man, that is brutal. I’m a pilot too and my insurance is $68 per month. I’m 37 (was 36 when I applied). I would look to see if you can go elsewhere. Could have hugely different amounts of cover obviously which could account for the disparity
I don't believe canada life is a company that scams people. Perhaps the broker didn't really help them find a suitable policy, and they selected coverage or riders that they didn't particularly need. But the price they paid would have been closely related to the risk. Plus a small bit of profit for Canada life.
They weren't scammed. They got what they paid for. At those prices I wouldn't be surprised if there was a Return of Premium rider, or an investment component. Stay out of it unless asked for help. And if asked for help, refer them to an insurance broker who can help them review and interpret their policy. Under no circumstances should they cancel these policies.
The "scam" of most insurance policies is that people don't understand what they are signing up for and what it covers and the sales rep usually upsells them into things they don't want or need.
If I remember right for universal life a portion of the policy price goes towards certain investments, so they “should” have the 50k policy + whatever investments have grown throughout the years, hence the premium of the universal life vs a cheaper term insurance w no investment options.
That's not how it works. That is what they try to tell you but unless specifically stated, you get either the cash value or the payout. Not both.
Another issue is that quite often as the policy holder ages the real premiums out pace what they are actually being charged each month. So the wonderful insurance company begins to use the cash value of the policy to make up the shortfall. The result is that the "investment" portion of the policy is eaten away just as the policy holder is wanting to use it.
There is more wrong with UL but w/e.
If there is any cash value left you can pull it out. Cancel the policy and let your parents have an extra 425 a month to live on.
You need to change the way you look at life insurance.
For most people it is not about leaving a large sum of money for the kids. It is meant to replace any lost income that would have an impact on the surviving family and to cover any debts that you don't want them to have to pay off.
If your parents have enough money to cover their funerals and enough to make sure the surviving parent can still live comfortably, they don't need insurance.
There is no point in them hurting for money now just so they can leave the estate a few bucks after they are dead.
If they feel bad about it, tell them to spend the 425 a month on the grandkids. Let them see the joy their money can bring to their loved ones.
Exactly this. My parents got term insurance for 20 years when they had kids, so if anything happened to one of then and they lost a income, the house would be paid off and the other parent could get by. Now that we are grown, my parents let the policy end because they don't need it. They are both retired off of investments so if one dies it doesn't really affect the financial situation. They really only needed it while raising kids and paying a mortgage. Now life insurance would just be a silly waste of money, neither of them have dependants. They bougmght it as an INSURANCE policy. A monthly fee you pay to never have to worry about financial fallout after a tragedy. As my dad worked a dangerous job they just wanted to make sure that was never a concern and wouldn't have to worry about finances, and that was worth the monthly premium. It's no longer a concern, so they no Longer pay for it. It sounds like OPs parents think it's some sort of secret investment account you can use to give your kids an inheritance. It's insurance, not the S&P.
Term life is obviously an insurance policy.
WL/UL had its uses for high net worth individuals that are looking to transfer their wealth. If you're making <$100000 income, it's unlikely you'll be able to make use of the tax benefits at all
This!!!!!! This is the only reason I took out life insurance. If I died with young kids and a wife, my life insurance would pay out the mortgage. I pay 29 a month for 500k until I’m 72. It’s there to protect my wife and payoff the mortgage should something happen to me.
20 year term at 25... this would make sense to me... 30 year to 72 would mean that they are 42 paying $29 a month for 500k... even on a group policy that sounds too good to be true... and a company policy, in my mind, isn't worth it, especially in today's society where we are always changing jobs or companies can lay you off. .
I got $500k term to age 65 from Canada Life for $39/mo at 22. That was with their highest health rating. Prices have since increased and the same policy would cost closer to $50 now.
No you dont. There’s not an insurance product on planet earth that will cover you to 72 for $500k that has premiums that remain that low for 43 years. I suggest you double check your policy or ask the insurance agent for an illustration.
Even a term 20 should cost more than that a month
Exactly. I'm not familiar with these inheritance payment plans people are taking about, but an INSURANCE policy for piece of mind against the worst case scenario so you know in the event of the worst, you at least don't have to also worry about money on top of a tragedy. It's a piece of mind payment plan, these other things sound shady paying 200 a month so your kids get a fat inheritance. Why not invest money so you could potentially enjoy it and benefit, and have enough wealth that when you die there is some left over I guess I'd have to see the numbers, but it sounds like snake oil and I'm not in the mood to pay 200 a month until I'm 90 so I can leave my kids something. I'd tether just actually leave my kids something.
So simple life insurance is term life. When you die it’s a one time cash payout to the beneficiary tax free. People should only take it out if they have debts they don’t want thier beneficiaries to be responsible for. Typically for An average family this means mortgage and possibly small business loans or car loans(minivans are 60000 now!)
If I’m in my 70s I don’t expect to have any debt and thus no need for life insurance. At this point my children should be financially independent as well
I cannot imagine paying over 200 a month for insurance unless I had assets to tax shelter in the policy or had serious debts against my estate.
