10 Things You Didn’t Know Life Insurance Could Do

Life insurance seems like a straight-forward financial product. Insurance companies receive premiums and in exchange they pay out a death benefit to policyholders’ beneficiaries. However, these plans can be much more complex than that.

“There are a lot of options – much more than people realize,” says Cliff Wilson, chair of the board of directors for Life Happens, a nonprofit that educates the public on insurance matters. Some policy perks are geared toward certain populations, such as the USAA Military Future Insurability Rider, which lets service members convert a military policy upon retirement. But other life insurance perks can be had by virtually anyone.

Here’s a look at 10 things you may not realize your life insurance policy could do.

1. Pay for long-term care expenses. Long-term care insurance is expensive, and adding a rider to a life insurance policy can be an effective way to get this coverage. Specialty products that combine life and long-term care insurance are also available. Whether the coverage comes as a rider or a specialty policy, using long-term care benefits typically reduces the amount of the death benefit.

While there is an extra cost for adding long-term care coverage to a life insurance policy, it can be more cost-effective than buying two plans. It can also be a good choice for people who want long-term care insurance, but aren’t sure if they will need it. “They are going to get coverage, but they aren’t spending money on a policy they aren’t going to use,” says Jimmy Lee, CEO of The Wealth Consulting Group in Las Vegas.

2. Provide benefits if you’re terminally ill. Known as living benefits, this perk comes standard on many term and whole life policies. “Living benefits are under-utilized and very prevalent in the industry,” says Greg Riedel, assistant vice president and product line leader of life insurance at USAA. The details vary by plan, but living benefit provisions generally allow those with a life expectancy of 12 months or less to receive a portion of their death benefit in advance.

3. A source of cash if you’re disabled. Policyholders don’t have to be dying to get their death benefit early from some insurers. Many plans offer chronic illness or critical illness riders that may pay out funds if a person becomes disabled or experiences a heart attack, stroke or invasive cancer, among other things. Wilson notes these options can provide a vital safety net to people who are unable to work and have mounting medical bills. “It’s more important to use those funds while [someone’s] alive than as a death benefit,” Wilson says.

4. Give one last gift to a favorite charity. You could leave the money in your savings account as a bequest to an organization, or you could use some of that cash to buy life insurance and give substantially more. “You can leverage your money for a bigger gift for charity,” Lee says. Depending on the policy, your age and health, you may be able to turn small monthly premiums into a large donation.

5. Ride out a bear market. One of the more novel approaches to using permanent life insurance is as a safeguard against a sagging stock market. “It’s a bucket of money to use in a bear market,” Lee says. “Instead of having to sell stocks and take a loss, take money out of life insurance.” This strategy only works with insurance policies that have cash value. Retirees can take a tax-free loan from a policy rather than withdrawing money from retirement funds. Then, when the market rebounds, gains from investments can be used to pay back the loan.

6. Minimize your taxes in retirement. Leveraging loans from a whole life policy isn’t just something for bear markets. “[Policyholders] can treat that life insurance as their own personal pension,” says Scott Moffitt, president and CEO of Summit Financial Group in Loveland, Ohio. Moffitt specializes in helping his clients work out a strategy of withdrawals and loans that will let them create an ongoing stream of tax-free money in retirement. This system can even be set up so policyholders stop making premium payments, Moffitt says.

7. Insure the life of a child. Although parents can buy an insurance policy specifically for their child, they could also add a rider on their own plan. Many insurers offer child protection riders at a low cost and with flexible coverage levels.

8. Cover a child’s college costs. Another way to use life insurance to help a child is to take out loans from a whole life policy for tuition payments. “The guaranteed loan rates [on many policies] are frankly better than the rates for a lot of student loans,” Moffitt says. What’s more, rather than paying interest to a bank or the government, that money goes back into the policy.

9. Waive your premiums. Premium waiver riders also come standard with many policies, and these provisions can help those who become disabled keep their coverage. As its name suggests, the rider eliminates premiums for those who have a qualifying injury or illness. Like living benefits, premium waivers are seldom used. “Many people don’t think about it,” Wilson says. “It’s explained at the purchase, and they don’t think of it [when needed].”

10. Return your money if you don’t die. Lastly, you might not realize your life insurance company could return all your premiums if you reach the end of a policy’s term and never make a claim. You have to pay extra for a return of premium rider, and it may make more financial sense to invest that money instead. However, some people like knowing they will get all their money back if they end up outliving their life insurance.

The bottom line for life insurance shoppers is to compare more than just the death benefit. Many plans come with valuable extras that could be worth a higher premium. “Don’t just shop for a price point,” Riedel says. Instead, he advises people to ask themselves, “What are the benefits I’m getting at that price?”


If you haven’t disclosed your home’s rental suite, you may be breaking the law

A rental suite is a great way to help homeowners meet their mortgage payments at a time when home prices are creeping ever upward in some parts of Canada.

But as many as 15 per cent of secondary rental suites in detached homes are being operated in Canada illegally, said a survey of over 5,000 homeowners in B.C., Alberta and Ontario by Square One Insurance Services.

