Hard times trigger changes in insurance choices
Hard times trigger changes in insurance choices
Garry Marr Jan 7, 2012
It almost seems hard to justify in times of austerity — paying for something you may never use.
But that period of your life might be exactly when you need the most insurance because if you lose your job or source of income you are much more financially vulnerable to a major calamity.
“When people become unsure, certain types of insurance become even more appealing,” says Clay Gillespie, a certified financial planner with Rogers Group Financial. “You might see things like property and car insurance go down but [money spent] on life insurance and disability insurance start to go up.”
Hard times lead people to plan and one of the issues they start thinking about is their mortality, he says. “There is usually some trigger that gets people thinking, like somebody dying,” says Mr. Gillespie, adding economic circumstances can also change thinking.
At the same time a stretched wallet means you have to start choosing between life insurance and something like critical illness, which pays if you get a certain type of illness.
“Then there’s disability or long-term care. You have to prioritize which is the most important. Death is important so you have to insure for that; disability is important so I’ll insure for that,” says Mr. Gillespie.
Term life insurance, which provides for a specific payout during the length of policy but offers nothing at the end if you don’t die in that time frame, can be a cheap alternative during a recession.
“If the question is, ‘If I die during this period what happens,’ that’s what you need a term insurance policy for,” he says.
The key thing to remember about cancelling any life or disability policy is that you are going to have to qualify again medically if you decide to renew them again — a strong incentive not to let your payments lapse as you get older and face more health issues.
There’s an adage in the insurance business that it’s a good idea to get a medical before you cancel a policy, just in case you are ill with something and don’t know.
So what insurance can you cut? Car and property policies are almost ripe for the picking, but even here there are certain minimums you want to maintain.
Mr. Gillespie notes you often have no choice but to get car insurance in most provinces so the question comes down to how much do you need to cover catastrophe. The same holds true for homeowners’ insurance.
“Some of this you have to have, so other things will get cut like savings or your RRSPs,” says Mr. Gillespie. “In a perfect world you would have it all, but we don’t live in a perfect world. Even when times are good you have to prioritize.”
Allen Wong, senior partner of Ottawa-based Wealth Creation & Preservation Inc., which sells life insurance, says rising premiums for some insurance policies has led some people to buy more life insurance so they can lock in a rate.
He suggests some customers have switched to term insurance — as opposed to whole life or universal — because rates have come down based on people living longer. By contrast, whole and universal premiums have risen as insurance companies have been squeezed on their ability to reinvest money because of today’s low interest rates.
“I always tell people to get [life]insurance first and if cash flow is an issue, get term,” Mr. Wong says. “After that you want to look at disability if you don’t have coverage and then critical illness.”
He says that if you make under $50,000, you should be spending 2% of your income on life/disability/health products. He raises that to 4% if you are making more than $100,000.
Over $150,000, it’s 6%.
“There comes a point where you can only afford so much insurance,” says Mr. Wong. “But I ask clients who think they are paying too much, ‘How much are you paying for your home and car insurance.’ What’s more important?”
Good question. Where to cut? Fortunately there are some savings you can also look for on your and home car policy.
If you have a older model car, you can cut the collision coverage. On your home policy who is to say you need such a low deductible when in truth most people don’t put in a claim unless it is for a large amount because of the fear it will raise their rates.
Daniel Mirkovic, chief executive of Vancouver-based Square One Insurance, says every provider across the country will allow you to increase your deductible.
“If you have a $500 deductible and submit a small claim you likely lose your claims-free discount,” says Mr. Mirkovic, adding that increasing your deductible from $500 to $1,000 could save you 5% to 10% on your premium. “You have to pick a number you are comfortable with but $500 was a number that made sense in the 1980s.”
The rules change if you are condo owner/renter or a homeowner. He suggests a condo owner needs only a $1,000 deductible while homeowner might want to go as high as $2,000.
Michelle Megna, managing editor of insurance.com, says there are no exact data on what insurance people will cut to save money but notes life insurance purchases are near a 50-year low in the U.S.
“They know they should have it but people don’t want to spend money on it,” she says, adding the complexity of insurance also tends to lead to indecision. “Everybody knows life insurance is something you should have but people just are not buying.”
Ms. Megna says car insurance costs are being chopped because people are driving their cars longer and longer, meaning they have cheaper cars that won’t cost them as much in insurance.
“They buy used cars instead of new cars. The average age of a car on the road is about 10.7 years and it was about eight in 1995,” she says, adding collision is something many people drop from coverage if they are feeling the pinch. Her rule of thumb is if your car is eight years old and your annual premium for collision and comprehensive is more than 10% of your car’s value, you might as well just pay the liability.
But there are other factors to consider. If your car is the only way to your source of income, you probably need extra coverage because no car means no job. “Whatever you cut depends on your individual situation,” Ms. Megna says.
Garry Marr Jan 7, 2012
It almost seems hard to justify in times of austerity — paying for something you may never use.
