Common Misconceptions and Mistakes when buying term insurance

Posted by admin on January 14, 2010 in insurance

I am pleased to introduce my guest-post today from Brian Poncelet from Right Insurance. Brian is a Certified Finance Planner who specializes in Life Insurance, Critical Illness Insurance and Disability Insurance. Brian takes his time today to write about common misconceptions and mistakes when buying term life insurance.

MISTAKE: Failing to buy enough insurance while you are still healthy.

Medical evidence is required when you buy life insurance. This evidence usually consists of a list of questions to elicit your medical history, a brief exam by a nurse, a blood and urine specimen and possibly a report from your doctor. If at a later date you decide that you really need more coverage, the process begins again. If your health has changed you may have to pay higher premiums.

MISCONCEPTION: Cheapest is the best.

That term policy premium might be cheap in year one. But most term policies renew at regular intervals (every 10,20 years) and the renewal premium rises at each interval because it reflects your new age.

In general, a 10 year term policy is the cheapest but by year 13 it is actually more expensive than buying Term 20. In other words, if you think you need coverage beyond 10 years, it is better to chose a 20 year term now.

MISTAKE: Failure to understand your options

So on each renewal the premium rises at each interval as stated above. But you do have options. Most term policies include a free option to convert your policy to permanent coverage before age 65. Converting to permanent coverage make sense especially if you have had a change in health. Even better, you will not require a medical to convert.

The types of permanent coverage eligible for conversion usually include whole life and universal life but these also vary by company. If you buy term coverage do so with a company that offers several options for the converted policy.

MISCONCEPTION: Buying through the internet is cheaper (no commissions to be paid)

Insurance comparison services on the internet say “buy direct and save money”. The fact is, you cannot receive a discount in the price of life insurance by avoiding a life insurance agent. Sales charges and costs (such as commissions) are built into the premium that you pay for any life insurance policy that you buy. You will be paying those built-in charges regardless of where you buy the insurance. Finding and using a local life insurance agent will not cost you more than dealing with someone in another city or province by telephone or mail.

MISCONCEPTION: Association insurance has cheaper rates.

Associations include organizations such as universities, credit card companies and consumer groups like CAA. Sometimes association rates are cheaper but in many cases the rates go up every five years. Associations are like groups where several insureds are lumped together and pay a premium relative to the group being covered. Even where limited medical questions are asked, the premiums reflect the inability for the insurance company to fully assess individuals and the group like rates is charged. Association groups also may offer very limited conversion opportunities. Therefore if you cancel your credit card or if you are no longer a CAA member you coverage is cancelled.

As a smart consumer, obtain an individual insurance quote and compare the products for price, renewal options and conversion options.

MISTAKE: failure to understand that buying term is like renting life insurance.

Permanent (whole life) plans are more expensive in the early years but the premium stays the same for the duration of the contract. Because you pay more in the early years, you have some equity (cash value) in the policy. If you decide to cancel the contract you get the cash value back. However, you have no equity in a term policy. You pay premiums applicable to your age and this rate rises at every scheduled renewal. Because you are paying the true cost of coverage, there is no equity in the policy. If you cancel the coverage 10 years down the road because the renewal rate is too expensive, then you walk away. Bottom line, you are renting coverage briefly and won’t have it when you need it or more importantly when your family needs it!

MISTAKE: paying your insurance premium on a monthly basis

The insurance company charges extra to those who pay monthly as they incur extra expenses to administer monthly payments. If you are able to pay the yearly premium it can save you up to 10%.

MISTAKE: paying extra for benefits (the frills) that you may never use

Waiver of Premium Benefit: the insurance company will waive the premiums if you become disabled. Few people understand that you must be totally disabled in order to be eligible. Also if you have term insurance the insurance company will usually pay only to age 65 while for some types of permanent insurance they will pay the premiums beyond age 65.

