Canadians are often looking to purchase term life insurance online. With the pervasiveness of the internet for research purposes, most consumers are aware that generally term life insurance is the most appropriate type of life insurance for them. And buying online seems like a great way to avoid any type of sales pressure.
Ideally, we would just find a website that lets us compare premiums, shop out our amount and type, and click to purchase the least expensive policies. Unfortunately, that’s not really available in Canada.
Buying online also means instant issue
When a consumer wants to purchase term life insurance online, the expectation is that they’ll also be insured immediately as well. But there’s a huge hurdle in the industry with this. Canadian life insurance companies don’t currently have the technology to instantly underwrite a life insurance policy. Accessing information like prescriptions from pharmacies, doctors reports, lab reports, etc. takes days and sometimes weeks (if your doctor is slow with sending over the report). So fully underwriting a policy takes time.
How does the industry get around that? Some life insurance carriers have developed specialty products with more limited underwriting. But limited underwriting means they aren’t doing a full investigation into your medical history, and that means that there’s a higher probability of accepting a consumer that may not meet the requirements for low premiums. But….also, consumers want instant coverage online and the cheapest premiums possible. Can’t have both, not if you’re insuring people that may be in less than perfect insurability. So what gives?
Online policies frequently chop benefits – Renewable and Convertible Term
In order to instantly underwrite and keep premiums low, something has to give. And what gives, are policy benefits, and in particular policy benefits that determine how many life insurance death benefits are paid out. One immediate casualty in this chopping of benefits, is the ‘Renewable and Convertible’ part of renewable and convertible term.
Renewable term policies let you keep your life insurance coverage in force at the end of the term. Convertible policies let exchange your term life insurance policy for a permanent life insurance policy, receive healthy premiums for the new policy, and do so without any medical requirements at all (called conversion).
Now, renewable and convertible provisions in term life insurance policies aren’t options that most people care about when they purchase a life insurance policy. They just want cheap and fast. Unfortunately, many people DO care a lot about these provisions at the end of the term – 20 years from now when they may have become uninsurable. Renewable and convertible provisions allow uninsurable people to maintain life insurance coverage way into the future, based on a term policy that they purchased today. For those that become uninsurable during the term, they now have an easy, inexpensive way to get life insurance coverage. And that coverage eventually leads to payment of life insurance death claims on those uninsurable clients.
Life insurance policies that are not renewable and convertible (as many ‘buy online’ term policies are) simply cease at the end of the term. No ability to renew, no ability to convert. And if you’ve become uninsurable, you’re simply dumped out at the end of the term with no life insurance and no ability to get anymore. That entire block of clients – which could be you, we don’t know that today – simply never pays a death benefit. And the result is term life insurance policies that pay fewer death claims in the future (that could be your death claim), which allows them to provide instant issue policies at competitive premiums.
This is bad for consumers. Consumer advocates have been saying not just ‘term life insurance’ for over 100 years, but ‘renewable and convertible term’. They’ve been clearly specifying that you need to make sure your term life insurance policy is renewable and convertible. David Chilton specifies renewable and convertible term in his famous book ‘The Wealthy Barber’, Gail Vax-Oxlade has clarified this, and more recently, Preet Banerjee did an entire video showing the pitfalls of online term life insurance that isn’t renewable and convertible. You can watch his video here.
You can’t compare prices with buy online
Most life insurance companies that offer renewable and convertible term life insurance have no ability for their agent/advisors to offer a buy online service. The technology just doesn’t exist in the industry. If a broker wants to let consumers shop from 10-15 term life insurance policies on their website, there’s no way that they can put up a ‘buy now’ button that connects to each of the companies. So brokers may have online shopping and premium comparison systems, but they can’t direct you through to a buy now option from Canada Life, Sun Life, Equitable Life, Foresters, etc. The only buy now buttons that are readily available are from the specialty carriers I described above, where they’ve often removed the renewable and convertible term provisions from your policy.
So you have two choices; buy online but at the expense of vital policy features, or shop premiums online and still deal with an advisor.
Good news, there’s a middle ground
So what to do? You want to compare and buy online, you want the best policy available, but you don’t want a life insurance agent in your home pressuring you to buy.
The solution that the industry has turned to is electronic and telephone technology. You can shop premiums online through some broker’s websites, then transact with them initially by phone and then later electronically through text/email and with signature requirements being done electronically. You speak to a real person at some point, but all of the paperwork and interactions are done electronically. That’s the current best practice methodology to make sure you get both very competitive premiums, and policies with features that won’t leave you hung out without the ability to get life insurance in the future. There’s a few life insurance brokers online right now doing this, The Term Guy website is one that lets you compare both renewable and convertible term life insurance premiums, but policy features as well.