Find out all about life insurance and how to reduce your rates! Never-before-seen techniques. The best techniques from the experts.
Ten things a life insurance broker should know
For people wishing to take out life insurance, having relevant information and clear answers to questions that may be of concern to them can be very useful in helping them to make a decision. With a view to clarifying the most important points relating tolife insuranceHere are the answers to the 10 most frequently asked questions.
When is life insurance activated?
When it comes to taking out insurance, everything starts with a meeting with a representative, who presents the customer with an application form to fill in. This document, known as the application form, is the official request for insurance.buying insurance with an insurer. But filling in the form and paying the premium is not synonymous with immediate coverage. In fact, coverage only becomes effective once all the conditions required by the insurer have been met. These include
- Acceptance of the proposal without change on the part of the insurer;
- Payment of the first premium;
- The customer's insurability, which must remain intact since the proposal document was signed, particularly with regard to his or her health.
Of course, every rule has its exception: some insurance companies guarantee that the policy will take effect as soon as the application has been signed. But only if they meet specific conditions, which are clearly listed in the application.
- What does insurability mean?
We speak of insurability when the insured has all the aptitudes and meets all the criteria required by the insurer. Generally speaking, the determining factors are age, state of health and profession, among others. Such information is listed in a declaration of insurability. We recommend that you do not automatically renew your temporary coverage, even if you are in good health. It's better to store around for better offers from other providers.
- What happens when there is a significant difference between the application submitted and the insurance policy issued?
The reference in this case is the proposal, which is assumed to be accurate, except where the insurer has accompanied the contract with a separate document listing all the differences. In this case, the policyholder is free to accept or reject the insurance. Let's take the example of a customer who fills in the application form to take out a temporary protection for a value of 100,000 $ over a 10-year period. If the insurer has issued a 5-year contract, he must prepare a document specifying that the insurance is for a fixed term of 5 years, not 10. In this case, the customer can accept or reject the coverage. However, if the insurer does not provide a supplementary document, the insured may demand to have the insurance for 10 years.
- What should be done if the insured's state of health changes after the policy takes effect?
The insured is not obliged to report any changes in his or her health to the insurer. If the insured is subsequently diagnosed with cancer, for example, and mentions this to the insurer, the latter will increase the premium, in which case the coverage will be useless. It has to be said that the premium should not be revised upwards when the policy is already in force, because the insured's state of health has changed in the meantime.
- When is the insurance value paid out in the event of death?
After the insured's death, the incident must be reported to the insurer by the deceased's next of kin. The insurer generally requires a number of supporting documents. Once the documents have been received, it takes 30 days for the insurance amount to be paid to the beneficiaries. The documents requested by the insurer may include a death certificate, a birth certificate or identity document to verify the insured's age, and proof that the person making the claim has been designated as the beneficiary.
- Does the insurance payout apply in the event of homicide?
If the insured is the victim of a homicide, it is necessary to check whether the crime was committed by the beneficiary; if this is the case, no sum is paid by the insurer. If there are other beneficiaries who are not involved in the crime, they will obviously receive the amount of coverage.
- Is the value of the insurance paid out in the event of suicide?
In the event of suicide committed by the insured when the insurance contract is less than 2 years old, the insurance must be paid out in full, unless there is an exclusion mentioned in the policy. In this case, only the premiums paid are payable. If, on the other hand, the suicide occurred more than 2 years ago, the insurer is obliged to pay the full amount of the insurance.
- Does the insurer have to pay the insurance amount if the insured person disappears?
The insured's disappearance may be the result of a plane crash, shipwreck, kidnapping, amnesia or other circumstances. In such cases, a court may declare the insured deceased, particularly if there is proof of death, as in the case of a plane crash. Once the court verdict has been announced, the insurer is obliged to pay the value of the coverage to the beneficiary designated in the insurance policy. If no beneficiary has been designated in the insurance policy, the amount must be paid to the estate. However, if there is no proof of the insured's death, a period of 7 years must elapse before the insured's death is declared and the beneficiary is entitled to collect the value of the coverage. It should be noted that during this period, the premium must be paid as usual.
Why isn't everyone required to pay the same life insurance premium?
Several factors are taken into consideration, including the gender of the insured. Men usually pay a higher premium than women because their life expectancy is lower, which explains why there can be a difference of up to 30% on the insurance premium to be paid.