Guaranteed Insurability Option: In a nut shell you pay more now just in case you want to buy more insurance in the future without having to provide proof of health. It essentially insures your insurability. However, your premium for the new policy will be at current age rates. One more reason to buy all of the insurance that you need now and at your current age.

Accidental Death Benefit: This benefit guarantees that if you die in an accident, your beneficiary will receive an additional predetermined amount of money on top of the base policy amount Again, I’d say if you need accident coverage buy it rather than depending on an ADB rider hopefully supplementing the amount of coverage your family really needs now.

MISTAKE: buying coverage because no medical evidence is required.

This might sound appealing but in actual fact you will pay more for this insurance and the amount of coverage available will be limited. If you are healthy, take the time to prove it and pay premiums that truly reflect the good risk that you are.

MISCONCEPTION: the premium I see on the internet is what I get.

Insurance companies offer several classes of standard rates. Those in the top physical condition and with no risk factors will get the best rate. Premiums on the internet usually default to the top preferred category (the cheapest). However, keep in mind, only a certain percentage of applicants will actually qualify for the best rates.

MISCONCEPTION: waiting until you lose weight or stop smoking in order to get the best rate.

This is just procrastination. Yes, you may pay higher rates now but did you know that if you quit smoking or if you keep the pounds off for one year, you can apply to have your rate reassessed.

32 Comments on Common Misconceptions and Mistakes when buying term insurance

By Christina on January 14, 2010 at 5:35 am

Thanks for giving light to this.

By George on January 14, 2010 at 9:03 am

Regarding Term coverage, you write: “Bottom line, you are renting coverage briefly and won’t have it when you need it or more importantly when your family needs it!”

Yes, this is true – term coverage is “renting” life insurance. But you’re not renting it ‘briefly’ – most term policies are for 10 or 20 years, with an option to renew. To me, a decade is not a brief period of time.

20-year term policies make a lot of sense for parents of young children, who are the people most likely to have a high need for life insurance. If you die and have several dependents who depend on your income, life insurance can be incredibly helpful to allow them to continue their life (financially) as if you had never died.

After 20 years, though, your children will be adults and at least starting the process of becoming financially independent. At that point, unless your spouse is entirely dependent on your income, your need for life insurance is considerably smaller. By this logic, “renting” life insurance for the time you need it most is a very smart idea.

By Richard on January 14, 2010 at 10:41 am

All good, however I whole heartidly disagree with buying insurance with a conversion option. Especially when their are policies that go on to 35 years level (and I hear of some coming out now that will be out to 40 years).

The whole life policy you get, in order to keep it at your current premiums, would be a major reduction in coverage when you are at a state of needing the extra coverage. Also, the cash value build up usually takes 2-3 years BEFORE you see any of that equity (have to pay those commissions to the agent and all) as well as about 15 – 20 years before your “equity” exceeds what you’ve paid.

On another note, buying term insurance is NOT like renting. Especially since they can go out to age 95 (and some may start going out to 120). You don’t rent you car insurance do you? home owners? medical? so why consider that as what you are doing with your life insurance? Their are no permanant plans or cash value plans with virtually every other insurance product.

By Potato on January 14, 2010 at 11:57 am

“Because you are paying the true cost of coverage”

That sounds like an excellent reason to pick term over whole. Most people’s insurance needs change over their life — when you’re young and your kids have a whole lifetime of support needs ahead of them and you owe six figures on your house, you’d probably need a lot of insurance. By the time a 10- or 20- year term comes up your kids will be older and closer to being self-sufficient, the mortgage will be smaller, and you’ll have some financial assets saved up as well. So you won’t need the amount of coverage you signed up for the first time around.

“Sales charges and costs (such as commissions) are built into the premium that you pay for any life insurance policy that you buy. You will be paying those built-in charges regardless of where you buy the insurance.”

But what if I buy over the internet where there is no salesman to pay?

I imagine it’s like mutual funds: some products will have a high MER even if you buy them without a salesman, but others (e.g., e-series) will be cheaper over the internet.

