Insurance – a word that is supposed to offer peace of mind. Think about it: when we buy insurance, we are purchasing coverage for something of value, the loss of which would be upsetting. To help ease the loss, we purchase a written promise to be appropriately compensated. The safety net of an insurance policy kicks in, and even in the worst of circumstances, it makes life a little easier. Or does it?
Regrettably, many products and services are sold by unlicensed merchants who offer insurance with little knowledge. To make matters worse, the consumer only discovers the problem at the time of claim! Here are a few examples of insurance programs that are best avoided because of their cost, contractual language, or claims adjudication protocol.
AD&D Insurance
Accidental Death and Dismemberment insurance is a staple of most employee benefit plans.
- It is inexpensive
- It pays out
- Death by unforeseen accident
- Loss of a body part (example: a limb)
The option of enhanced coverage is tempting because the cost is cheap. I recommend skipping the enhancement option and consider your regular life insurance needs.
AD&D is inexpensive because the likelihood of a claim is remote since most claims occur because of disease rather than accident. Buying enhanced coverage tells us more about the client than the product – the client could be underinsured and want peace of mind. A better consideration is regular life insurance where the success of claim is not determined by how one passes away and the need is the determining factor in this purchase, and not the cost.
Emergency Travel Coverage on Credit Cards
The desire and frequency for travel has increased exponentially as COVID travel restrictions are removed or relaxed. With increased demand, the cost of travel has increased, and travelers may forego emergency travel insurance when booking, believing they are adequately covered using a credit card’s master contract for travel. Be wary here – there are several considerations including:
- Pre-existing conditions
- Travel duration limits (typically 15 days if you are under the age of 65)
- Age
- You must seek treatment from an approved facility in advance and submit out-of-pocket original receipts for services rendered. They will then reimburse you for services not covered by your provincial medical program.
Rather than hoping for equitable treatment at the time of claim, purchase travel medical from an insurance professional rather than a travel agent. Insurance specialists understand caveats and conditions, and most have more than one carrier to choose from. These options will include:
- Possible ratings for elevated risk
- Reviewing out of country claims protocol, including having the insurer speak to your medical provider at time of claim
- The hospital bills the insurance company directly rather than forcing you to be claims adjudicator and collections agent after you return to Canada, reducing your out-of-pocket expenses
Creditor/Mortgage Insurance
We can make a similar case for insurance to cover a loss or a financial obligation, like a mortgage. Mortgage/loan specialists are obligated to remind you that when taking out a large debt, it is often desirable to rid the family of the financial burden of the debt at a time of disaster and offer mortgage/creditor insurance. The client answers a few health-related questions by the lender, signs a document, and then has premium debited from their account or blended into their payments back to the bank. The bank:
- Determines the price which you pay
- Is the owner/beneficiary of the policy
- Places limits on both age and mortgage amount within the program
All is fine until claim time. It is after a death or disability that the health questionnaire is expanded, your medical records are reviewed for accuracy, and the policy limits become known. CBC’s Marketplace did a compelling story on mortgage insurance when interviewing borrowers who bought the product and learned that they were denied coverage at claim time – years after the purchase and premiums collected. Check out CBC Marketplace: In Denial for more details on the restrictions of this program.
A better approach is to choose life insurance to cover your mortgage and work with a licensed professional instead. Benefits of life insurance for this scenario are:
- Broader market access
- Ability to underwrite the policy before claiming so you know where you stand
- You own the contract
- You select your beneficiaries
- The personal coverage is not only more flexible to the consumer – it is usually less expensive than the bank product.
In short, you end up with a better program at a better price, and that brings peace of mind!
