Looking to buy term life insurance online? It’s possible, but there’s an important fact that most Canadians are not aware of. You’ve heard the old adage ‘cheap, fast, good, you can have any two?’. The same applies with life insurance online.
When buying life insurance online, cheap, fast or good are really exemplified – and you really only can have two of the three. And in most cases, ‘good’ is what Canadians are losing out on. Important policy features are being discarded in today’s marketplace.
Here’s why. Consumers want to go online, answer few to no questions, and get a policy immediately. This is possible, but by restricting underwriting to a few questions, the life insurance company has to accept a much higher risk. Consumers who are a higher risk profile for the life insurance company can now get the the same policy as a professional athlete – and does that make sense when we consider it? Probably not.
Ideally the life insurance company could underwrite fairly quickly – and that time is coming. But in today’s marketplace in Canada, life companies don’t have automated access to doctor’s reports and drug history reports. These have to be ordered by hand, and can add substantial time to the issuing of a policy. Including these reports in the underwriting certainly can be done instantaneously.
The result? If a life insurance company is offering fast or instant life insurance policies online, dollar for dollar, prices have to increase and increase substantially. More high risk individuals = more death claims in the future = higher premiums.
But there’s another idiosyncracy. Many (most) term life insurance policies in Canada have built in safety features in the policy that protect your ability to get life insurance in the future even if you become uninsurable (these features are called renewable and convertible). And because consumers don’t generally want to pay these higher premiums, some life insurance companies are now offering life insurance policies with these future safety features removed (i.e. they’re non-renewable, non-convertible term life insurance policies).
Removal of these features lets the life insurance companies lower their premiums. They’re not removing the death benefit feature now. Instead, they’re removing the ability of policyowners to get life insurance in the future if they become uninsurable – so they’re going to pay less life insurance claims in the future. And who would want these policies? People who become uninsurable in the future. So renewable and convertible are policy features that you may not even care about now – but if you become uninsurable, these features let you purchase life insurance in the future. Removal of these features can mean you don’t have life insurance in the future if you become uninsurable – exactly when you’re going to most want a policy.
So by cutting these features, life insurance companies can offer fast issue policies and insure healthy people alongside higher risk people at the same premiums AND keep their rates low. And the people that will pay the price on this won’t be the high risk people now – it’ll be the policyowners who are insurable now, but become uninsurable in the future only to find their ability to purchase life insurance removed.
So if you’re buying term life insurance online – make sure that your policy is renewable and convertible term life insurance – even if you have to wait a bit longer for your policy to be issued.