Canadian Life Insurance

Lifetime Level Cost Insurance

by Andrew Murray, Performins Canada 

The current low interest rate environment has been a blessing and a curse to consumers

1. Borrowing costs are reduced

2. GIC rates are reduced

The current interest rates environment has affected life insurance products and costs

1. Initially, Canadian insurance companies had increased the costs for lifetime level cost insurance products (Term to 100) in an attempt to offset profitability exposure. These products were priced assuming insurers could match liabilities with investments (mostly bonds) that produced yields of 6-8%.

2. With the prospect of continuing low interest rates, some Canadian insurance companies have totally exited the level cost of insurance market. This type of product is unique; Canada is one of the last counties still offering these types of guarantees.

Opportunity?

In the short term, the answer is yes;

1. Most Canadian insurers continue to offer this product

2. Although costs have increased, and continue to increase, the current costs do not, yet, reflect current bond yield (costs are still priced at a discount)

What should I consider?

Many Canadians have purchased term insurance (term 10/20). Most term 10/20 policies allow the insured to convert, change a portion of the coverage from a Term10/20 to lifetime level cost insurance, without having to medically or financially qualify. With lifetime level cost insurance priced at a discount and the long term availability in question, now may be the time to convert. Consider converting a portion of you current term policy to lifetime level cost insurance for:

1.       last expenses

2.       Estate tax liabilities; RRSP’s, Cottage capital gains,

3.       Business succession planning

Andrew Murray is Business Development Director at Performins Canada Inc.

For questions, comments and feedback: email: a murray@performins.com.