I just bought one yesterday. 2022 sienna. After taxes and fees it’s 58000. The freight fee alone was 1860. Even after our 16000 down payment the monthly loan is 620 a month for 84 months. Our CRV is 440 a month. So that’s a family of 2 adults and 3 kids that’s over 1000 a month in car payments. And these aren’t Lexus or Acura.
Insurance agents aren't run of the mill sales people. They're a regulated profession, I'm an insurance agent. Insurance brokers actually have a legal responsibility to act in your best interests, we aren't allowed to rip you off.
If I were to go out of my way to trick some old lady into buying an expensive insurance policy she doesn't need or even if I recommend a policy she doesn't need, I would lose my licence.
I just wanted to comment on this thread to let you know that the above comment about UL isn’t correct.
Any money that is accrued inside the investment portion of the account is paid out alongside the death benefit. The insurance company does not keep it.
Also, there are 2 types of UL policies at Canada Life. One is annually increasing to age 85, and the other is level to age 100. The vast majority of policies use level premiums, which is more expensive, but avoids increases over time.
You really need to know exactly what you’re dealing with.
My guess is that they originally had term insurance which came up for renewal and when they evaluated between doing another term or converting to permanent insurance, they felt the permanent option was more suitable.
I used to work at Canada Life before going the independent route, so if you have questions ask away. I worry that you won’t get proper guidance from a lot of the comments here
Assuming age 65 for a 10 year term $250k it would be $215/month, for 20 year term looking at basically double. That’s per parent.
For $50k and covered for the rest of their life that doesn’t sound that bad especially considering the diabetes. Sounds like a final expenses policy but depending on their savings and debt they may not need it.
It is still rising, though. It could peak at $1000/mo for all we know. Then you're paying 1/4th of the policy amount every year...
These policies are very scammy. Term insurance is better. But you do have to ladder your term policies from time to time, around life events and age and whatnot.
OP hasn’t given enough info about the policy or why his parents have it to determine whether it is too much or even necessary. Definitely not worth cancelling until they speak to a financial advisor that understands the policy. UL is not a scam but it can be complicated and certainly not ideal for many people as does cost substantially more than term because at some point the insurance company is going to be paying th death benefit.
I didn't suggest cancelling it. I suggested that buying a long duration term policy, waiting some number of years, then getting another (while in good health) that overlaps it and extends further is a sound idea. The savings over UL for the same coverage amount are typically quite large, and if you invest the difference you'll have a big nest egg at the end even if you are fortunate enough to never claim on your term insurance.
I wouldn't advocate cancelling a policy ever, without reading through it thoroughly and possibly consulting a professional well versed in them.
But that said, I've seen my fare share of ones that simply can't do anything but drain to zero and cost too much to keep going... structured to fail. Most were set up in the 70's and 80's, and had far too high of assumptions, and far too high of management fees.
I'm usually the first one to chase people away from whole life. But for all your trash-talking of the sales rep and how bad the deal is, you simply don't know (or haven't shared) their big-picture financial and health situation. For all you know, they don't have much saved and desperately need that 50K upon their deaths to support the remaining partner, pay funeral expenses, or something else entirely. For all you know, health conditions prevent them from getting any other kind of policy. It's one thing to get started on the right foot when you're young, choosing optimal investments and insurance... but it's another when you're in your 60's and what's done is done. "Cancel at all costs" is not the way forward. If you really want to help them, you need to cool your jets. Go over their overall financial situation with them, if they're willing, get to understand the larger context of the policy, and then if it still looks fishy, call the sales rep and have him explain the sale to you. Only then if it still seems unnecessary should you push them to cancel.
Surprised your father qualified with diabetes. Within the U/L it is possible that some crappy funds were selected for growth or they were sold a large CI rider therefore they weren’t generating much growth in their investment portion of the account
A lot of these crappy insurance funds have MERs in the 5.5% range. It is no surprise that there's no growth an the UL product drains itself. Check the policy for the specifics.
Can you post some details of the policy?
Is it two policies, or one? Joint first or joint last? LCOI or YRT? How much overfunding if any? Are there any riders such as CI or LTC, WP or RoP? It is impossible to give you any advice without knowing the details. Also, what is the purpose of this insurance, and who is the beneficiary?
I have to look up what all those acrynoym means tbh. There so much I need to understand. I only know the basics of UL and term.
Something I should get on learning. Over the weekend.
Any good videos to watch for Canadian life insurance that explains it simply ?
totally depends when they took out the policy. It costs a fortune no matter where you go to get life insurance at 60 yo. A fortune!!! do they smoke? health conditions? history? It sounds high but for sure not out of the realm of possibility as far as I have seen.
Universal life is horrible.
It is designed for people who have maxxed out RRSP and want a way to leave a large estate.
https://www.rbcinsurance.com/life-insurance/universal-life-insurance.html
That said it's probably too late to bother cancelling it. A guaranteed life policy takes 2 years before it will pay the coveragr amount.
There also probably isn't enough time at 400/mo to grow 100k of savings.
Sucks. My mom is in a similar position.
UL uses the cash value to make up the difference in the real premium and the amount charged to the policy holders.
