“It’s Patrick. He took out life insurance…Good for you, son.” If you were a child of the 1990s like me, you will no doubt remember the iconic lines of one of the most run commercials on the air in the late 80s and early 90s that was mixed in between episodes of The Simpsons and The X Files. As a 12 year old I knew little about life insurance but was curious. Why were Patrick’s parents so happy that he took it out? And most importantly, how could Patrick say “hello” to his father and then tell him that he took out life insurance in literally less than a second and a half?
This commercial, showed people that life insurance could be affordable and easy to get. How great was that! Obviously, it was great, look how happy Patrick’s parents were to hear about it.
So, let’s take a look at what Patrick likely purchased and if it really was a deal.
Typically, when a person applies for life insurance, they are asked a series of questions about their health, family history, lifestyle and finances. Based on the responses, the insurance company will determine the amount of risk in insuring the person. The higher the risk – for example if Patrick had a history of health issues – the higher the cost to buy the insurance compared to someone without health issues. Or the insurance company could decline coverage if the risk was too great. The fear of being declined insurance was what this commercial was trying to highlight in the minds of its viewers;
What is guaranteed issue life insurance? Remember, insurance companies assess applicants to determine the risk of paying out on death before they can collect enough in premiums. What if insurance companies didn’t ask any questions and just assumed that all applicants were high risk and simply charged everyone more for insurance. That’s how guaranteed issue life insurance works: In exchange for not being asked any health or life experience questions, clients are willing to pay more for the insurance.
This is why most financial advisors will talk to their clients about one of the most important reasons for purchasing life insurance – protecting insurability. Often I have talked to people, usually single people without children, who will say, “I’m single, I don’t need life insurance. I don’t have any dependants.” True, but…
Pretend you are in your late 20 or 30s. The world is your oyster and you are all about living in the moment. A handsome and charming financial advisor – let’s call him Orlando – mentions that life insurance is an important part of your complete financial portfolio. You quickly decide life insurance is not for you because you don’t have any dependants and you just leased an expensive new car so it’s not a priority.
Fast forward five years. You are diagnosed with cancer, but luckily after months of treatment you come out with a clean bill of health. Along the way you fall in love with your soulmate, and you propose to her and six months later you are married and expecting your first child. Congratulations!
Now, you decide it’s time for life insurance because things have changed. But, you are disappointed; although your desire for life insurance is higher, so is your risk level for the insurance companies due to your cancer scare.
It is important to remember one of the core principals of insurance: You need to get insurance before a life-changing event happens, not after. Every insurance advisor can also tell you a story – I can tell you many – about clients who call asking about buying insurance because they just got diagnosed with a serious illness. Unfortunately, after the advisor shakes his head in disappointment, he will have to tell the client the cold, hard truth: There isn’t much he can do.
Which brings me back to protecting your insurability; you don’t know what the future holds for you, so consider your insurance options sooner rather than later.
Let’s consider an alternative to the commercial we started with.
Scene: An elderly couple enjoying the afternoon in their sitting room. The phone rings.
It’s Patrick. He’s taken out life insurance but had to purchase guaranteed acceptance based on his health issues and is paying way too much.
(nods then writes on a note pad)
He said all that on 1.5 seconds? (father nods)
Did you try to get approved for standard life insurance, son?
(voice through phone)
I did, dad. Of course, I did! But, all the other companies declined me because of my heart attack. I really had no other choice!
I told you years ago to take out life insurance but you were too busy to listen to your father. Where did that get you?
The father doesn’t wait for an answer. He hangs up the phone.
He’s such a disappointment. He’s not like his brother John who was responsible and took out life insurance years ago for his family.
(mutters to himself)
It’s time to re-draft the will.
Protect your insurability. Speak with a life and health insurance advisor today.
Director, Sales and Business Development
Life and Health Insurance Advisor
Desjardins Financial Security Independent Network
(416) 695-1433 ext. 232
155 Rexdale Blvd., Suite 406
Etobicoke ON, M9W 5Z8
This article should not be construed as insurance or financial advice, or as an offer or solicitation to buy any products or services mentioned herein.