In many cases, illegally-operated secondary suites also go unreported to insurance providers

Homeowners find themselves in this situation in a number of ways, Square One president Daniel Mirkovic said in a news release.

Sometimes, they buy homes that already have suites in them, unaware of municipal building standards and therefore that their suites may not be up to code.

They may also not know about municipal laws that require them to obtain business licences before renting them out.

“Part of this dates back prior to the ’90s, when very few municipalities would allow you to have a suite in your own home,” Mirkovic explained.

However, in a statement issued with the findings on Wednesday, he said some municipal laws are outdated and don’t support the goal of building more affordable housing.

“It’s hard to understand why cities advocating for more affordable housing options would continue to enforce this outdated regulation.,” Mirkovic said.

Homeowners are often fined by their municipalities if they’re caught operating illegal suites in their homes.

The fines can reach up to $2,000, like they do in Vancouver, Mirkovic said.

Additionally, homeowners may be required to rebuild their secondary suites to make sure they meet building standards.

Square One found that 17 per cent of rental suites in detached homes are considered illegal.

Ontario had the highest percentage of illegal rental suites in the survey at 21 per cent, followed by B.C. with 15 per cent and Alberta with 14 per cent.

The actual percentage is likely to be higher as residents may be reluctant to disclose illegal rental suites.

Ontario has more than 233,000 secondary rental units, while B.C. has over 155,000 and Alberta more than 125,000, according to the Canada Mortgage and Housing Corporation (CMHC).

According to the survey, 40 per cent of homeowners build rental suites for extra income, while 34 per cent do it to help with mortgage payments.

It’s no coincidence that the highest percentage of illegal secondary suites are present in provinces where real estate is most expensive, Mirkovic told Global News.

Additionally, many homeowners don’t disclose their secondary suites to their insurance providers. Those people could lose their coverage altogether.

“If they don’t disclose this, their whole policy could be null and void,” Mirkovic said

This could be especially risky for homeowners who call on their insurance providers after their homes are damaged, or people are injured on their property, Pete Karageorgos, director of consumer and industry relations at the Insurance Bureau of Canada, told Global News.

“You obviously face the risk, if you have a loss, that the insurance company may not pay because it contradicts the terms of the policy,” Karageorgos explained. He said that when insurance companies work with clients, they attempt to match the risk that a client presents with the policy they would need to best cover them.

Karageorgos warned that those living in illegal suites may not be covered by insurance.

And if someone is hurt on a property that houses an illegal rental suite, the homeowner’s liability insurance may also be affected.

Karageorgos warned that those living in illegal suites may not be covered by insurance.

And if someone is hurt on a property that houses an illegal rental suite, the homeowner’s liability insurance may also be affected.

While many homeowners are nervous about disclosing their rental suites to insurance providers, Karageorgos said some may not even be aware that they’re violating the terms of their agreement — just like they’re not aware that they’re even breaking the law.

Mirkovic and Karageorgos agreed that the best way to avoid the consequences of operating an illegal rental suite is to become familiar with municipal bylaws and the terms of your insurance policy ahead of time.

If you haven’t disclosed your home’s rental suite, you may be breaking the law

Insurance M&A activity slumps

A mid-year growth report by Clyde & Co has revealed that the global volume of completed mergers and acquisitions (M&A) among insurance companies has continued its downward trend, reaching a two-year low.

According to the report, there were 170 deals in the first six months of 2017 compared to 186 in the same period last year. M&A activity is down 24% from the last high in H1 2015, when there were 225 deals.

While global M&A activity on average saw a slump, the results for each individual region were mixed. The Americas experienced increased M&A, with 86 transactions so far – five more transactions than in H1 2016. The Middle East and Africa saw a modest uptick in activity, with eight deals – compared to only two last year.

Not all regions were as active, however. European M&A activity fell 28% in the last six months – a trend the report believes was driven by the UK’s intended withdrawal from the EU. M&A deals in Asia Pacific for the period were at 22, down from 36 last year.

“Uncertainty is the enemy of deal-making. M&A has risen in the Americas now that the uncertainty that plagued the market in the run-up to the US presidential election has eased somewhat,” commented Clyde & Co Corporate Insurance Group global head Andrew Holderness in a release.

“However, in Europe, uncertainty persists with Brexit acting as a significant brake on M&A activity. Transactions have been overtaken on the corporate agenda by Brexit preparations as companies realize that there is no time to lose. Elsewhere in Europe political and economic uncertainty in markets as far apart as Greece, Italy and Russia continue to weigh heavy on investor sentiment.”

“Growth remains a shareholder imperative in an increasingly difficult trading environment, and insurers are investigating every avenue – both organic and inorganic – in an attempt to deliver this, wherever they are in the world,” added Holderness.

Despite the transaction decline for the first half of the year, Clyde & Co believes that as markets become less exposed to both political and economic uncertainty, M&A activity will stabilize or rebound in the second half.