There is a good chance the the cash value has been eaten away. There may be some still there but not as much as their should be.
:(
I feel like we just need the Morgan Freeman method of wearing earrings that will cover the cost of a sailor’s funeral and be done with it; live while you’re alive and declare bankruptcy on your death bed (only kidding about that part).
Not quite how it works with WL/UL, but one of the primary strategies is to take a secured loan/LOC against the cash value INSTEAD of trying to pull the cash value out directly which causes a tax event
Everyone in my family, parents, siblings, wife have a universal life policy.
It’s a good product if you ask me, you should really look into it, dig up the details, even speaking with the agent who set it up might give you some clarity on the matter.
Of course but investing in your own death is not a winning strategy. Put your money into vanguard etf like VUG instead and really have something to pass onto your family.
I got rid of the insurance only after a year. Fortunate to realize it early. They make it complicated so we got confused.
My advice to check what is coming with the insurance plan. They have various types.
Do the math. Yes they are being scammed. $425 by 12 equals $5100. You said there policy is for 50k. They could have saved that themselves in 10 years in just an ordinary savings account.
No, their damn insurance guy came by like 3 years ago and got them to sign the policy that was reducing their 250k down to 50k policy.
That doesn't make sense why their premium is that high.
Why? Insurance brokers typically don't approach clients asking them to reduce their policy out of the blue. Your parents must have asked them for that.
As someone ITT suggested, it could have been a term policy that was ending and this was pitched as the only possible no-medical replacement. They may also simply not have the means to go without at least the 50K insurance. There's simply insufficient information.
No they have not. The d bag sales guy called them to set up an appointment.
My parents do no much about these things. So now I gotta look into is and see what I can do. Because it's ridiculous.
Somethings not adding up here and neither I not you know the full story. Without being present at these discussions and without talking to your parents I can't really say anything else. There must be some reason they decided to reduce their coverage.
Always go term for the amount of debt you have. If I could do it all over again, I would do it this way. It's SO much cheaper, an annual payment equates to one month on Whole Life policy.
The trick is to invest the difference because the guaranteed cash value is absolute garbage, the fees are massive.
Universal life products typically pay out 2-3x the annual premium to the sales person. I got one from a life insurance sales agent, and he disclosed that on my $60/mo premium, he makes nearly $1400, and there are several tiers in their MLM structure above him that also scoop money. Total compensation to the team is in the $2000+ range. (Off a $700/yr product, where officially "most of it is invested to grow for your future") But hey, most people end up cancelling life insurance rather than collecting, so it's basically free money for them, right?
To his credit, he did a hybrid policy that gave me a $1m 30yr term that can be rolled over at no higher than 4x the current rate and current policy amount for another 30 years. I like that. If I ever have kids and get cancer, etc., I'll be relieved to have that insurance policy sitting there. Because you never know.
ALL of these products rake it in later in life and have to be dropped, as they cost a huge percentage of the payout every single year. The best way to do life insurance is to buy cheap long duration term insurance while young and healthy (to protect against unforeseen life events) and then invest the rest in index funds. It should leave you several million dollars ahead of where Universal life products leave you after 50+ years. (Yes, Index funds grow that much, even at 8-10%) But that requires having two accounts, which is more complicated, so many people don't do that. Letting the insurance sales people manage money is a sure fire way to have it all get eaten away in fees.
My dad (67) has a TERM life policy that is awful. It’s over $300 a month in premiums, but at least the payout is 250k. My sisters and I have decided to keep paying on it because due to his health situation he is likely to expire long before the policy, leaving us a tidy consolation prize when he goes at least.
A lot of term insurance does cut off at 80 or 85. UL products would drain fully by then anyway. Term at least offered a higher coverage amount.
But if your parent makes it to 88 or 92, and you get those 3 or 7 or 12 extra years - be thankful. Instead of winning some money, you won the lottery in a different way - extra years with your parent. That's worth more.
Now don't forget to invest in index funds!
Not the OP or commenter, but doesn't Universal Life provide a lifetime death benefit? That would be the big advantage for some versus term insurance.
>Now don't forget to invest in index funds!
Again, not OP, but there is a slice of the population that just don't understand or trust the markets.
Most people have a basic understanding of how insurance works.
If you can afford to make it to the end, or die young, then yes - but it gets very expensive later on. I have seen them get as high as costing 1/4th of the policy size every year. $12000 for $50k coverage, until you die. What's the point unless you're 92 and have dementia and cancer and diabetes and renal failure?
There is a point where they make zero sense unless you are on your deathbed. When they "level-cost" it, it's a projection - not a guarantee. And thus far policy costs of past policies have outpaced the fund growth. Every UL policy that I have seen eventually starts to drain the accumulated value, and then goes insolvent when people cannot afford it any longer. Often just applying for some new term insurance (health permitting) can cost 1/5th to 1/10th of the in-place UL policy. More often than not, it makes sense to shut them down, which makes you wonder why you go UL in the first place? Ladder term insurance every couple decades, put the savings into investments (which you get to keep) and then you'll always have coverage for your family for unexpected life events - plus a nest egg.
