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I have had a ten-year term life insurance plan to act as “Mortgage Insurance” on my house (no, it is not a Mortgage Insurance product (that is a rip-off (IHMO)), and the ten-year term is about to expire. I received a letter informing me of this and how if I wanted to renew for ten years more, my monthly premium would be 3.45 times higher.

This perturbed me a bit, but I decided that since this wasn’t going to happen until July, I’d have time to shop around and maybe find something cheaper or determine if I needed this policy anymore.

I received a phone call from TD Life Insurance (the Policy provider). A licensed TD agent called, asking if I had read the letter and whether I had any questions. I said I wasn’t happy with the rate increase but knew it would go up but not by that much. The agent sounded sympathetic, and then she said that there was another option. At that moment, my “here comes another one for my horse” incident in my life, and I was not wrong.

If I buy a NEW policy, I could have only a 50% monthly rate increase. However, since it is a new policy, I’d have to answer a medical questionnaire and sign forms stating I was telling the truth about my current health.

I guess this is the Insurance Company attempting to cover itself, assuming an old guy like me might have picked up some disease or bad lifestyle choices, so they want to be sure I have a clean(er) bill of health than most 50 years olds. This is the risk you take buying Term Insurance and not “Whole Life,” and I fully realize this. However, a quadrupling of my rates does seem a little punitive (just my opinion).

I think I’ll shop around a bit more, but I haven’t decided on my next steps just yet.

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originally published on May 27, 2013 { 19 comments }

• Jacqui583 January 2, 2014, 9:33 AM

  “My guess is this is the Insurance Company attempting to cover itself, assuming an old guy like me, might have picked up some disease or bad lifestyle choices, so they want to be sure I have a clean(er) bill of health than most 50 year olds.”

  I have a different theory. After watching the exposes on CBC about insurance companies not paying out, it seems that it takes a doctor and a lawyer to interpret the policy and whether the questionaire has been answered correctly. This is their “gotcha”; any discrepancy between your answers on the questionaire and something they dig up in your medical records can make the policy invalid when time comes to pay out, regardless of whether the discrepancy had anything to do with what you were treated for or died from.

  Reply
  • bigcajunman January 2, 2014, 10:02 AM

    Agreed, why is it that we all live in a John Grisham novel? We all need a Rainmaker I suppose.

    Reply
• Farly December 30, 2013, 4:15 PM

  When I bought term life insurance the renewal rates were very high. My agent told me this was something I could use if my health deteriorated greatly, cancer etc.

  Reply
  • bigcajunman December 30, 2013, 4:17 PM

    Pardon?

    Reply
    • Farly December 31, 2013, 2:38 PM

      In other words if I became not insurable for some reason, bad health for example, this would be a last resort to use the guaranteed renewal. Under normal circumstances I would go though the process of reapplying, medical exam etc.

      The agent also pointed out that the renewal rates should be factor in determining which policy.

      Reply
      • bigcajunman December 31, 2013, 5:47 PM

        Yes, but the warning I have had is that if you “renew” and even have the medical and such and get the cheaper rate, there may not be a pay out in the first couple of years (read your policy carefully).

• valleycat1 December 30, 2013, 11:41 AM

  After 10 years of paying the mortgage, any new term policy you look at should be for the reduced remaining principal amount (assuming the plan is that your surviving partner would use the policy to immediately pay off the mortgage in full). Also, one would assume your investments and any other savings have grown, so the need might not be quite as great.

  Also, if I were young & trying to decide which way to go, I’d do the math to consider how 10 years at the cheaper rate and then 10 or more years at a higher rate compares to whole life, before locking myself into the insanely high whole life premiums.

  Reply
• Dave June 9, 2013, 10:23 PM

  Insurance is always a crappy deal but it’s something that you have to deal with.

  Reply
• ForryShaa June 9, 2013, 4:40 AM

  Before my retirement i tried to find out the cheapest insurance policy. I studied a lot and meat many people and as result i got the cheapest policy.

  So try little hard before making any decision.

  Reply
• Brian Poncelet,CFP June 8, 2013, 8:46 PM

  BCM,

  Term is like renting it has some good points (cheap) but over time it is expensive.

  Reply
• Gary Gorr June 6, 2013, 7:04 PM

  With insurance you can pay me now (Whole Life) or pay me later (Term)
  Just when you grow older and need the insurance they increase the rates. However you fell for the cheapness of term. It is only every initially cheap.

