A Life Annuities Podcast

I recently made a podcast with Monty Loree who runs the Canadian Money Advisor site at http://www.canadian-money-advisor.ca/podcast-summary.html.

A lot of the conversation was about life annuities and their growing importance to the investing public.And the question arose;why life annuities?

A growing number of people are fed up with the stock market and its volatile behaviour which makes everyone anxious.

It appears about 99% of mutual and segregated fundholders were left in their sinking funds as the Dow fell from 14,000 approx to 6,500 approx in March 2009.All of these clients could have been moved into money market funds or daily savings accounts where they would have made little or no money or even lost a very little,but at least their capital would have been preserved.But no,they were left to rot and now face a market which has struggled back about 50% or so.

So do they stay in and hope to recover more? Or do they bail and head for security in a life annuity? With a life annuity the income is known,it last a lifetime (literally ) and you don,t care if the market falls into a black hole as it probably will.And that is why the public are turning to life annuities.

Your Term Life Insurance Exam

When you purchase a life insurance policy, you may be required to take a medical exam. Life insurance companies need these medical exams to determine the premium to be charged. If the medical exam results indicate that you have a greater risk of dying at an early age the life insurance company will charge higher premiums. However, if you are in good health you will pay the standard life insurance premium.

Life Insurance Factors
Life insurance companies use two factors to judge how much to charge. The mortality rates of people are statistics found in the longevity charts of the life insurance companies and the second factor is your medical exam and history.
Generally life insurance medical exams are carried out by para-medicals or doctors who are hired by the life insurance company. They will come to your home or office unless the life insurance company requires additional tests. The questions on a life insurance application are divided into two parts. Part 1is usually completed by your agent in your presence or online by you. Part 2 is the paramedical. Once you submit your application for life insurance , the insurance paramedical services needs all your information and the amount of life insurance that you are applying for.

Life Insurance Requirements
As part of your life insurance medical exam you will be asked about:
- Your personal medical history
- Your family’s medical history
- Contact details for your primary doctor
- Information on your life style habits; if you smoke, drink, or use drugs
- What and how much life insurance you are interested in purchasing

What Are The Life Insurance Procedures?

The following are the procedures that you can expect during your life insurance medical exam:
- weight and height measurement
- measurement of blood pressure and pulse
- blood work (to check cholesterol, glucose, protein and HIV)
- Urine Analysis (to check on protein, glucose, creatinine and cocaine)

Keep in mind life insurance exams vary from one life insurance company to another life insurance company. If you are older and want a large policy, you might be required to undergo ECG’s or other tests.

What is your life insurance company looking for?

Basically, the life insurance company needs to know what risk you pose to the company. When the medical practitioner collects samples of blood and urine, they will test liver for kidney disorders, diabetes and other immune disorders. Urine samples will also be analyzed for medications, cocaine and other drugs. If you plan to buy a large amount of life insurance, you might need a blood profile as well.

The results of your life insurance medical exam are sent directly to you the life insurer’s office. If there are problems with your health, more medical tests or information may be requested. If a medical problem is present you may be offered a policy with a higher premium. Whatever the premium is, you will normally find the cheapest policy is for term life insurance.

Term Life Insurance And Whole Life Insurance

Needs evolve and your life insurance should change with them. But deciding what life insurance policy is best for you is a more difficult choice. There are benefits in your term life policy but many people want the benefits of whole life insurance.

The Value of Term Life Insurance

Term life is designed to help people purchase the protection they need at the lowest cost or when they only need coverage for a specific period of time. Term life insurance has a guaranteed death benefit but no cash value and the premiums will increase at pre-determined intervals such as 10 years, 20 years or you can buy a level term policy to age 100.

It is also very often the product of choice when life protection needs may be high as when your family is growing. Term life insurance can also be an effective way to provide retirement income if you take a term life 100 policy or there is an age disparity.

Whole life insurance, in contrast to term life insurance, provide life insurance coverage plus other additional living benefits, including guaranteed cash values. However , you are then paying interest on your own money if you borrow against the cash value.

The Value Of Whole Life Insurance
Cash value life insurance is often the best long-term solution for many people. Here are just a few of the reasons:

1. Whole life cash value insurance provides life long insurance protection as long as you pay the premium. Regardless of your subsequent health, the life insurance will remain in force.

2. Whole life insurance builds guaranteed cash value. This cash value can be used for a down payment on a home, to help pay for your children’s education or to provide income for your retirement

A short comparison list may help illustrate the differences between term life insurance and whole life insurance:

Term Life:
- Designed for short term needs, except term to 100
-You pay for pure death benefit protection, without cash value accumulation, just like your car and home insurance
- Inexpensive, with known costs increasing at each renewal
- Term conversion privileges are available with most policies up to convert to a permanent policy that builds cash value

Whole Life
- Designed for long term needs but is not cheap
- Has cash value accumulation which is accessible through loans or partial withdrawals. You pay to borrow your own money
- Premiums are high for the life of the policy

Annuities: An option for any retiree

Annuities: An option for any retiree

My comments from the article

I just want to point out a few things:
1." adjusts the payments for inflation ".If you do this,you,ll find it will take at least 10 years or so to reach the unadjusted income level on a monthly or annual basis.Of course you will still be behind in income received to date,which will take more years to accumulate.You have to find another way to provide inflation protection.
2." Annuities reflect interest rates at time of purchase ".Annuity rates are a blend of age and long term bond rates,not GIC rates.
Otherwise this is a good general article;as the writer says you should go to a broker who will give you quotes from all the companies so you can choose the best-paying life annuity.

Ivon T Hughes

Questions and Answers

Is it legal for funeral homes to take assignments on life insurance policies in Canada for the purpose of paying for funeral and burial expenses?


Send an email to www.assuris.ca which may be able to help you. That is the company set up by the major Canadian life insurance companies to provide backup coverage for clients in need.It is not-for-profit organisation which could possibly help you with this question on life insurance.

How Are Life Annuity Rates Arrived At?

Life annuity rates are a blend of ages and long term bond rates, not current GIC rates. The age factor is predominant. In other words, you can wait, but you then need the time to make up for taking a slightly less payment today. In other words if the payment is $500 today and $550 in 1 year's time, you need 120 months to make up the loss of the missed payments. It is something you need to consider.

Is There Cash Value In A Term Life Insurance Policy?

No,the difference between term life insurance and whole life insurance is
the cash value.

Term life insurance has no cash value;think about it like your car or house
insurance.If your car isn't totaled or your house doesn't burn down,you
need to repeat the payment the next year.

Whole life insurance on the other hand is more expensive as you are,to some
extent,prepaying the premium or building up a savings account from which the
life insurance premium can be paid.