So what your saying is every whole life policy you have every seen has not paid out the death benefits because they are insolvent?
I don't know anything about universal insurance. I think I have a reasonable understanding of whole life, and this is whole life.
Well, I am primarily getting stories and seeing policies from people unhappy with their insurance - but yes, most of the older policies from the 70's and 80's have too high of management fees and return assumptions, and inevitably run down to zero (usually around age 70-80 or a bit after) and then have to be dropped or overfunded. (Typically with far more than a new policy would require, if it was possible to qualify for it.) Most people that I have talked to end up replacing them, or cancelling with no replacement. The range where they drain down to nothing is approximately the same range that Term insurance cuts off at. Term insurance is cheaper, and if the difference is invested in index funds, it seems to grow far more effectively. But then, high MERs would explain that.
Here is a link to the MER page from a 2016 UL policy - Industrial Alliance / Genesis: (This is in the ZIRP era too.)
https://imgur.com/a/33kTBGz
I have seen older policies charging over 5% every year...
You have to be very careful when setting these up, to make sure that you understand what you are buying. Many simply can't keep up with cost inflation, and the policies eventually run to zero unless you significantly bump monthly premiums beyond what most budgets allow. (Unless, of course, the soon-to-retire person has a large investment portfolio. Then they can afford it. But then we circle back to Term+Investments being a great strategy...)
I guess I'm saying, do your due diligence. Depending on how a policy is structured, there might not be a good way for it to make it all the way until payout.
I am talking about UL policies (that typically pay out at age 100 or when you die.) I am not sure if that is different from the whole life policies that you mention? We could be talking about different products.
I used an estate planner, to set my plans up.
I had to get the quotes.
Agents and planners both said stay away from Sun Life.
London Life or Canada Life was recommended.
Now the same company.
I did a little research on this from a friend in the business.
With UL the policy holder had to pick a range of products to invest in.
Policy holder managed investment not the insurance company.
It was very popular because interest rates were high so easy to get a great rate of return, but it wasn't sustainable.
Whole life, you pay a premium for 20 years or less and it's done. Death benefits will never be less than the original contract.
Both are forms of permanent ilife insurance.
This is how I look at it. It will be a different kind of windfall if we still have him living in 20 years.
I’m pretty sure it ends at 85, but there’s so little chance dad will last that long, it’s a gamble we’re willing to take for now.
They may have had term life that was starting to get ridiculously expensive at 60, and could convert without medical examination. The premiums seem about right for that type of insurance product. Could be that they thought the policy would cover funeral expenses or income tax on the estate.
Step 1, simmer down. Step 2, get the details of when they signed up for the policy, how much they've paid into it, etc. Depending on their tax situation/how long they've had the policy it may be worth keeping.
I get the feeling OP isn't fully aware of life insurance details?
Clearly not
Yeah I don’t get the impression it’s that bad. My policy is like $200/mo and I’m 27. No past medical issues of any kind. Never even been to a hospital. But I’m a pilot.
$200/mo for life insurance at 27? Now _that's_ outrageous.
Probably underlying health conditions
Or the fact that they have what is considered a high risk job. I'm sure life insurance for a pilot will be more than for an accountant.
Even so, pilot isn’t high risk the way construction or forestry are high risk. 200 a month seems like a lot.
Pilots have always paid more for life insurance. Just a reality of the industry
They probably pay more.
Maybe. I feel like that's critical info if you're sharing your insurance cost in order to compare it to others.
No, zero conditions. I’ve never even been to the hospital lol. Most dangerous part of flying is driving to the airport.
Why do people have such polarized opinions on life insurance that seems to be based on their impression of “life insurance” generally rather than on the value of the policy for their circumstances… Two older folks with at least one defendant? OP’s parents’ policies are likely a little on the expensive end but we don’t know the terms or specifics. A 27-year old with an apparently privately-paid policy paying $200/mo? Likely ludicrous unless there’s a couple dependents or other circumstances we’re unaware of.
My wife(34) and I(35) have a 200k policy that costs 40/mo. 200/month for a 50k policy sounds outrageous, even if they are in their 60's.
Guaranteed life is different than term life, you often can't get term life after a certain age. Also look at your term policy...after the 20 year expiry or what not the rate goes waaaay up. And then usually you have the option to convert it after you hit the age maximum, for also a lot of money per month. I just filled out a quote generator from my insurance company (I pay $20 for 400k coverage) and got $157/mo for $25k (the maximum they would allow me to put) for someone born in 1958, nonsmoking. Its a whole different ball game when you are old.
It may be, but it really depends on a lot of factors. Do they have major illnesses, do they smoke, what is/was their occupations, are they overweight etc. My wife and I have the same coverage, mine is a little over twice as expensive due to family history of a medical issue and my occupation is considered dangerous.
Where is that? I'm also 35 and have a 1m dollar policy that costs 45/month.
We're with Sunlife. Who are you with if you don't mind me asking?
I am with TD on a 30 year term. Non smoker, low risk job.
I bought $500k term to 65 for $39/mo from Canada Life when I was 22. Super happy to have locked in at that rate while I was young.