Another equally important factor is age. Insurance premiums increase with age, as the risk of death is greater. Place of residence is also a factor, as insurance in some regions of Canada is more expensive than in others. This can be explained by life expectancy at birth, which can be lower or higher than in other areas, and these differences are also present in Quebec.
Of course, the state of health of the insured must not be overlooked; in fact, insurance companies carry out an investigation at the time of the claim. life insurance quote. It's worth remembering that the healthier a person is, the more likely they are to be covered at very competitive rates. On the other hand, if the occupation may present a higher risk than other professions, this has an impact on the insurance. The riskier the job, the higher the premium.
Certain habits also influence the amount of the premium, notably tobacco consumption, which affects life expectancy. So it's only natural that smokers should pay a higher premium, and in some cases twice as much as non-smokers. People who have stopped smoking for more than 12 months should notify their insurer to benefit from a reduction in their premium. If the insured did not smoke when he took out his insurance, but then starts smoking, his premium remains unchanged. But if they intend to change insurers, they should be aware that they will have to pay the special premium for smokers.
As far as alcohol consumption is concerned, as long as it is in moderation, it has no impact on the premium, but in the event of abuse, the premium is revised upwards, and coverage may even be refused.
Fans of dangerous sports should be aware that scuba diving, climbing, parachuting or car racing have a significant impact on the amount of premium to be paid, as the risk of death is too high.
In addition to factors relating to the insured, the amount of the premium can be affected by the insurance itself. The amount insured is a key factor. It goes without saying that the higher the sum insured, the higher the premium, but it is possible to benefit from economies of scale. For a value of 100,000 $, the insured will not have to pay double the premium than if he had taken out insurance for a value of 50,000 $.
It's important not to forget the duration of the coverage, which plays an important role in the final cost. It goes without saying that term insurance is less expensive than open-ended life insurance. In the first scenario, premiums are gradually revised upwards at each renewal, taking into account advancing age. In the second, premiums remain constant throughout the term of the contract. However, in this case, the insurer always reserves a portion of the premium for the event of death. So, for payments over a 25-year period, the insurer would have set money aside for this period.
Economic conditions influence insurance market like any other sector. That's why we need to focus on the concept of current and anticipated interest rates.
When insurers are unable to invest the premiums paid by policyholders, they charge higher premiums. This is because they earn money from the investment income generated by the premiums paid by customers. It's the same concept as for retirement savings: when the rate of return is low, the customer has to pay more money to reach his financial goal.
-What's better than constant or evolving premium coverage?
If you can choose between constant and evolving premiums for an insurance policy with a given value and the same cost, you may be tempted to opt for the former. However, constant premiums are more expensive in the early years than those that evolve over time. It's a good idea to consider this factor carefully, taking into account your budget and the duration of the insurance.
Real-life declaration of insurability for life insurance
In 2008, Anne-Sophie decided to take out life insurance for herself and her four toddlers. The insurance agent asked her to complete four declarations, while the 4th was exempt. However, the following year, the latter died, and when Anne-Sophie filed a claim with her insurer, he refused to pay out the policy, pointing out that he would have refused to insure the child if he had been informed of the child's health at the time of taking out the policy.
Although the mother filed a complaint, the insurer remained firm and refused to settle. Anne-Sophie, for her part, decided to turn to the Autorité des marchés financiers to analyze the case.
In this example, the representative didn't complete the declaration of insurability for the deceased child, and the insurer didn't request it, so Anne-Sophie is "safe". This is because no one required the document at the time of underwriting, but only at the time of the claim. She bears no responsibility for this oversight. In the end, the insurer had to give in and pay the death benefit to the mother, the case having been resolved amicably. However, it should be noted thatfinancial markets authority can in no way require the insurance company to settle the case by mutual agreement.
Life insurance beneficiary terminology
- Revocable beneficiary: When taking out a life insurance policy, the insured is free to designate a beneficiary, but thanks to the revocable beneficiary clause, he or she has the right to designate another beneficiary at any time without notifying the first beneficiary or obtaining his or her agreement.
- Irrevocable beneficiary: This term indicates that if the insured wishes to change the beneficiary, he/she can only do so with the written consent of the initially designated beneficiary. Without the latter's consent, the policy remains in force until the death of the insured. However, there is one exception to this rule, namely in the event of divorce. In such a situation, the beneficiary spouse automatically loses this status, even if he or she has been designated irrevocable beneficiary.
- No mention: In this case, the insurance contract implicitly states that the beneficiary is revocable. Except where the beneficiary is the policyholder's spouse, who has irrevocable beneficiary status.
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