By Kenny on January 14, 2010 at 12:48 pm

I disagree that you shouldn’t buy term (or that you won’t have it when you need it). As you age you need less and less insurance, so why not rent. You can always invest the difference and make more.

Also, I’ve run the numbers for my self (age 28) for Term 10 (renewable) vs. Term 20. By pretending I’m 10 years older now, and assessing my expected insurance needs in 10 years, I can estimate how much it should be to renew the 10 year policy. Using this calculation it appears much less expensive to purchase a T10 renewable over a T20.

By admin on January 14, 2010 at 12:56 pm

Potato: Most of the on-line insurance sites are run by an agent/broker or insurance companies that will assign you an agent/broker. Someone always gets paid the sales commission.

I am hoping Brian can answer the other comments raised. Thanks.

By Brian Poncelet, CFP on January 14, 2010 at 7:55 pm

Hi Guys,

Let me answer some of your questions about “renting”.
First of don’t get me wrong term has its place and coverage is important.

I am going to try to answer all questions/statements.

Richard, when you are looking at coverage for say 35 or 40 years after year 36 or year 41 and you die your family has zero. If you feel you need the coverage for that amount of time it makes even more sense to consider permanent. The company I think you are talking about is Primerica, which believes buy term and invest the difference.

One of the few companies that does not offer the conversion is Primerica. So my question is why not?

It’s like every car you buy has a spare tire and the car that that you want is being sold does not offer it and even costs more.

By George on January 15, 2010 at 12:15 am

“Richard, when you are looking at coverage for say 35 or 40 years after year 36 or year 41 and you die your family has zero.”

People typically look for insurance when they have kids, say at around age 25-30. Thirty-five to forty years later, that person is 60-65 years old, has kids that are grown and self-sufficient, and probably has no mortgage to pay. If the individual has saved a bit, he or she has probably has a decent nest-egg available. At that point in life, the person should be self-insured. The family doesn’t have “zero” when he/she dies – they have the remainder of the person’s estate after all debts are paid.

By Brian Poncelet, CFP on January 15, 2010 at 12:50 am

Kenny,

The one of the issues with term (I own some myself) is because it is a fixed amount through inflation over the years you own less in real dollars in the future. An example is $250,000 term policy @ 4% inflation in 20 years in the future, you really have $125,000 coverage in today’s money.

Your statement that you can get insurance insurance in ten years in the future may or may not be the case. Every time you want to continue your coverage means you have two choices renew at the higher rates the insurance company offers at much higher rates, or prove your health with a medical.

Over time some people put on weight get high blood pressure etc. This means a higher rating which means higher premiums. Even if you had some speeding tickets you may be rated. Generally I tell people if they think they need coverage for ten years or more, play it safe go with term 20.

By Brian Poncelet, CFP on January 15, 2010 at 1:56 am

George,

You made some good points. Since you said a decade is not a brief period of time, I will assume you are under 50!

The hope is over time people will have lots of assets and the need for insurance disappears. Sometimes this is the case sometimes not.

Here is some examples: Son and daughter going to university, which costs over $15,000 each, for 4 years. Parents will have to replace a car or two. RRSPs/pension is small, parents now in 50′s not able to save much over the next number of years because kids education.

People buying bigger houses (mid to late 30′s or 40′s) mortgage will not be paid off until late 50′s or early 60′s. Problems with small pensions/job changes or RRSPs (bigger mortgage tighter cash flow).

———–

Why permanent may help for retirement planning:

If one is teacher for example, at retirement you have several options if you are married.

One is when you die your spouse gets 60% of pension.

Or get a higher monthly payout, which is about 2% of gross income and spouse gets 50% of pension and a tax free lump sum, if you have permanent life insurance.

If one has open money you can buy an annuity pay very little taxes and get about same as getting a 7 to 8% gic or higher, also can get it indexed to inflation for life. If you die too soon the life insurance (permanent) will cover the lump sum lost to the insurance company. If your health is poor (and you got life insurance while you were healthy and younger) the monthly payout could be much higher.