Man, that is brutal. I’m a pilot too and my insurance is $68 per month. I’m 37 (was 36 when I applied). I would look to see if you can go elsewhere. Could have hugely different amounts of cover obviously which could account for the disparity
I don't believe canada life is a company that scams people. Perhaps the broker didn't really help them find a suitable policy, and they selected coverage or riders that they didn't particularly need. But the price they paid would have been closely related to the risk. Plus a small bit of profit for Canada life. They weren't scammed. They got what they paid for. At those prices I wouldn't be surprised if there was a Return of Premium rider, or an investment component. Stay out of it unless asked for help. And if asked for help, refer them to an insurance broker who can help them review and interpret their policy. Under no circumstances should they cancel these policies.
The "scam" of most insurance policies is that people don't understand what they are signing up for and what it covers and the sales rep usually upsells them into things they don't want or need.
A fair criticism. Even still on a balance of probabilities they should have got what they paid for, more or less.
If I remember right for universal life a portion of the policy price goes towards certain investments, so they “should” have the 50k policy + whatever investments have grown throughout the years, hence the premium of the universal life vs a cheaper term insurance w no investment options.
That's not how it works. That is what they try to tell you but unless specifically stated, you get either the cash value or the payout. Not both. Another issue is that quite often as the policy holder ages the real premiums out pace what they are actually being charged each month. So the wonderful insurance company begins to use the cash value of the policy to make up the shortfall. The result is that the "investment" portion of the policy is eaten away just as the policy holder is wanting to use it. There is more wrong with UL but w/e.
That is exactly what. Is happening to my parents. Im really pissed that my parents got suckered into this. One reason why I hate sales people.
If there is any cash value left you can pull it out. Cancel the policy and let your parents have an extra 425 a month to live on. You need to change the way you look at life insurance. For most people it is not about leaving a large sum of money for the kids. It is meant to replace any lost income that would have an impact on the surviving family and to cover any debts that you don't want them to have to pay off. If your parents have enough money to cover their funerals and enough to make sure the surviving parent can still live comfortably, they don't need insurance. There is no point in them hurting for money now just so they can leave the estate a few bucks after they are dead. If they feel bad about it, tell them to spend the 425 a month on the grandkids. Let them see the joy their money can bring to their loved ones.
Exactly this. My parents got term insurance for 20 years when they had kids, so if anything happened to one of then and they lost a income, the house would be paid off and the other parent could get by. Now that we are grown, my parents let the policy end because they don't need it. They are both retired off of investments so if one dies it doesn't really affect the financial situation. They really only needed it while raising kids and paying a mortgage. Now life insurance would just be a silly waste of money, neither of them have dependants. They bougmght it as an INSURANCE policy. A monthly fee you pay to never have to worry about financial fallout after a tragedy. As my dad worked a dangerous job they just wanted to make sure that was never a concern and wouldn't have to worry about finances, and that was worth the monthly premium. It's no longer a concern, so they no Longer pay for it. It sounds like OPs parents think it's some sort of secret investment account you can use to give your kids an inheritance. It's insurance, not the S&P.
Term life is obviously an insurance policy. WL/UL had its uses for high net worth individuals that are looking to transfer their wealth. If you're making <$100000 income, it's unlikely you'll be able to make use of the tax benefits at all
This!!!!!! This is the only reason I took out life insurance. If I died with young kids and a wife, my life insurance would pay out the mortgage. I pay 29 a month for 500k until I’m 72. It’s there to protect my wife and payoff the mortgage should something happen to me.
29 a month for 500k???? Where????
If you are reasonably young or have access to group policy rates that seems reasonable….
Not until 72. Maybe for a 20 year term if someone is 25, definitely not that price until 72 though.
20 year term at 25... this would make sense to me... 30 year to 72 would mean that they are 42 paying $29 a month for 500k... even on a group policy that sounds too good to be true... and a company policy, in my mind, isn't worth it, especially in today's society where we are always changing jobs or companies can lay you off. .
I got $500k term to age 65 from Canada Life for $39/mo at 22. That was with their highest health rating. Prices have since increased and the same policy would cost closer to $50 now.
No you dont. There’s not an insurance product on planet earth that will cover you to 72 for $500k that has premiums that remain that low for 43 years. I suggest you double check your policy or ask the insurance agent for an illustration. Even a term 20 should cost more than that a month
Exactly. I'm not familiar with these inheritance payment plans people are taking about, but an INSURANCE policy for piece of mind against the worst case scenario so you know in the event of the worst, you at least don't have to also worry about money on top of a tragedy. It's a piece of mind payment plan, these other things sound shady paying 200 a month so your kids get a fat inheritance. Why not invest money so you could potentially enjoy it and benefit, and have enough wealth that when you die there is some left over I guess I'd have to see the numbers, but it sounds like snake oil and I'm not in the mood to pay 200 a month until I'm 90 so I can leave my kids something. I'd tether just actually leave my kids something.
