Guest expert. For some, serious illness insurance is almost the second wonder in the world, as is life insurance with cash value. There are a few things to think about here.
Serious illness insurance
according to Report obtained from monitoring work in insurance for serious illness According to the Autorité des marchés financiers (AMF), the rejection rate for serious illness insurance claims is almost 20%. Therefore, one of the five claims will be rejected.
One of the reasons for this high rejection rate is the widespread use of statistics in advertising. For example, an ad that talks about the risk of developing cancer but neglects to mention the limited definition of the disease in the contract. In serious illness insurance contracts, the definition is much more restricted than the definition of life insurance or disability insurance.
The AMF report makes the following recommendations for insurance companies that offer insurance products for serious illnesses:
- The documents or advertisements created should not cause confusion or mislead consumers into the product.
- Further help consumers understand their products correctly
- Accompany the insured, contact them, get information, understand their rights and obligations, and know the right time to exercise them.
- Better equip distribution networks to properly advise customers
- Facilitates the process of claiming compensation, handling complaints and resolving disputes
That said, if you are interested in this type of product, you should first read the next section. Serious illness insurance (serious or serious) The following is an excerpt from the AMF website.
- “If you want to be covered in case of an illness that interferes with your work, consider taking out disability insurance instead. It will cover you if you can no longer work. Please confirm that. “”
- “Maryse suffers from cancer and has been unable to work for nearly a year. Nevertheless, the insurance company rejects his claim …
- Therefore, while the contract covers this type of illness, Maryse’s cancer does not exactly meet the definition of the contract and cannot be compensated. »»
This page compares this insurance with disability insurance and life insurance.
Life insurance with cash value
It brings us cash-valued life insurance. According to its followers, it will meet both your life insurance needs and your savings needs.
If you are interested in this type of product, you should read the section first Participatory whole life insurance When Universal life insurance The following is an excerpt from the AMF website:
- “In addition, the amount paid to the contract, including the savings portion, is subject to a 3.48% tax. »»
- “Insurers are required to pay a 15% tax on the return on investment generated by the capitalization fund (quality applies and limits are imposed on the amount” invested “in the capitalization fund). .. We do not pay these taxes directly, but these amounts may be included in the fees charged by the insurance company. You may also have to pay taxes when withdrawing funds. »»
- “Universal life insurance is often sold with forecasts that show what to accumulate in different scenarios. This is not a guarantee of profits to be earned. For realistic rate of return forecasts. please give me. “”
- “Evaluate other investment opportunities. For example, take out another cheaper type of insurance and see the relevance of donating your savings to TFSA, RRSP, RESP, or retirement plans ». »»
Therefore, savings with a Tax Exemption Savings Account (TFSA), Registered Retirement Savings Plan (RRSP), or Registered Education Savings Plan (RESP) are more tax effective than savings with life insurance. In fact, these plans do not tax savings (insurance with savings is the only product taxed on savings) and pay a specific tax of 15% on income.
Also, it is generally advantageous to repay your debt before you buy life insurance with savings. In addition to the interest saved, debt repayment reduces the need for insurance in your life. Debt-free people sleep better, including during periods of market turmoil. In addition, when the mortgage is repaid, some insurance companies offer a discount of about 20% on the mortgage premium.
Finally, is it good to focus insurance and savings on one contract? If you become unsatisfied with managing your investment within a few years, you will not be able to easily transfer your savings to another financial institution and you may lose your insurance.
You can determine your actual insurance needs by consulting with your financial planner before subscribing to these products.