New kind vs old kind of life insurance

What is the best life insurance plan for me?

Close up of the hand of a businessman displaying a card reading - Life insurance - as he removes it from the pocket of his jacket in a conceptual image.

What is the best life insurance policy for me?

This is a question that I, as a financial advisor and insurance broker, get from people every day. There is a lot of confusion out there in the marketplace, caused in large by misinformation and unscrupulous life insurance agents who are putting their needs before their client’s needs.

I also found that most people that I speak to about life insurance either have the wrong life insurance coverage or have the wrong idea about how life insurance works and what the true purpose of life insurance even is.

This blog post is to clear up some of these misconceptions and hopefully shed some light on the truth about life insurance.

The truth about life insurance

Let’s start by identifying first of all what the reason is to take out a life insurance policy in the first place.

The main reason why people purchase life insurance is to leave some money behind, should you be taken out of the picture (pass away) prematurely. I mean, we all know that 10 out of 10 people will die at some point, but that point for most of us is somewhere really far in the future. Average life expectancy these days is 84, and many people will live even longer than that.

So for the majority of people, their life insurance will not pay out until a very long time into the future, which begs the question, why even worry about having any insurance coverage?

Why even bother with buying life insurance?

That’s a great question. If most people live till their 80s, then why bother getting a policy when you are younger?

The reason for buying life insurance when you are younger is two-fold

  1. Because bad things happen to younger people as well. In my 26 years as an insurance agent, I have seen my share of tragedies. I have delivered a $500,000 cheque to Lucie B. who ‘s husband Bill died at the age 0f 46 when his own car collapsed on top of him. I have seen the horror when my client’s 11-year-old child committed suicide at age 11. I could name many more examples here, but you get the picture. There is no safe age, anything can happen to anyone at any given time, we all know that.
  2. If everyone waited until they are 75 before buying life insurance, then nobody would be insured, because it is extremely hard to qualify for a policy at the older ages, becasue our health declines as we get older. The other problem is price, which will be a lot higher when you are older.

New kind vs old kind of life insurance

Believe it or not, there is really no “New kind” or “old kind” insurance. This is a phrase that I coined myself, but it makes a lot of sense.

In the old days, when I started in the business, we were taught to sell Whole life insurance. I call that the “old kind” of insurance. Term life insurance was just starting to get more popular, but because the commissions were not that high on term insurance, we were encouraged by our managers to push more whole life, and I did for a while.

Then a good friend of mine explained to me how term life insurance can actually be a better solution for people if done right, and I have been a big fan of term insurance ever since. Sure, the commissions are not that good, but at the end of the day, it is more important to me to do the right thing, than make more money.

I wrote another blog post called Term vs whole life insurance. I would encourage you to read that one as well, becasue it will explain in detail the differences, and why it could make a big difference in how much money you spend on insurance, and also how much money your family will get in case something happens to you.

Just think about Lucie B, remember the lady I mentioned earlier, her husband Bill died at age 46, and she still had 2 boys that she was raising. Imagine if instead of him buying 500k of term insurance, if he had bought instead a 100k whole life policy (both cost about the same). Thinks about Lucie, and what would she have told me, if she only knew that for the same premium, we could have insured Bill for 500k insured (luckily I did).

So please check out the following blog post to learn more about the difference between the old and the new insurance.