Interestingly, the retirement seminars put on by fee only advisors, to people lucky enough to have a great pension, will talk about the importance of life insurance. Usually a little late for some people to do anything about it.

Or if one was smart and had permanent insurance, get 2% gross more money than above and leave the spouse with 50% pension plus tax free life insurance.

Some clients have pensions worth a million plus if they live a long life, but their kids get zero. Permanent insurance fixes that.

There really is no real easy answers. Each person is different. Term helps if you die too soon and gives a great rate of return if you die, this happens about 1%of the cases. Over time the insurance company keeps the money and is off the risk, once rates climb later in life. In many cases it may make sense to have a mix of both (term and permanent).

By Brian Poncelet, CFP on January 15, 2010 at 9:31 am

Richard,

The more I think about, “On another note, buying term insurance is NOT like renting. Especially since they can go out to age 95 (and some may start going out to 120)”
I have more questions for you.

Is this person buying term? Almost all term policies end at age 80.

If you can get coverage beyond (95 to 120) as you suggest, you can, what is the insurance company and what is the term? What age can they get this to go to age 95 to 120?

thanks,

Brian

By Richard on January 15, 2010 at 11:46 am

“Your statement that you can get insurance insurance in ten years in the future may or may not be the case. Every time you want to continue your coverage means you have two choices renew at the higher rates the insurance company offers at much higher rates, or prove your health with a medical.”

Wrong. That is only in most cases. There are very few companies that allow you to exchange your term policy out based on current age rate ONLY without having to show medical. As to why more don’t do it, I could only fathom because the companies care more about profits than their customers.

“Almost all term policies end at age 80.”

Everyone I’ve seen goes out to age 95. It is only the level period that ends. Some of the policies that are being designed now (don’t think any have been released yet) allow it to go out to age 120. Even heard of a few new ones (still in design I think) that offer max ISSUE age of 80 for 20 year terms.

“after year 36 or year 41 and you die your family has zero.”

If all they do is get insurance and don’t invest the difference from a permanent insurance policy, you’re right. For the sake of argument, let’s say there is a $100 difference for the same face amount. Take that $100/mo and invest conservatively at 10% (various funds of course). At the end of 35 years, that’s roughly $380k in CASH. If they averaged 12%, that would be over $600k CASH. If they up it to $300/mo and still average the 12%, that’s $1.9 MILLION. Um, I think the family can live on. Even with just $380k.

“One of the few companies that does not offer the conversion is Primerica. So my question is why not?”

Well, if the Primerica agent does what they say they are going to do, why should Primerica offer an option that is to the disadvantage of their clients?

By Brian Poncelet, CFP on January 15, 2010 at 3:23 pm

Richard,

I really don’t understand having a conversion is a disadvantage. Suppose a person buys a term 10/20 policy invests the difference a few years later he has cancer. He can convert that policy into a permanent one at his current age. With Primerica, my understanding is if he wants to keep the policy he has to pay the renewal rate which is much higher. As more time goes by this rate keeps climbing.

As an side, why do women pay the same rates as men (same age and health) when every other insurance company charges much less? Is this not a disadvantage?

By Richard on January 15, 2010 at 8:56 pm

“my understanding is if he wants to keep the policy he has to pay the renewal rate which is much higher.”

Incorrect. They can exchange their policies out for newer term policies based on current age and original class. IE, if they orig qualified for the highest class, even with cancer, they could exchange that policy for a new term policy of the same class based on current age.

In addition, the conversion will raise their rates to a point to where it may come down to a pay the insurance or pay medical bills. In my opinion, the conversion option was put in play in order to get people to drop coverage due to cost instead of having to pay out claims.

“why do women pay the same rates as men (same age and health) when every other insurance company charges much less?”

