Joint Term Life Insurance Explained

First of all, what is “Term Life Insurance” ?

Term Life Insurance is where you take out a policy to cover a death of the insured for a set period – the Term. These are typically used by people who may have a mortgage, or other large repayment commitment, and require coverage to make sure that during the period of the commitment the payments are covered in the case of death. Once the Term insurance is finished you do not get any funds in refund for not making a claim against the policy nor do you get a surrender value.

Once you stop paying the premiums of a term life insurance policy, or joint term policy, the policy will be cancelled and you will not be entitled to any refund.

Joint Term life insurance, as the name implies, is where two people are listed on the policy and payment is made if one of them dies or is unable to work. Traditionally the couple on the policy would be man and wife and the policy is created to cover a joint liability (eg a mortgage, income replacement, or other such large domestic cost).

Once claim payment has been made on a joint term life insurance policy the policy is terminated, premium payments are no longer required, and the surviving partner should sign up for a another single term policy if they have on-going commitments that the original joint policy did not cover. Some life insurance companies will provide a window of time where the surviving insured can apply without proving current health and avoid underwriting.

Can I cash in a joint term policy ?

Traditionally – no you cannot. It is used purely as death benefit coverage.

Can I transfer a joint policy to a single person’s term policy ?

Most insurance companies will allow you to convert a joint term policy into a single term policy, providing that both parties are willing to do so. This is mostly used in the case of divorce, or separation where both of the insured’s agree to separate the policy into two policies however beware that there are life insurance companies that do not allow this type of change.

If my partner and I have a mortgage must we use a joint term policy ?

Not at all. If you wish to take out a single term policy just for you (or two policies – one for each of you, you are free to do so). However you should consider some of the pit falls of a joint term life insurance policy.

All policy features are based on equivalent single age this is when the life insurance company calculates a combined age which is higher the then oldest insured. i.e. conversion and termination date.

If one insured is ill and would not qualify for a new policy the healthy insured may have to renew at the higher rate in order to maintain the coverage for the insured that is ill.

Solutions Financial is a Canadian owned and operated life insurance brokerage.

 

 

Choosing Life Insurance Beneficiaries

Nobody likes to think of dying, but as it is a fact of life it must be given consideration at some stage in your life. Normally people will start to think about things like life Insurance when they start families, relationships, or enter into agreements where security in the event of their death is required.

When looking into life insurance and signing up for a policy certain things must be taken into account.

Who are the beneficiaries going to be is an important one. Does any money paid out go automatically to your spouse, children or bank? If you are in a stable relationship, but not officially married, does your partner automatically receive payment or do you have to specify this.

(We have all seen news reports where people have died and their families have hit the headlines while battling amongst themselves for what monies the deceased had, or was entitled to from their insurance policy).

When you take out a life insurance policy of whatever form, there is a space on the policy document where you can name your chosen beneficiaries. If you fill this out any monies due at the time of your death will go directly to them, usually without question and within 30 days.

If you do not fill out this section of the document, any monies due at the time of your death will go to your estate (the collection of assets you owned at the time of death). This estate is handled “in probate” by a lawyer who decides depending on circumstance how the money is distributed.

Normally, the lawyer handling your estate has to respect the contents of a will and distribute the estate as the deceased required. This process can, however, be contested in court by relatives of the deceased for a multitude of reasons.

If you have completed the beneficiary part of your insurance document, it is your responsibility to make sure that it is up to date, changing it as your circumstances change. (For example; when you first got married you took out a life insurance policy and named your, then, spouse as the sole beneficiary. Later on in life you divorced and re-married. In the event of your death any monies due from the insurance policy will automatically go to your first spouse – unless you changed the beneficiary listed in the policy and named your current spouse.)

(Changing the beneficiary listed on your insurance policy is fairly simple, most insurance companies will just require that you fill out the appropriate forms and will then update your existing policy. Whereas changing a will usually requires the actions of an attorney and that the will is signed in the presence of witnesses)

When naming beneficiaries on a policy you have a number of choices:

  • You can name a sole beneficiary: In the event of your death the policy is paid directly to them.
  • You can name primary and secondary beneficiaries: in the event that the first beneficiary dies before you do the proceeds of the policy will go to the secondary beneficiary listed.
  • You can name a list of beneficiaries and specify what percentage each will receive at the time of your death. In the event of the death of one or more of the beneficiaries the figures will be adjusted to accommodate those remaining.

