While a Mississauga firm negotiated its line of
credit, the bank "pressured us to have our corporate line
life-insured by them. There was the implication that if
it were not done the line wouldn't be there. We have
since fired this bank. I know darn well that I can get
the identical product for at least 35 - 45% less
from any one of 20 - 25 major Canadian life companies".
This businessman is right. Bank insurance is
expensive. As a customer explained to his bank, "your
letter states that you have 'negotiated a highly
attractive life insurance package'. You further state
'because this is group insurance, prices are extremely
attractive'. After looking at comparable rates per 1,000
for my age, I find that instead of paying $3.84 for one
year, $5.52 for 5 years, and $7.80 thereafter, I can buy
term insurance with a large insurance company for $2.37,
and that premium will remain constant for a full 10
years. How can you say your rates are competitive let
alone attractively priced? This is distorting the facts.
Is this the kind of thing we have to look forward to if
the banks are allowed into the life insurance
business?"
But the Mississauga businessman is wrong in thinking
it is "the identical product". It isn't, as a British
Columbia couple discovered a few years ago. They had been
banking at the same branch for over 15 years, and had a
5-year mortgage, life insured by the bank, which they
kept renewing. At each renewal, new medical evidence was
demanded for the insurance. Just before they renewed
their mortgage for the third time the husband was
diagnosed as having cancer, and the bank refused to renew
his life insurance. When he died there was no insurance
to pay off the mortgage.
Despite this apparent shortcoming, bankers love their
life insurance. You pay the premium and they collect the
death benefit. It also locks you in as their customer.
Its sole advantage to you and your family is that it will
pay off the debt if you die while you are still
insurable.
Is that really an advantage? Or would your family be
better off if they collected the insurance and then
decided whether to pay off the debt? If it's a mortgage
and they decide to sell the house, isn't it easier to
sell it with a mortgage? What happens if you increase
your mortgage or sell your present home to buy another
with a higher mortgage? Or decide to switch banks? You
need new life insurance. But what if you can no longer
get it like the BC man?
The answer is to have a policy which belongs to you
instead of the bank, which is paid to your beneficiary
rather than the bank, and which also does not require new
medical evidence every time you re-negotiate a loan,
switch to another bank, or buy a new home.