Despite the advantage to women, it is discriminatory none the less. Especially since people (both men and women) are living longer and the gap is shrinking. Second, Primerica uses banded coverage to allow for greater price breaks based on total coverage.

By Brian Poncelet, CFP on January 16, 2010 at 10:21 pm

Richard,

I don’t understand “Despite the advantage to women, it is discriminatory none the less.”

Lets look at some examples (quotes can be found on my website using compulife)

30 year old female (non-smoker) $500,000 term 20 Equitable $26.55/month
Primerica $56.05/month

Term 30
BMO $40.05/month
Primerica $67.45/month

Take any age female and Primerica is more expensive, how is that an advantage?

Even the male rates in many cases the rates are more with Primerica.

I want to comment on the conversion points you raised, but for now lets focus on the “advantage to women.” I don’t see it, but maybe you can help me cause, I don’t see any price breaks for women.

By Brad Davis on January 17, 2010 at 2:10 am

Another mistake is comparing only the first years rate. Some term policies rates do in-fact rise during the life of the policy (I’ve seen this on some group policies), while others are flat. Great discussion.

By Brian Poncelet, CFP on January 17, 2010 at 2:15 pm

Richard,

If someone has say a term 10 or term 20 policy has to get a medical, blood work etc., get the policy, later gets cancer, wants to get a new policy to say extend the term, you are saying they can do this without getting a medical with Primerica? If they buy a term 10 policy get cancer can they switch to a term 20 or term 30 policy with no medical?

With most insurance companies you can convert to a permanent policy without a medical. It’s is in the contract.

The statement “In my opinion, the conversion option was put in play in order to get people to drop coverage due to cost instead of having to pay out claims”

I don’t understand, because of health reasons I have converted a number of term policies for people to permanent, because they would be highly rated or declined if they wanted to get a new policy, or pay the much higher renewal rates. People keep the policy for life when they convert it, not drop it. Health problems change the way people think about life and life insurance.

By Brian Poncelet, CFP on January 17, 2010 at 2:24 pm

Brad,

You made a good point. “Another mistake is comparing only the first years rate. Some term policies rates do in-fact rise during the life of the policy (I’ve seen this on some group policies), while others are flat.”

Must group policies increase every five years on the persons 5th and 10th birthday.

Example 34 year old male would expect age age 35 to have an increase. Also when he turns 40, 45 50 etc.

Must group policies are such that you can not fix the rates for an extended period of time, or convert to permanent. Also, every one gets the same rate. So a female who is healthy will pay the same as one who may be a bit overweight. So the healthier you are the more you subsidize others in you age group at work.

By Richard on January 17, 2010 at 5:07 pm

“how is that an advantage?”

You misread my post. Although lower price is an advantage, it is still a discriminatory practice. I never said Primerica was cheapest or cheaper. And I’m not going to compare prices. Comparing on prices alone is the idiots way of buying things AND doing business. Price is only a major factor with the ABSENCE of value.

If you want to compete on price, go find a patsy to fight with.

@Brad
Most group plans are just ART (Annually Renewable Term) plans with no level period. Most term you buy is not “pure term,” they are level term. Level term is ART with a level period. When comparing policies, price should be one of the LAST things compared, it is important, but if you get 10x the value for 10-25 more/mo, would that be worth the money?

By Richard on January 18, 2010 at 1:20 am

“If they buy a term 10 policy get cancer can they switch to a term 20 or term 30 policy with no medical?”

No. I’m saying they can exchange their old term policy to a new one of what is available at the time (within the limits of the contract) without proving medical so long as they don’t increase coverage. Any increase would require a medical check ONLY for the additional amount.

I’ll use a story of a client from my office. Client was near the end of his level period, got diagnosed with terminal cancer, but had sufficient medial/personal funds to cover costs (thus not needing to activate the terminal illness rider), did the conversion to a new TERM policy WITH the SAME face amount without much increase in price (<$50/mo increase I believe). Policy was issued, 6 months latter he died. Primerica paid.