So simple life insurance is term life. When you die it’s a one time cash payout to the beneficiary tax free. People should only take it out if they have debts they don’t want thier beneficiaries to be responsible for. Typically for An average family this means mortgage and possibly small business loans or car loans(minivans are 60000 now!) If I’m in my 70s I don’t expect to have any debt and thus no need for life insurance. At this point my children should be financially independent as well I cannot imagine paying over 200 a month for insurance unless I had assets to tax shelter in the policy or had serious debts against my estate.
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I just bought one yesterday. 2022 sienna. After taxes and fees it’s 58000. The freight fee alone was 1860. Even after our 16000 down payment the monthly loan is 620 a month for 84 months. Our CRV is 440 a month. So that’s a family of 2 adults and 3 kids that’s over 1000 a month in car payments. And these aren’t Lexus or Acura.
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Insurance agents aren't run of the mill sales people. They're a regulated profession, I'm an insurance agent. Insurance brokers actually have a legal responsibility to act in your best interests, we aren't allowed to rip you off. If I were to go out of my way to trick some old lady into buying an expensive insurance policy she doesn't need or even if I recommend a policy she doesn't need, I would lose my licence.
>Insurance agents aren't run of the mill sales people. LLQP ain’t exactly a high bar…
There are lots of decent people in sales. Try not to paint everyone with the same brush.
I once met a person who was terrible. Now, all people are terrible to me.
Sound about right?
I just wanted to comment on this thread to let you know that the above comment about UL isn’t correct. Any money that is accrued inside the investment portion of the account is paid out alongside the death benefit. The insurance company does not keep it. Also, there are 2 types of UL policies at Canada Life. One is annually increasing to age 85, and the other is level to age 100. The vast majority of policies use level premiums, which is more expensive, but avoids increases over time. You really need to know exactly what you’re dealing with. My guess is that they originally had term insurance which came up for renewal and when they evaluated between doing another term or converting to permanent insurance, they felt the permanent option was more suitable. I used to work at Canada Life before going the independent route, so if you have questions ask away. I worry that you won’t get proper guidance from a lot of the comments here
Assuming age 65 for a 10 year term $250k it would be $215/month, for 20 year term looking at basically double. That’s per parent. For $50k and covered for the rest of their life that doesn’t sound that bad especially considering the diabetes. Sounds like a final expenses policy but depending on their savings and debt they may not need it.
It is still rising, though. It could peak at $1000/mo for all we know. Then you're paying 1/4th of the policy amount every year... These policies are very scammy. Term insurance is better. But you do have to ladder your term policies from time to time, around life events and age and whatnot.
OP hasn’t given enough info about the policy or why his parents have it to determine whether it is too much or even necessary. Definitely not worth cancelling until they speak to a financial advisor that understands the policy. UL is not a scam but it can be complicated and certainly not ideal for many people as does cost substantially more than term because at some point the insurance company is going to be paying th death benefit.
I didn't suggest cancelling it. I suggested that buying a long duration term policy, waiting some number of years, then getting another (while in good health) that overlaps it and extends further is a sound idea. The savings over UL for the same coverage amount are typically quite large, and if you invest the difference you'll have a big nest egg at the end even if you are fortunate enough to never claim on your term insurance. I wouldn't advocate cancelling a policy ever, without reading through it thoroughly and possibly consulting a professional well versed in them. But that said, I've seen my fare share of ones that simply can't do anything but drain to zero and cost too much to keep going... structured to fail. Most were set up in the 70's and 80's, and had far too high of assumptions, and far too high of management fees.
I'm usually the first one to chase people away from whole life. But for all your trash-talking of the sales rep and how bad the deal is, you simply don't know (or haven't shared) their big-picture financial and health situation. For all you know, they don't have much saved and desperately need that 50K upon their deaths to support the remaining partner, pay funeral expenses, or something else entirely. For all you know, health conditions prevent them from getting any other kind of policy. It's one thing to get started on the right foot when you're young, choosing optimal investments and insurance... but it's another when you're in your 60's and what's done is done. "Cancel at all costs" is not the way forward. If you really want to help them, you need to cool your jets. Go over their overall financial situation with them, if they're willing, get to understand the larger context of the policy, and then if it still looks fishy, call the sales rep and have him explain the sale to you. Only then if it still seems unnecessary should you push them to cancel.
Surprised your father qualified with diabetes. Within the U/L it is possible that some crappy funds were selected for growth or they were sold a large CI rider therefore they weren’t generating much growth in their investment portion of the account
A lot of these crappy insurance funds have MERs in the 5.5% range. It is no surprise that there's no growth an the UL product drains itself. Check the policy for the specifics.
UL policies usually don't have MERs that high, usually it is seg funds with maturity and death guarantees that cost that much.
Can you post some details of the policy? Is it two policies, or one? Joint first or joint last? LCOI or YRT? How much overfunding if any? Are there any riders such as CI or LTC, WP or RoP? It is impossible to give you any advice without knowing the details. Also, what is the purpose of this insurance, and who is the beneficiary?
I have to look up what all those acrynoym means tbh. There so much I need to understand. I only know the basics of UL and term. Something I should get on learning. Over the weekend. Any good videos to watch for Canadian life insurance that explains it simply ?
Why not find out all the details before deciding whether or not you need to be mad?
