Latest / The Chiro Money Show / 055 | Life Insurance for Chiropractors: Who Needs It, How Much, and What Kind
Transcript
- Chris Scheele: Welcome back to the Chiro Money Show, where we're helping chiropractors make better financial decisions so they can build stability in their finances and a lifestyle that they love. We're your hosts, Chris Scheele and Scott Campbell, financial planners with Align Wealth. Scott Campbell: How are we doing today, Chris? Chris Scheele: Good man. I think that was my best intro yet. Scott Campbell: So you're the you're on the top of the world. Near the intro. Good job. Yeah. Chris Scheele: Yeah. Doing good, man. We're yeah, we're we're knee deep in fall meetings. It's been been a busy couple weeks here to kick things off, but it's going re going great, having lots of fun, getting lots of awesome feedback on some of the new systems we've implemented and yeah, new deliverables for the clients and follow up from those fall meetings. So that's been cool. Scott Campbell: Yeah. Yeah. Lotta lot of fun stuff being rolled out for this round of of meetings with all the clients. So Chris Scheele: Yep. Yep. Scott Campbell: yeah. It's great. Chris Scheele: I mean, I think we also gotta give the update on on your official status now. Your Scott Campbell: no longer a half iron man. I got the I got the I got the ha I got the other half. I'm a full Iron Chris Scheele: You're no longer half. You're full, man. Yeah. Scott Campbell: Man now. Yeah. Chris Scheele: Does that mean a tattoo on each bicep or what? Scott Campbell: No tattoos. I'm not going down that path. That's a hard no. For our listeners, Chris Scheele: No. Okay. Scott Campbell: maybe you're not aware of this, but I don't know how I don't know what I'd be curious to know what percentage of Iron Man athletes like you get you do the first time Iron Man, you get the tattoo. Think it's fifty Chris Scheele: Mm. Scott Campbell: percent? Chris Scheele: That high? Scott Campbell: I I think I bet you it's fifty percent or more. Get the Iron Man tattoo after their first full Iron Man. But Chris Scheele: Crazy. What about the swag? What about the backpack? can't you just wear that 24-7? Scott Campbell: so for it was a one time only, but on the way home from California I had my Ironman California hat on, I had my Ironman California finisher hoodie that they gave me and my backpack. So every like half an hour my wife Anya would just be like, Hey, did did you do an Iron Man this weekend? yeah. I I looked I had too much swag on on the way home, but that was a one time one time event only. Chris Scheele: We won't be going down that road again. Scott Campbell: No, no, I can't wear all the I can't wear all of it at the same time. One at a time. But yeah, Iron Man went great. Fantastic race. I had a really great experience overall. It was a hot day, but managed the heat really well. Was in good mood all day, smiles and everything went great. From start to finish, felt great, hit all the time goals for the swim, bike and run and overall time goals. So and I had my family there, my wife, my kids. My closest friend from kindergarten, his wife was racing with me. I had two friends come down and surprise me the day before, knocked on the Airbnb door and and surprised me to be there to cheer me on as well. So all in all, fantastic. I don't know when the next Iron Man will be, but I think I will do one at some point again. At some point. But Chris Scheele: Wow. Okay. Gonna keep going. Scott Campbell: I still don't know what the next thing is for me. I d I don't know. I don't know. TBD. Chris Scheele: TBD, we'll keep you posted, listeners. Scott's next Scott Campbell: Keep you posted. Chris Scheele: endurance event. Scott Campbell: Gotta have something on the calendar. Chris Scheele: N next big goal. Yeah. That's right. Absolutely, Scott Campbell: Gotta have something. Yeah, for sure. Mm-hmm. Chris Scheele: man. Mm-hmm. Scott Campbell: Yeah. All right. Chris Scheele: Shall we? Scott Campbell: That's yeah, since we're doing a podcast, we have a topic to talk about, we might as well. Chris Scheele: Yep. Alright, man. Here's yeah, Scott Campbell: It's an exciting one. Chris Scheele: well, I don't know, maybe. Maybe exciting depending on how Scott Campbell: Important, very important one. Chris Scheele: it's an important one, yes. Scott Campbell: Yes. Chris Scheele: And as soon as we pitch what this what the topic is, I know we're gonna get some eye rolls and some right. Shoot. There's no secrets in this world. Scott Campbell: Well, they know what it is. They saw the title of the podcast. Or should we disguise we'll disguise it. We should disguise the title. They don't know what they're getting into. Chris Scheele: Yeah. All right. We're talking about insurance. Scott Campbell: Talking about insurance. We've done a few Chris Scheele: Specifically life insurance today. Scott Campbell: Yeah, we're talking about life insurance today. We've done we did a podcast way back, episode eleven f fully dedicated to disability insurance. We did episode twenty three was all about critical illness insurance, but we haven't done one specifically on life insurance. So for your reference, if you want to go back to check out those episodes on those other conversations, feel free. But yeah, today is just talking about, you know, what what's life insurance? Why do you need it? How much do you need it? What type do you need? How much should it cost? We'll cover it all. Chris Scheele: Yep. I think the a good starting point is this kind of framework that you you shared is if you didn't come home tomorrow, what would the