Or how about this one, a man was diagnosed with an inoperable tumor. His policy was an older one WITHOUT the terminal illness rider. Within 10 days of finding this out, a NEW policy was issued of the same face amount WITH the rider and the rider was activated. He was able to receive the treatment he needed and is still alive now.

A) Conversion to a permanent plan with the same face would require a higher premium than another term policy.

B) I know of no other company that would allow a client to basically add a rider then immediately activate it.

I'll throw one more in from my office. Had a client that was late on his payments. Had the check written and in the envelope ready to send. The day his policy lapsed, he was in a car wreck and passed on. Same day they found the check ready to go. Called the claims center and explained what had happened. Mailed the check in. Claim was paid even though the policy had lapsed. Not typical, but still true.

How many carriers do you represent that would allow any of the above? How many stories like that do you have? I've yet to have ANY agent tell me of a single case even remotely similar.

By Brian Poncelet, CFP on January 18, 2010 at 7:43 am

Richard,

Sorry if I misread your post. As I see it females pay much higher rates not by little but a lot! It is the same rates for males. I understand why you don’t want to compare prices, but why should females pay so much more when no other insurance company in Canada has this pricing problem with females? If you know of another insurance company that does this let me know.

In my article one key point was the ability to convert a term policy into a permanent one is built into the life insurance. This seem to be missing with the insurance company you are talking about.

People should be able to pay a reasonable price without one group (in this case)paying so much more for less coverage.

Let me give another example

Female born 01/18/1982 (regular health) 28 years old
term 20

Equitable $26.55/month
Western life $27.07/month
Canada Life $27.45/month
Primerica $54.63/month

For $1,000,000 coverage term 20
Here is what she can get:

Equitable $47.70
Manulife $47.99
Primerica $101.18

So double the coverage, more options for less money vs. the $54.63/month for only $500,000 of coverage.

If she wanted to be covered be covered for life. UL/T100

$500,000

Transamerica $96.25/month
Desjardins $98.03/month
BMO $99.06/month

So for a extra $45/month she could be covered for life. Using the idea with Primerica’s pricing buy term and invest the difference she would have $30,374 @10% in twenty years and no insurance.

Or take the difference of more options less cost (for the $500,000 term) and be about $21,000 better @ 10% rate of return.

“Price is only a major factor with the ABSENCE of value.”
I don’t know how this works for females, since they pay a lot more for less, plus less options to convert to permanent life insurance if they wish.

As an aside, I think the 10% rate of return you are talking about is high. Especially over the last 20, 30 years, unless you can tell me what stocks or funds you used.

Richard, it is good that you try to help people with your company but if you can, see if you can offer other companies to give more choice to your clients. Many years ago I was with Investors Group and had strong feelings just like you. The more you learn, the more you can help others.

By Brian Poncelet, CFP on January 18, 2010 at 12:46 pm

Richard,

Your point “..How many carriers do you represent that would allow any of the above? How many stories like that do you have? I’ve yet to have ANY agent tell me of a single case even remotely similar.”

Your story sounds strange, since the person dies in the car accident or shortly after. Then “they” find a cheque. What I don’t understand is why would you mail the cheque? Why not courier the cheque? Since there is a death claim, your sense of urgency seems missing. I don’t have any stories like that.

In the insurance contracts the grace period for payment of premiums is 31 days. So after the payment is overdue by 31 days the insurance company will allow another 18 days. During this period of 18 days the person is not covered, if the insurance company gets the cheque they are reinstated.

By Richard on January 23, 2010 at 12:13 am

“I think the 10% rate of return you are talking about is high. Especially over the last 20, 30 years,”

Really? The avg return in my office over the last 15 to 20 years has been 10 to 15%. I think 10% is actually quite conservative.

“I don’t have any stories like that.”