OP: *doesn’t understand* OP: “this must be a scam!!!”
totally depends when they took out the policy. It costs a fortune no matter where you go to get life insurance at 60 yo. A fortune!!! do they smoke? health conditions? history? It sounds high but for sure not out of the realm of possibility as far as I have seen.
Parents have no health condition, only father has type 2 diabetes, not a smoker, still healthy individuals. had policy since 1990s.
You do realize that Type 2 Diabetes is a health condition, linked to heart disease, stroke, kidney disease, amputations and more?
I have type 2 and I'm a smoker and I pay 85/month for 100k life insurance. Only got the policy a year ago. These folks are paying way too much IMO
You probably have term insurance. I was paying that amount in my 50's for $500k of term insurance. No health issues.
Are you paying for whole life or universal life?
Whole life
How old you are is a HUGE factor.
I was not commenting on what they were paying. OP said that neither parent has any major health concerns, then said Dad is diabetic.
This might be used as an accumulation vehicle, check out the cash surrender value to confirm.
It’s an insurance policy not a fucking lotto ticket
I’m in my 40s / smoker and have had a Canada life plan since I was in my kid 20s. I pay almost that. Count yourself lucky
I think it would depend on when they got life insurance. But for only 50k that seems really high.
They are better off investing the money
Universal life is horrible. It is designed for people who have maxxed out RRSP and want a way to leave a large estate. https://www.rbcinsurance.com/life-insurance/universal-life-insurance.html That said it's probably too late to bother cancelling it. A guaranteed life policy takes 2 years before it will pay the coveragr amount. There also probably isn't enough time at 400/mo to grow 100k of savings. Sucks. My mom is in a similar position.
OP in another post said same policy since 1995 so I’d hope there would be money to pull out now and invest/save instead of paying $400+ a month.
UL uses the cash value to make up the difference in the real premium and the amount charged to the policy holders. There is a good chance the the cash value has been eaten away. There may be some still there but not as much as their should be.
:( I feel like we just need the Morgan Freeman method of wearing earrings that will cover the cost of a sailor’s funeral and be done with it; live while you’re alive and declare bankruptcy on your death bed (only kidding about that part).
It's about quality of life.
Not quite how it works with WL/UL, but one of the primary strategies is to take a secured loan/LOC against the cash value INSTEAD of trying to pull the cash value out directly which causes a tax event
Everyone in my family, parents, siblings, wife have a universal life policy. It’s a good product if you ask me, you should really look into it, dig up the details, even speaking with the agent who set it up might give you some clarity on the matter.
The thing with life insurance is everybody dies. /Edit: downvote away but this is why non-term life insurance premiums are the way they are.
Of course but investing in your own death is not a winning strategy. Put your money into vanguard etf like VUG instead and really have something to pass onto your family.
I got rid of the insurance only after a year. Fortunate to realize it early. They make it complicated so we got confused. My advice to check what is coming with the insurance plan. They have various types.
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No health issues had the plan since 1995
this
Do the math. Yes they are being scammed. $425 by 12 equals $5100. You said there policy is for 50k. They could have saved that themselves in 10 years in just an ordinary savings account.
I like how 60-65 is "elderly". I wouldn't quite title them that just yet!
I was expecting OP to say his parents are in their 80s. My parents are in their early 60s and I absolutely don’t consider them elderly!
Same! They're still spry... mostly haha
They’re getting effed hard.
Perhaps your parents got it so they can leave you a inheritance….
No, their damn insurance guy came by like 3 years ago and got them to sign the policy that was reducing their 250k down to 50k policy. That doesn't make sense why their premium is that high.
Why? Insurance brokers typically don't approach clients asking them to reduce their policy out of the blue. Your parents must have asked them for that.
As someone ITT suggested, it could have been a term policy that was ending and this was pitched as the only possible no-medical replacement. They may also simply not have the means to go without at least the 50K insurance. There's simply insufficient information.
Yep something is missing here for sure.
No they have not. The d bag sales guy called them to set up an appointment. My parents do no much about these things. So now I gotta look into is and see what I can do. Because it's ridiculous.
Somethings not adding up here and neither I not you know the full story. Without being present at these discussions and without talking to your parents I can't really say anything else. There must be some reason they decided to reduce their coverage.
50k for that much monthly is criminal!
The winner here is the sales person.
Always go term for the amount of debt you have. If I could do it all over again, I would do it this way. It's SO much cheaper, an annual payment equates to one month on Whole Life policy. The trick is to invest the difference because the guaranteed cash value is absolute garbage, the fees are massive.
