Are insurance premiums on the rise?
Here’s something you probably haven’t noticed: life insurance rates, after years of falling, are now reversing course and starting to go up.
Two of Canada’s largest life insurance companies recently announced they were hiking rates on one type of guaranteed insurance by as much as 22%, says John Nicola, head of Vancouver-based Nicola Wealth Management.
Most affected are Term-100 and Level Cost of Insurance plans within Universal Life policies, he says. Rates for renewable term insurance aren’t rising and unlikely to do so, he adds.
The larger increases are occurring at younger ages and for policies that are joint last-to-die where the death benefit is paid on the death of the remaining partner.
Their premiums up till now have been low and competitive, Nicola says, so much so that the life insurance companies were actually losing money on them. But this may no longer be the case.
Although a bit complex for this space, Nicola goes on to describe how such policies can be used in creating tax-effective retirement income and estate planning.
Purchased with non-RRSP funds, he describes a combination of a prescribed life annuity and a life insurance policy, which together produces a tax-efficient income stream and guarantees the value of your estate at the same time.
Click here for another explanation of "insured" or "back-to-back" annuities.
Gordon Powers, MSN Money