That’s quite common. I’ve actually heard more stories of other insurance companies finding reasons NOT to pay death claims instead of actually helping their clients. I also speak of the 9/11 incidents. Primerica hand delivered EVERY one of it’s legit death claims within a few days of the event. Most carriers had to be SUED to pay their claims 5 years later claiming reasons including suicide (for those that jumped), no body to verify, and activating the act of war clause.

I’ll be damned if I’m going to offer my clients a product from any company that has a track record of doing what is WRONG for the client. Be my guest and keep doing just that, Primerica will be happy to clean up your mess.

By Brian Poncelet, CFP on January 24, 2010 at 5:18 pm

Richard,

I don’t understand why Primerica charges more for females that the rest of the insurance companies and Guaranteed Insurability Option. (still waiting for an answer)

Here is another example:

female non-smoker preferred plus born 06/15/1985 (25 years old)

term 30 $500,000
Unity life $26.55/month
BMO $27.45/month
Primerica $53.20/month

term 30 $1,000,000
Unity Life $44.10/moth
BMO $48.65/month

So in this case a female can get double the coverage for less than Primerica with more options. How is that wrong?

By Richard on January 26, 2010 at 1:56 pm

Brian,

First, apparently you missed when I said “I’m not going to compete on price.”

Second, it’s DISCRIMINATION to price men and women differently. More so now that gap between men and women is shrinking.

Primerica’s policy allows for renewal/exchange to ANOTHER term policy WITHOUT proving insurability. Traditional term only allows conversion to a permanent plan that is typically too costly for the same amount of coverage or has to have coverage reduced to make it affordable.

Primerica also works to get people OUT of insurance, not keep them in it. Primerica is about putting more money into their clients pockets, not take more out of it.

By Brian Poncelet, CFP on January 27, 2010 at 3:07 pm

Richard,

You are trying to have both ways. The idea of buying term and investing the difference sounds great, but females pay in many ways double the rate than many, many insurance companies, for less coverage. So I understand why you don’t want to compete on price. In this case one can not covert the policy, so they get less features as well.

What you are suggesting is since you can only sell term (expensive for females compared to the industry in Canada) then this should be good enough for them. It’s like going to a hardware store a selling only hammers (pricey ones at that)but if your are a male you get a better deal. Does that seem fair?

Your comment “Primerica is about putting more money into their clients pockets, not take more out of it.”

This does not seem to apply females since they have less coverage for more money.

By Richard on January 27, 2010 at 9:17 pm

So let me get this straight Brian, you are FOR discrimination in pricing? While we are at it, lets add in different pricing for blacks, asians, mexicans, etc. Rate cops and military up due to increased risk, rate based on level of education? Why not. Best rates would be given to young white women with college degrees working as a secretary.

Sarcasm aside, it’s still discrimination to give lower rates to some and not others. The fact that the practice is still used today in a world where people are fighting for equality just shows how backwards the industry is.

Primerica uses banded coverage to allow for a discount of all members on the policy instead of just a discount to one.

In the end, it doesn’t really matter which way you feel is better. Keep doing what you are doing, you are keeping us in business. The industry KNOWS we do what is right and undercuts/undermines Primerica every chance they get. It’s a real shame. If they would do the same thing Primerica does, Primerica would get shut down from competition. Seriously. As it stands now, there is none. It has remained Industry vs Primerica for the last 33 years and I don’t see it changing anytime soon.

By Brian Poncelet, CFP on January 29, 2010 at 8:54 am

Richard,

The facts are women live longer than men so they pay less.
What Primerica is saying with their pricing is we will charge what we charge men. So women must pay more, for less coverage or less features.

If you’re going along with your 10/20 or 30 year term policy and become uninsurable, there’ll be no more buying a new term policy in 10/20/30 years. If your current policy has a conversion priviledge, you can trade it in for a permanent policy and get the same rates as someone who just qualified medically. And if you’re uninsurable you’re going to ‘want’ permanent insurance (it’s a different perspective you get when you realize you can’t get insurance anymore). So rather than being overly concerned with a product being ‘renewable’ because while most term plans are in fact renewable, few will want to actually take advantage of it, you should be very concerned that your product has a conversion priviledge. Do not buy a term policy that is not convertible!