Can you name any one as a beneficiary?

Yes, you can name any one you wish as a beneficiary. They do not have to be a member of your family, or even connected to you in any way. In cases where a policy holder has no direct descendants it has been known for them to name someone unrelated to them who may have cared for them, or even charitable organisations.

It is, however, important to inform the beneficiary that you have named them as such, because if the life insurance company cannot locate the listed beneficiary after a certain period the proceeds of your policy will revert to your estate. (Which, in the case of no descendants, may revert to the province)?

So, when you take out that insurance policy think about whether you wish to name a beneficiary, or let the proceeds go to your estate, which will respect the contents of your will.

Obtaining Life Insurance For a Charity

There are numerous people that have charities that are near and dear to their heart. Throughout their lives they may give a considerable amount of their time and money to specific charities. Such individuals may also want to continue giving to these particular charities even after they pass on. The individuals that want to leave funds to a charity upon their demise have the option of obtaining life insurance for a charity. Although this may sound somewhat peculiar, there are a number of people that take this particular route in order to ensure that their special charities continue to receive the monies they are used to receiving even after a person’s demise. While some individuals may choose to leave monies to a charity via a will, obtaining life insurance for charity is usually the best way for an individual to leave a specific amount of money for their charity without having to worry about such issues as the will being contested.

What is Life Insurance for a Charity?

Those that are unfamiliar may want to know what is life insurance for a charity? Life insurance for a charity is basically setting up an insurance policy so that a charity is able to receive funds upon a person’s demise. In many ways, the charity is the beneficiary. However, there are circumstances where the policyholder of the life insurance policy can decide that the charity itself will be the policyholder. It is very important to understand that life insurance for a charity only becomes effective for payout when the policyholder passes away. For some, this is an excellent way for them to be able to make sure that their favorite charities receive income even after their death. In order to keep the life insurance for a charity applicable and active, all premiums must be paid in full on a timely basis.

What is the Purpose of Life Insurance for a Charity?

As stated before, the main purpose of life insurance for a charity is to make sure that a charity is able to receive funds upon a person’s demise. Often times people that leave monies to charities usually do so because these charities are close to their heart. They have probably already formed some type of relationship with the charity and they want to continue to provide financial support even after death. In other cases, a person may just simply decide they want life insurance for a charity because they want to give a specific amount to a particular charity upon death. Individuals that choose to obtain life insurance for a charity have a number of ways of executing this type of policy. Some individuals choose to purchase a new policy where the charity becomes the policyholder. Then there are others that may decide to purchase the insurance policy under their name and then simply make the charity a beneficiary. There are also cases where individuals decide to make their estate the beneficiary and then a certain amount is set aside as a bequest to the charity in the will. Ultimately, the whole idea of life insurance for a charity is to provide a charity with monetary support after a person passes away. This is an excellent option for anyone that has developed a firm relationship with a charity that they truly believe in and want to make sure that the charity is properly funded in the future. 

How Individuals and Charities Benefit From These Policies?

It should be noted that with life insurance for a charity both the individuals and charities benefit greatly from these types of life insurance policies. Individuals that choose to obtain a life insurance policy for a charity benefit greatly through a number of tax benefits. The ways in which an individual receives the tax benefits from a life insurance for a charity depends on how the policy is executed. If an individual decides to purchase an insurance policy and make the charity both the beneficiary and the policyholder, then any premiums that are paid on this particular life insurance policy are considered a tax-deductible donation. In the case where an individual decides to make the charity a beneficiary on a pre-existing life insurance policy, then the individual will not be able to receive any tax benefits on the premiums paid out. However, as long as the policy has a cash surrender value, the charity can provide a tax receipt which is equal to the amount of the cash surrender value. The individual will be able to claim a charitable donation credit once the transfer of the policy ownership to the charity is confirmed.

Overall, obtaining life insurance for a charity is an excellent way to support causes that are near and dear to one’s heart after one passes away.