“Deals are still getting done and a merger or acquisition remains an attractive route to generating value,” explained Holderness. “While insurers continue to consider all the tools at their disposal in the quest for growth, there is good reason to expect that more M&A will get over the line in the coming six months.”



AA data leak: Over 100,000 customers’ emails and personal information exposed after breach

UK car insurance firm AA reportedly left over 100,000 customers personal and sensitive information exposed and failed to notify customers about their leaked data, despite having been aware of a potential breach in their systems. The data was reportedly leaked via an exposed server, which contained a database linked to AA’s online store.

The exposed data included 117,000 unique email addresses, full names, addresses, IP addresses, details of purchases, as well as the last four digits and expiry data of credit cars, Motherboard reported.

However, AA president Edmund King reached out to IBTimes UK to stress that customers’ card data was “never at risk” and was not exposed.”The data incident was related to the AA Shop which is run by a third party website supplier with no links to AA Insurance,” King said in an email, adding that a “full independent inquiry” is currently underway.

On 26 June, AA customers received password reset emails, however, the firm told Computer Weekly that an “internal error” and “not a hack” resulted in some customers receiving the email and that “no data has been compromised.” The firm also claimed at the time that the incident was “related to the AA shop and retailers’ orders rather than sensitive info.”

King told us that the password reset emails “was 100% separate.”

“The password reset emails were nothing whatsoever to do with the breach. AA shop system is outsourced so completely separate system,” King added. “No passwords were affected in AA Shop breach. As I understand the data relates to retail orders of maps, highway codes etc. for other retailers and some private customers.”

King however did acknowledge that “Data did include some things in the public domain like addresses of customers who may have bought maps.”

However, security researcher Troy Hunt took to Twitter to shed further light on the incident. One of Hunt’s followers allegedly warned AA about an insecure database exposing 13GB of data in April. The issue was resolved on 25 April, however, the firm refrained from informing its customers about the incident. It remains unclear as to how long the data remained exposed before AA was notified about it.

“We can confirm that the AA was informed of a potential vulnerability involving some AA Shop data on 22nd April 2017,” the AA told Motherboard. According to the firm, the data was “only accessed several times.”

According to security researcher Scott Helme, the leaked data also includes password hashes and private encryption key. “This is essentially the username and password that the AA use to login to their Secure Trading account,” Helme said.

“The most infuriating aspect of this incident is that the AA knew they’d left the data exposed, they knew it had been located by at least one unauthorised party and they knew that a six figure number of customers had been impacted, but they consciously elected to keep it quiet and not notify anyone,” Hunt told Motherboard.

“Any data breach is serious hence we are looking at legal action,” King told us, adding, “we did not feel customers were at risk of fraud as this related to the AA Shop rather than insurance details.”

Security researcher Bob Diachenko of Kromtech Security, which hunts for data breaches, told IBTimes UK that such incidents generally occur when businesses fail to incorporate basic security practices. According to the researcher, breaches and leaks more often occur, not as a result of a malicious hack, rather due to organisations’ “ignorance” or lack of implementation of basic security protocols.

The AA has since tweeted out an apology to its customers, adding that the issue is “now fixed” and that no credit card information was compromised. The firm also said that it is conducting an independent investigation into the matter.

The AA Shop data issue is now fixed, No Credit Card info was compromised
& an independent investigation is under way. We’re sorry.



Canadian seniors deserve right to sell their life insurance, says advocate

Canadian seniors are being prevented from adopting a practice that could unlock “billions of dollars” from their life insurance policies, according to one advocate.

Many countries around the world allow seniors to resell their unused, in-force insurance policies in an open and free secondary market, according to a piece published by the Toronto Sun. Through a practice called life settlement, such policies can be sold for an amount that’s more than their cash surrender value, but less than their death benefit.

“In the United States alone, more than $7 million a day is paid to people through life settlements,” said Leonard Goodman, founder and chair of the Life Insurance Settlement Association of Canada (LISAC) and author of the think piece.

However, Goodman said, regulations in six out of ten provinces prevent a well-regulated secondary market where life insurance policies can be bought and sold. “For decades, Canadian life insurers have lobbied against changing these regulations, and are fighting to include regulations in the other four provinces,” he said.

Goodman claimed that over 80% of life insurance policies are either cancelled or expire without a claim ever being made, which means many seniors own assets they ultimately do not benefit from. Allowing life settlements would provide a much-needed source of retirement funding for seniors, and it would let more people benefit from otherwise unused policies.

“The biggest problem is that seniors are not aware of this unfair and egregious practice,” he said. “Most legislators do not know much about life settlements. And Canadian insurance brokers and financial planners either don’t know or cannot properly inform their clients.”

According to Goodman, most insurance brokers rely on insurance companies and face a risk of getting their license terminated by an insurance provider, so they don’t recommend life settlements to senior clients.

“[I]f we can get provincial governments to recognize the rights of seniors and change the regulations, it will significantly help millions of seniors who are struggling financially in retirement,” he said, calling for life settlements to be made into “a ballot box issue in the next election.”