Here is an other example from my web site using independent software

female born 29/01/1965 45 years old (regular health)

term 20 $250,000

Western life $37.49/month
RBC life $38.25/month
Primerica $66.03/month

Why should females pay more? This means even though females live longer they must pay more (with Primerica) have less coverage and less money for their families. That does not seem fair, when no other insurance company I know has this pricing policy in Canada.

By Richard on January 29, 2010 at 8:26 pm

“If you’re going along with your 10/20 or 30 year term policy and become uninsurable, there’ll be no more buying a new term policy in 10/20/30 years.”

I’ve already explained this but as a traditionally trained agent you don’t seem to read what matters, only what benefits you. With Primerica, once insured, they can exchange for a NEW term policy with Primerica after the first 5 years. Let me repeat that. After the first 5 years is up in a Primerica policy, you can exchange for a NEW Primerica policy WITHOUT doing medical.

Let’s take someone who just got a policy. 30yr level term. 15 years into it, they develop cancer. They call their agent to get options. They are adamant that they don’t want to lower the face amount. With a conversion option to a plan of the insurance companies choosing, the rates will realistically double or triple. Well, they have plenty of medical bills to pay now as well so they can’t afford that option and choose to leave it alone hoping to either get rid of the cancer or die before the policy expires.

12 years later, the cancer is in remission finally (27 years into the policy). They know their policy is getting closer to renewal so they call their agent again to see what they can do. Again he presents the conversion option and this time it’s still at least triple for the same coverage. He then brings up the 5 years minimal of not being able to qualify again for insurance. With Primerica, that wouldn’t be an issue. They could have been diagnosed with cancer the DAY BEFORE RENEWAL. Primerica would STILL issue a NEW TERM policy without question at the HIGHEST CLASS ORIGINALLY QUALIFIED FOR.

The other thing you missed, the gap between men and women’s life expectancy is shrinking every year. But alas, I wouldn’t expect a traditional agent to understand that since it’s bad for their commission to actually pass along truth’s to their clients.

By Brian Poncelet, CFP on January 31, 2010 at 5:00 pm

Richard,

The problem I see here is it still term which may expire before the person. If one is female the rates as discussed before will be double.

The part “The other thing you missed, the gap between men and women’s life expectancy is shrinking every year”…So,
Why do women pay almost double and get less coverage with Primerica? Where does the commission go?

By Richard on February 2, 2010 at 11:54 am

“The problem I see here is it still term which may expire before the person.”

I see the same problem with permanent, universal life, variable life, variable universal life, etc as well. It’s listed in the policy but the client never hears about it until they receive a bill and wonders why their policy that was never expected to go up, went up.

“Why do women pay almost double and get less coverage with Primerica?”

Funny, Primerica’s policies reflect ACTUAL cost since all they offer is term and DON’T back it up with proceeds from cash value policies. Most carriers sell certain policies as loss leaders in order to get business. Primerica doesn’t.

All companies know that statistically, they wont have to pay a death claim. Most carriers do what they can to actively not. Primerica does what it can to pay them.

You see, you talk all high and mighty here, but the reality of the industry is this. For every term policy sold, 40 cash values are sold. For every death claim paid, Primerica pays ON AVERAGE 2 to 3 times MORE than the industry. ON AVERAGE, Primerica clients PAY LESS for life insurance AFTER being served by Primerica.

If all you want to do is compete on price, be my guest. When it comes to real value, Primerica has done more good in the last 33 years than the industry has in over the last 200. Primerica never changed it’s core values in all that time while the industry created new ways to screw over consumers in the last 33 years.

Say what you want, if all you are going to come back with is price, you lost years ago.

By admin on February 2, 2010 at 12:12 pm

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