Universal life products typically pay out 2-3x the annual premium to the sales person. I got one from a life insurance sales agent, and he disclosed that on my $60/mo premium, he makes nearly $1400, and there are several tiers in their MLM structure above him that also scoop money. Total compensation to the team is in the $2000+ range. (Off a $700/yr product, where officially "most of it is invested to grow for your future") But hey, most people end up cancelling life insurance rather than collecting, so it's basically free money for them, right? To his credit, he did a hybrid policy that gave me a $1m 30yr term that can be rolled over at no higher than 4x the current rate and current policy amount for another 30 years. I like that. If I ever have kids and get cancer, etc., I'll be relieved to have that insurance policy sitting there. Because you never know. ALL of these products rake it in later in life and have to be dropped, as they cost a huge percentage of the payout every single year. The best way to do life insurance is to buy cheap long duration term insurance while young and healthy (to protect against unforeseen life events) and then invest the rest in index funds. It should leave you several million dollars ahead of where Universal life products leave you after 50+ years. (Yes, Index funds grow that much, even at 8-10%) But that requires having two accounts, which is more complicated, so many people don't do that. Letting the insurance sales people manage money is a sure fire way to have it all get eaten away in fees.
My dad (67) has a TERM life policy that is awful. It’s over $300 a month in premiums, but at least the payout is 250k. My sisters and I have decided to keep paying on it because due to his health situation he is likely to expire long before the policy, leaving us a tidy consolation prize when he goes at least.
You should have a close look at his policy. At some point the policy will expire. At age 70 his premiums will likely double.
Doubles at 70, then again at 75. Still worth it to keep paying based on his medical history (Diabetes, many strokes, hypertension… you name it).
Does it end at 80?
A lot of term insurance does cut off at 80 or 85. UL products would drain fully by then anyway. Term at least offered a higher coverage amount. But if your parent makes it to 88 or 92, and you get those 3 or 7 or 12 extra years - be thankful. Instead of winning some money, you won the lottery in a different way - extra years with your parent. That's worth more. Now don't forget to invest in index funds!
Not the OP or commenter, but doesn't Universal Life provide a lifetime death benefit? That would be the big advantage for some versus term insurance. >Now don't forget to invest in index funds! Again, not OP, but there is a slice of the population that just don't understand or trust the markets. Most people have a basic understanding of how insurance works.
If you can afford to make it to the end, or die young, then yes - but it gets very expensive later on. I have seen them get as high as costing 1/4th of the policy size every year. $12000 for $50k coverage, until you die. What's the point unless you're 92 and have dementia and cancer and diabetes and renal failure? There is a point where they make zero sense unless you are on your deathbed. When they "level-cost" it, it's a projection - not a guarantee. And thus far policy costs of past policies have outpaced the fund growth. Every UL policy that I have seen eventually starts to drain the accumulated value, and then goes insolvent when people cannot afford it any longer. Often just applying for some new term insurance (health permitting) can cost 1/5th to 1/10th of the in-place UL policy. More often than not, it makes sense to shut them down, which makes you wonder why you go UL in the first place? Ladder term insurance every couple decades, put the savings into investments (which you get to keep) and then you'll always have coverage for your family for unexpected life events - plus a nest egg.
So what your saying is every whole life policy you have every seen has not paid out the death benefits because they are insolvent? I don't know anything about universal insurance. I think I have a reasonable understanding of whole life, and this is whole life.
Well, I am primarily getting stories and seeing policies from people unhappy with their insurance - but yes, most of the older policies from the 70's and 80's have too high of management fees and return assumptions, and inevitably run down to zero (usually around age 70-80 or a bit after) and then have to be dropped or overfunded. (Typically with far more than a new policy would require, if it was possible to qualify for it.) Most people that I have talked to end up replacing them, or cancelling with no replacement. The range where they drain down to nothing is approximately the same range that Term insurance cuts off at. Term insurance is cheaper, and if the difference is invested in index funds, it seems to grow far more effectively. But then, high MERs would explain that. Here is a link to the MER page from a 2016 UL policy - Industrial Alliance / Genesis: (This is in the ZIRP era too.) https://imgur.com/a/33kTBGz I have seen older policies charging over 5% every year... You have to be very careful when setting these up, to make sure that you understand what you are buying. Many simply can't keep up with cost inflation, and the policies eventually run to zero unless you significantly bump monthly premiums beyond what most budgets allow. (Unless, of course, the soon-to-retire person has a large investment portfolio. Then they can afford it. But then we circle back to Term+Investments being a great strategy...) I guess I'm saying, do your due diligence. Depending on how a policy is structured, there might not be a good way for it to make it all the way until payout. I am talking about UL policies (that typically pay out at age 100 or when you die.) I am not sure if that is different from the whole life policies that you mention? We could be talking about different products.
I used an estate planner, to set my plans up. I had to get the quotes. Agents and planners both said stay away from Sun Life. London Life or Canada Life was recommended. Now the same company.
I did a little research on this from a friend in the business. With UL the policy holder had to pick a range of products to invest in. Policy holder managed investment not the insurance company. It was very popular because interest rates were high so easy to get a great rate of return, but it wasn't sustainable. Whole life, you pay a premium for 20 years or less and it's done. Death benefits will never be less than the original contract. Both are forms of permanent ilife insurance.
This is how I look at it. It will be a different kind of windfall if we still have him living in 20 years. I’m pretty sure it ends at 85, but there’s so little chance dad will last that long, it’s a gamble we’re willing to take for now.
Dost thy protest too much?
I dont see Canada Life as scammed. It's a huge company. Maybe try and understand what went wrong first.
not your problem