Ten reasons for using a Life Insurance Broker

Finding the correct life insurance policy can be easy, difficult, impossible, or just extremely frustrating depending on how much time you have to research it and the people who you end up talking to on the phone. Each person you phone with regards to a policy is going to try and get you to sign their policy by telling you about all of the good things, while conveniently glossing over some of the not so good things. Unless you are an expert at reading contract language there is a strong chance that you signed for something you may not have wanted. This is where an insurance broker comes in.

They know the product.

By definition an insurance broker sells insurance. Or to be more precise, in today’s world an insurance broker will connect you with an insurance company and broker the policy deal between you and them. They are aware of what products exist, what the product is and what it means to you in terms of money out and money in.

They know the people.

As insurance brokers tend to deal with lots of people, each with different situations and requirements they tend to have a large portfolio of insurance companies that they deal with, on a daily basis. They know who to phone at these companies to get quick answers. They have contacts that they regularly speak to, who you as a member of the public may never get in touch with. People who can make your process of getting a policy easier.

They know the language.

Insurance contracts are steeped in legal jargon. They have to be, there is a lot of money involved in each policy and every eventuality has to be covered in the document that forms the policy you sign. This language is difficult to follow and comprehend to the layman, but to someone who deals with it every day, it is simple.

Experience with problems.

Hopefully when you decide to take out a life insurance policy there will be no problems. But this is life, there could be lots of problems. You may find that your scuba diving hobby is making the insurance company hesitate and that they are asking you lots of questions about it. You gave up smoking two years ago and the company want a blow by blow account of your smoking history. All of this delays you getting a policy with you sending in the form, getting questions back, replying, etc. Back and forth constantly. An agent will be able to ask you all of the relevant questions, then only come back when they have definitive answers.

It’s their job to shop around.

You obviously want the best policy for the minimum monthly outlay. Unless you get extremely lucky with your first enquiry to an insurance company, this is going to involve you phoning lots of companies to compare prices. Even if you use the internet to do the comparisons before you start phoning you are still going to have to look through a lot of sites before you narrow down your search. A broker will be able to ask you how much do you want to spend, what coverage are you looking for. Then just by looking in his laptop, or case they will be able to pull out a list of companies that have policies to meet your requirements.

They can answer your questions in layman terms.

Phone an insurance company up and query page 3, paragraph 6, sub section 12 of your policy. When you finally get through to someone who is qualified to answer you, the answer they give you will be in pure insurance language, leaving you more confused than when you started. A broker is there to make sure that you are answered in laymen terms, in terms of what it is going to cost you, what the pros and cons are. Basically they are there to explain it to you in a way that you can understand.

They should be impartial.

A good insurance broker should be impartial. They should not be affiliated with any particular insurance company and be able to suggest a number of companies to you when you ask them about available policies. It is there job to find you the best value policy for your situation, not the highest paying customers for an insurance company. If an a broker is unable to recommend a number of different companies, find another broker.

They can sort out problems.

You are travelling to Russia next week on business and need to check if Russia is still a restricted country, and will travelling there affect your life insurance policy. You don’t have time to sit on hold for days on end trying to find someone in your insurance company who actually knows the definitive answer. Your broker is there to help you. Field the question to them, let them use their contacts to find out the answer. Then when they have they can get back to you and let you know if there is anything you need to do.

They are one stop contact.

In theory, once you have a policy you are locked into a company. That company will have a customer support department and should be able to answer your question or handle your problems. In the real world this is not always the case. There are support departments for billing, claims, questions, legal and so on. With a broker, they are a one stop shop for your insurance dealings. Have a problem with your monthly payment; field it to them, a problem with a claim; let them handle it. By using a life insurance broker, you should only ever need to speak to one person.

Peace of mind.

Insurance is complicated, there is no question of that. When you sign that policy are you sure that every “t” is crossed, and every “i” dotted? That’s what a life insurance broker is for, to make sure every thing has been covered and to give you the peace of mind you require.

In conclusion, most people are capable of going out and finding a company that will offer them life insurance, and most will find a policy that suits them to a certain extent. But is it worth the chance that when you found the policy you liked, you missed something. Something that could potentially cost you thousands in the future ?

To put it another way; when your car needs to have the breaks replaced, do you take it to a mechanic and make sure that the job is completed properly, or do you have a look on the internet and do the job yourself, risking the scenario that when you need to stop you might not have done the job as well as should have been expected?