  Reply
• Jon June 3, 2013, 10:42 PM

  This definitely sounds like some more complexity for what I would assume you were hoping would be a relativly smooth transaction…just look at all the things you need to consider to get the same policy…
  – health survey
  – 2 year suicide clause (as Glenn pointed out)
  – comparing new policy vs old policy
  – why the cost increase on old but not the new policy

  And you are an educated financially literate individual that understand all this…its not surprising that Canada’s insurance industry has a low customer satisfaction rating compared to US/Mexico (see EY survery pg 6 – http://www.ey.com/Publication/vwLUAssets/Global_Consumer_Insurance_Survey_2012_-_The_Americas/$FILE/EY_GIR_AMERICAS_SML.pdf)

  Thanks for sharing your story – Hopefully you will let us know what you ultimately decide.

  Reply
• My Own Advisor May 27, 2013, 8:24 PM

  Definitely trying to cover themselves…

  Like all insurance products, you need to ask yourself, what are you insuring against?

  I would argue if you have insurance through work, and your mortgage amount is low, you might not need it.

  Every person is different. I’m sure a pro like Glenn can likely help you out here 🙂

  Mark

  Reply
• Robert M May 27, 2013, 3:24 PM

  Hi BCM,

  I am also very skeptical of any life insurance product based on being sold an insurance policy as an rrsp in my 20s. Fortunately, I caught the mistake early and wrote it off under “education”. Recently, my soon to be ex financial advisor tried to sell me on the idea of a whole life policy to offset estate taxes. Too be fair, there are two situations where this does make sense, but neither applied to my wife and I. o after much arm twisting, he finally understood that no was really no.

  Based on your story, the decision to offset the house mortage is also based on the remaining value of the mortgage against your current financial liquidity. You might be at the point where the remaining value is low enough to be offset by existing resources. Also, you might need less insurance which should mean lower premiums.

  Finally, if you have enough equity built up, one option is to sell the home and rent thus clearing the balance sheet.

  It sounds like you have an interesting business case developing here. I will be interested in hearing about the final decision.

  rob…

  Reply
• krantcents May 27, 2013, 12:18 PM

  Although I am close to retirement and virtually no debt, I maintain life insurance as protection against income loss. I use online insurance search engines to find the best low cost providers.

  Reply
• LifeInsuranceCanada.com May 27, 2013, 7:35 AM

  Oh, and for completeness, you should appreciate that with a NEW policy you will have a new two year suicide exclusion clause and a new two year incontestibility clause. In layman’s terms, your new policy gives them a new two year timeframe to deny your claim should you die. Not a reason to delay purchase, but it’s something you should at least be aware of (that TD probably didn’t tell you about, amiright?).

  Reply
  • bigcajunman May 27, 2013, 8:11 AM

    Glenn, I knew you’d fill in a lot of blanks on this, thanks (and NO, TD did not mention that one either).

    Good to have friends in the business, thank you for all the great info.

    Reply
    • Bet Crooks May 28, 2013, 9:19 AM

      Glenn, sounds almost like the lawyers wrote in all those 2-year clauses just to make more work for themselves. Since I doubt any of the “agents” at the bank/s know the details of the policies they are selling, they will probably all not warn customers. Then when they renege on payout, the lawsuits will begin! “No one warned me.” “It was in the contract” You can see the billable hours racking up….

      Reply
• LifeInsuranceCanada.com May 27, 2013, 7:31 AM

  30 years ago, renewals on term insurance made sense. However in the 90’s, insurance companies switched to using two different mortality tables for their pricing. For the first term on your policy you receive the ‘select’ or healthy mortality tables. Premiums at renewal use the ‘ultimate’ or ‘we don’t know if you’re healthy’ mortality tables, and yes, those tables are lot more expensive. Preet Bannerje wrote about it in the globe here:
  http://www.theglobeandmail.com/globe-investor/personal-finance/preet-banerjee/how-to-minimize-your-life-insurance-premiums/article2220938/

  I did a blog post comparing TD life insurance products vs. what’s available in the market, you might find it worthwhile reading as you analyze your perceived benefits of the product you’re considering purchasing:
  http://www.lifeinsurancecanada.com/td-life-insurance-did-you-compare

  It’s no different than any other financial product, shop around, compare, and make sure you’re buying product not marketing. (the no medical exam thing is a good example – everyone wants to believe that no-medical exam and cheap pricing can co-exist in one product just because companies market ‘affordable rates’. Affordable is not a synonym for competitive.)

  Reply

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