The word 'insurance' is more likely
than almost any other to strike fear in the hearts of
physicians. And with reason. No other financial topic
is as mind boggling. Should you have the misfortune
of finding yourself alone with a life insurance salesperson
you'll quickly come to feel that you've been led into
the murky woods and that you'll never find your way
out.
Beware of anything and everything
you're shown from 'comparison charts' to 'illustrations'
to 'projected returns', many of the latter of which
are based on the go-go days of the stock market in the
late 90s. What to do?
Get independent advice.
This means truly independent advice, advice you pay
for, not the 'free advice' that comes from someone who
is trying to sell you something — like an insurance
policy — on commission.
Finding such an animal isn't easy.
Only 10% of the members of the Canadian Association
of Financial Planners (www.cafp.org)
claim to be independent and not all of these deal with
insurance. The best place to begin looking for a 'fee-only'
insurance advisor is with your accountant or with a
colleague who can recommend such services. You can try
the web but be forewarned, looking for a fee-only Canadian
insurance advisor is akin to finding a Bloc Quebecois
member in the Liberal Cabinet.
Know what you want If you
can't find a fee-only advisor, then figure out what
insurance you want on your own — before you meet
with the insurance sales person.
Don't be mislead by a 'broker'
An insurance broker is just like a salesperson who works
for a single company. In theory, a broker can shop around
and get you the best deal. In practice, as current hearings
into the industry in the US have shown, the industry
is all about extracting the most out of the most. Even
'honest' brokers have been shown to deal with only a
handful of companies, usually those that pay them the
highest commissions.
Insurance isn't savings
Insurance is often likened to a bank account, an 'investment,'
an annuity. It isn't, it's insurance.
Buy term insurance Term
insurance offers insurance only, no savings. You buy
it for a 'term,' say 10 years, you pay a premium every
year and if you die before the term is up, your estate
receives the proceeds. Because this kind of insurance
is straightforward you can compare prices on the internet.
Go to www.lifeinsurancequote.com,
click on Canada, fill in the boxes and you're away to
the races. The range of quotes for essentially the same
policy is disturbing. For example the annual premium
for a $500,000, 10-year term policy for a 45-year-old
man in 'preferred' health, goes from a low of $560 to
a high of $1,255! Rates with AIG Life Insurance of Canada,
a large firm, are shown as $635.
Beware of policies based on
tax-savings These often hinge on loans, which you
may not be able to get when you need the money. Phrases
that promise retirement income 'tax-free' are suspect.
A generous act You're not
buying life insurance for yourself, you're buying it
for your heirs. Ask yourself do they really need/deserve
it?
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