impact be? who would you owe money to? How much? what would the impact be on your family? Like that's the whole life insurance question. Just that right there. Yet there are so many pitches and ideas that start talking about life insurance with tax strategy and growing wealth and all kinds of stuff. That's all the unnecessary, confusing stuff that we don't need. Scott Campbell: We'll touch on it, but we need to t we need to start with answering that first question. the reason why we buy life insurance in the first place. if you think back to those previous episodes, we were talking about disability insurance and criticalness insurance, which is a benefit to you, the insured. Well, if you are alive but something's happened where there's been a financial impact to you, obviously we're we're not this is kind of in self intuit it's intuitive, but like a life insurance policy, you're you're no longer here. But You have people that you love and care for that that that potentially required your income, you have debt. there's a whole lot of reasons why you need to have some level of life insurance in the event that something happened to you prematurely. Chris Scheele: Yeah. Yeah. Totally. Most families need it. if there's someone counting on your income or there's you have some liabilities, like debts, then you need life insurance. Then the question just Scott Campbell: For sure. This Chris Scheele: becomes, how much and what kind? Yeah. Scott Campbell: That's exactly right. Yeah. And let's touch on this real quick while while I'm thinking about it too. Even if you don't have a spouse or dependents, requiring your you and your your income, there still could be a need to have some level of life insurance. Even if you're single and have some debt. And say if you say you just got your first home and but you're still single and you have a mortgage or something happened to you, well, what do you want to see happen? You know, you still would have potentially parents that are need to sell the ho house off, do you need to Have that debt covered, what does that all look like? Right? Chris Scheele: Yeah. Yeah. What if what if there's more debts? What if there's more liabilities than there are assets? What if we have student loans that are fairly significant, right? Like Scott Campbell: Right. Student loans for sure. Yeah. Chris Scheele: Yeah. Scott Campbell: Or even above even even going beyond debts and that stuff, it's like, well, if something's happened to you, is there people that you still care about if you're s even if you're single? Like I want to leave some money to nieces and nephews or I or a charity that I feel feel strongly about. Like there's a whole other reason a whole slew of reasons why you might want to have a basic life insurance policy in place that probably c probably less than what you probably think it it would cost to have all those things. Well covered. Chris Scheele: Yep. Yep. Scott Campbell: So let's go let's talk about maybe the more common situation that that we would typically be talking to a lot of clients about in terms of, you know, family, you have a spouse, maybe have some children. What are we what do we need to start thinking about first and foremost when it comes to what we're looking to have covered? Chris Scheele: Yeah, I mean really the first thing is looking at income and and assets, right? So Scott Campbell: Yeah. Like when you say income, like income replacement. Chris Scheele: income replacement, exactly. Yeah. So if you're say, yeah, say your family, you've got a w a spouse and maybe a couple of kids, and you bring in a hundred and eighty thousand dollars to that household each year. If you pass away and therefore your income stops. Can your family maintain the same lifestyle that they have? Or would you want them to maintain that same lifestyle if you were gone? You know, a lot of us think about that as like, I don't want to be a burden on my family. I want to, you know, make it as easy as possible for them to grieve and, you know, get on with life in in, you know, the strongest way they can, and life insurance Scott Campbell: Yeah. Chris Scheele: can support that. Scott Campbell: Yep. Yep. So often we'll hear first and foremost, we wanna make sure that the mortgage is taken care of on on the principal residence. we wanna make sure that they're mortgage free, don't need to worry about a mortgage payment anymore. Then when it comes to the income replacement side of things, they're that that that can change quite a bit depending if the other spouse is working or not and bringing in an income. If Both spouses are bringing an income, then only one chem income is lost, but there's still the family, total family income has gone down, potentially by a fair bit. Then starting to answer some of the kind of questions of how much family income was lost, what percentage do we need to maintain our fam our lifestyle, and then for how long? Right? Is that till the kids are out of the house and and independent? There are a lot of different ways that you can look at that, but it's just there's no there's no specific formula or That's that can be broadly used for everyone, but it's a it's a good starting point for the conversation. Chris Scheele: sure. So let's give an example. Let's say we've got a 35-year-old chiropractor, they're part, their partner, their spouse works part-time, they've got a couple kids under the age of six. In this case, you know, the say the chiropractor that's getting the life insurance, they want to provide about $75,000 a year to their family for 20 years. So it what that would look like just doing the