But that period of your life might be exactly when you need the most insurance because if you lose your job or source of income you are much more financially vulnerable to a major calamity.
“When people become unsure, certain types of insurance become even more appealing,” says Clay Gillespie, a certified financial planner with Rogers Group Financial. “You might see things like property and car insurance go down but [money spent] on life insurance and disability insurance start to go up.”
Hard times lead people to plan and one of the issues they start thinking about is their mortality, he says. “There is usually some trigger that gets people thinking, like somebody dying,” says Mr. Gillespie, adding economic circumstances can also change thinking.
At the same time a stretched wallet means you have to start choosing between life insurance and something like critical illness, which pays if you get a certain type of illness.
“Then there’s disability or long-term care. You have to prioritize which is the most important. Death is important so you have to insure for that; disability is important so I’ll insure for that,” says Mr. Gillespie.
Term life insurance, which provides for a specific payout during the length of policy but offers nothing at the end if you don’t die in that time frame, can be a cheap alternative during a recession.
“If the question is, ‘If I die during this period what happens,’ that’s what you need a term insurance policy for,” he says.
The key thing to remember about cancelling any life or disability policy is that you are going to have to qualify again medically if you decide to renew them again — a strong incentive not to let your payments lapse as you get older and face more health issues.
There’s an adage in the insurance business that it’s a good idea to get a medical before you cancel a policy, just in case you are ill with something and don’t know.
So what insurance can you cut? Car and property policies are almost ripe for the picking, but even here there are certain minimums you want to maintain.
Mr. Gillespie notes you often have no choice but to get car insurance in most provinces so the question comes down to how much do you need to cover catastrophe. The same holds true for homeowners’ insurance.
“Some of this you have to have, so other things will get cut like savings or your RRSPs,” says Mr. Gillespie. “In a perfect world you would have it all, but we don’t live in a perfect world. Even when times are good you have to prioritize.”
Allen Wong, senior partner of Ottawa-based Wealth Creation & Preservation Inc., which sells life insurance, says rising premiums for some insurance policies has led some people to buy more life insurance so they can lock in a rate.
He suggests some customers have switched to term insurance — as opposed to whole life or universal — because rates have come down based on people living longer. By contrast, whole and universal premiums have risen as insurance companies have been squeezed on their ability to reinvest money because of today’s low interest rates.
“I always tell people to get [life]insurance first and if cash flow is an issue, get term,” Mr. Wong says. “After that you want to look at disability if you don’t have coverage and then critical illness.”
He says that if you make under $50,000, you should be spending 2% of your income on life/disability/health products. He raises that to 4% if you are making more than $100,000.
Over $150,000, it’s 6%.
“There comes a point where you can only afford so much insurance,” says Mr. Wong. “But I ask clients who think they are paying too much, ‘How much are you paying for your home and car insurance.’ What’s more important?”
Good question. Where to cut? Fortunately there are some savings you can also look for on your and home car policy.
If you have a older model car, you can cut the collision coverage. On your home policy who is to say you need such a low deductible when in truth most people don’t put in a claim unless it is for a large amount because of the fear it will raise their rates.
Daniel Mirkovic, chief executive of Vancouver-based Square One Insurance, says every provider across the country will allow you to increase your deductible.
“If you have a $500 deductible and submit a small claim you likely lose your claims-free discount,” says Mr. Mirkovic, adding that increasing your deductible from $500 to $1,000 could save you 5% to 10% on your premium. “You have to pick a number you are comfortable with but $500 was a number that made sense in the 1980s.”
The rules change if you are condo owner/renter or a homeowner. He suggests a condo owner needs only a $1,000 deductible while homeowner might want to go as high as $2,000.
Michelle Megna, managing editor of insurance.com, says there are no exact data on what insurance people will cut to save money but notes life insurance purchases are near a 50-year low in the U.S.
“They know they should have it but people don’t want to spend money on it,” she says, adding the complexity of insurance also tends to lead to indecision. “Everybody knows life insurance is something you should have but people just are not buying.”
Ms. Megna says car insurance costs are being chopped because people are driving their cars longer and longer, meaning they have cheaper cars that won’t cost them as much in insurance.
“They buy used cars instead of new cars. The average age of a car on the road is about 10.7 years and it was about eight in 1995,” she says, adding collision is something many people drop from coverage if they are feeling the pinch. Her rule of thumb is if your car is eight years old and your annual premium for collision and comprehensive is more than 10% of your car’s value, you might as well just pay the liability.
But there are other factors to consider. If your car is the only way to your source of income, you probably need extra coverage because no car means no job. “Whatever you cut depends on your individual situation,” Ms. Megna says.
Kevin & Faye Kitzman
Sales Representatives
Remax Real Estate Centre
Direct : 519-577-0603
Faye Kitzman
Mortgage Agent
Mortgage Intelligence
519-588-0141
M08003930
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