Life Insurance FAQ (Frequently Asked Questions)

nsurance Broker vs Agent: Background

Insurance Brokers and Insurance agents both sell insurance. The key difference between insurance broker and agent is that an insurance agent (also called captive agent) typically works for one insurance company and thus can sell insurance policies of this company only. That limits consumer’s options to compare different products.
Insurance broker on the contrary does not work for one insurance company but rather have a distributor relationship with multiple insurance companies. That allows insurance broker to compare several polices available on the market. When engaging an insurance broker to find an insurance policy, a consumer should clarify upfront with how many companies insurance broker works.

There are also some differences in compensation of insurance agents and insurance brokers: insurance agent typically receives a fixed salary and might get a sales bonus based on own sales results. Insurance broker gets compensated through commission paid by an insurance company for each policy sold (and sometimes some smaller amounts on policies which stay in place).

Insurance Tip Related to Insurance Brokers and Agents

Insurance broker can often get better insurance rates: Life insurance is not the simplest product as opposed to e.g. auto insurance. A good life insurance broker can navigate you through many question marks, compare for you premiums across dozens of different companies and often get lower rate than you would get on your own (e.g. because brokers may have some air to offer discounts on insurance products due to the large insurance volumes they make).

Difference between Bank and Insurance: Background

Both Banks and Insurance companies sell Life Insurance. According to the existing regulation banks are not allowed to sell insurance products other than Travel or Creditor Insurance in their branches. The most banks though have an independent insurance company (e.g. BMO Insurance, RBC Insurance, TD Insurance etc) which can sell you insurance and some of them offer Life Insurance.

The difference between Life Insurance offered by banks and insurance company is quite simple. Whereas banks offer typically more simple products such as e.g. Term Life Insurance, many insurance companies are able to provide more complex products such as Universal or Whole Life insurance. You need to consider following when you are buying directly from a bank or an insurance company: in this case you are offered products from one provider only but there are ways to compare life insurance products across multiple providers.

Insurance Tip Related to buying Life Insurance

Insurance broker can often get better insurance rates: A good and experienced life insurance broker can navigate you through many question marks, compare for you premiums across dozens of different companies and often get lower rate than you would get on your own (e.g. because brokers may have some air to offer discounts on insurance products due to the large insurance volumes they make).

Your Life Insurance policy protects your family and your close ones in case anything happens to you. Thus you want to ensure that in any case there is enough coverage to reflect your current life situation. Typically you want to increase you coverage if any changes in your life require more financial support if you are not there e.g. birth of a new child, getting a new mortgage, increasing your debt through additional line of credit or loan. These are all financial obligations that you or your family will need to deal with in future.

At the same time sometimes the need in financial support can go down as well. Examples of such life changes can be growing children (the older are your children, the less financial support you would need to the moment when they become independent), downsizing of your properties (e.g. selling off a larger house if your kids leave on their own and paying off outstanding mortgage). Reduction in your Life Insurance coverage means that you can shift to a smaller policy saving on regular (monthly or annual) life insurance premiums.

In any case, you need to sit down with your insurance advisor (e.g. insurance broker) at least once a year to see if there are any changes in your life insurance policy are required.

Insurers treat life insurance claims differently depending on the time when a death occurred Should a death occur within 2 years after a life insurance policy was issued, it may be contested by an insurer including an investigation. Such aspects of the life insurance policy will scrutinized as existing pre-condition or any fraud possibilities. After 2 years an insurer would typically pay but it still can investigate case details.

If your policy has been denied, there are several steps that you should go through:

1. Make sure that your adjuster has all the information and there was no misunderstanding.
2. Try to clarify the situation with the claim manager, to make sure that all conventional ways are resolved
3. Contact an ombudsman that will look in details into your situation.
4. If there is no positive solution, you can engage a lawyer to represent your interest in court. Typically, lawyers will work on the commission basis and be paid if they are successful with your case.