math on that would be about $1.2 million, is what it would take to cover that. Liability to replace that income for that 20-year period of time. Then, we might add in a mortgage. Let's say they have a $600,000 mortgage. They might have, and they got say $75,000 of line of credit and car loans that they want to pay off. also in this case, they've done some thinking ahead to education costs for their kids and they know they've already started an RESP. But the RESP isn't fully funded. So they also want the life insurance to fund a hundred thousand towards education. And Scott Campbell: Mm-hmm. Chris Scheele: then lastly, there's the one thing that often is overlooked is final like ceremony expenses. we all need to be buried or dealt with in some way. So there's there is a cost to that, and that's an easy one to, you know, take that burden away from the family and have a life insurance payout cover it. So add up all those things, the one point two million of of income replacement plus these liabilities and other goals, this this situation we're up to two million dollars of coverage. Scott Campbell: Mm-hmm. Yep. Broadly speaking, that that scenario that you just walk through, plus or minus like the income level need or the mortgage, I would say broadly speaking, in today's day and age, in terms of what typical income levels are and mortgages are, it's pretty typical now to see clients needing an like at least a million dollars of insurance to cover off mortgage and income replacement needs. If you're Chris Scheele: For sure. Yeah. Scott Campbell: high income doc with a mortgage still, like two million dollars might be the basic starting point to at least give you kind of base base coverage, right? Chris Scheele: Yep. For sure. Yeah, one one to three million probably is is the range for most people. You know, obviously there's gonna be outliers, but yeah. Scott Campbell: Mm. But here's the thing, and I think we can transition to the next is is talking about, well, if I need one to maybe three million dollars worth of worth of insurance, what type of insurance do I need? Because the first thing that I'd probably if I if I was someone considering needing this amount of coverage, I would the first one of the questions I would think to myself is, well, I don't need this coverage forever. I'm not gonna have a mortgage forever, and my kids aren't gonna be dependent on my income forever. So how do how do I how do I what policy do I do I get to cover me for this period of time where I have these obligations? Chris Scheele: Yeah, that's where in our opinion, term coverage is is usually the best option, right? It's not a permanent insurance need, especially not the bulk of it, right? Like some of this might be a permanent need. but you know, the mortgage is gonna be paid down. The income replacement over like we started with a twenty year period where we needed to replace that income. Every year you age, that's one less year you need to replace that income for. So the need of insurance is gonna decrease over time. We also factor in what we call becoming self-insured, like having the assets available to to cover you in the event that you pass away. So insurance need drops, our asset level grows, we become, you know, more self insured in a way. And in a lot of cases, we can let the life insurance go at some point in time. In a lot of cases. Scott Campbell: Mm-hmm. Yeah, another way, another way of looking at it rather than even just saying self-insured, it's more so there's no longer this significant financial burden if something happened to you prematurely. Right? So you mentioned term term insurance. So let's let's break that down in terms of what that what that terminology of term insurance means. Essentially what we're thinking about here is that. You you can buy you you can essentially rent life insurance for a certain period of time at the cheapest cost possible. So you can buy your policy in different term lengths, or the most common term lengths that we can consider looking at when it comes to term insurance. Chris Scheele: Yeah, ten or twenty years are usually the most common. There are other increments we can consider, but you know, ten ten is kind of the low end starting point and twenty is yeah. Scott Campbell: Yeah. Chris Scheele: Another option. Scott Campbell: For sure. you can really get whatever term length you want to, but they're typically Chris Scheele: For sure. Scott Campbell: packaged in that ten year term or twenty year term type of type of policy. Either either route can be could be the right route for you to go. In some cases We like to think that tem tenure term policy could be a great option and something that you can reevaluate and get a new tenure term policy every, you know, four or five years as you reevaluate reevaluate your needs for how much insurance that you need and keep your costs minimal. in some cases, getting a 20 year term policy makes a lot more sense. Just said and forget it. I have this set amount of coverage for a low cost for the next 20 years. The premium is not gonna change on me. monthly for the next twenty years. I also see cases where it can be maybe a combination of both. I have a million dollars in a term twenty policy at a low cost, and I got another million dollars in a tenure tw tenure term policy that I know I might need to reevaluate every four or five years as well. Right? Chris Scheele: And some of the reason you might consider that is as your need for insurance declines, you you can let your 10-year policy expire at and then in year eleven to 20, just have the 20-year term policy. There's lots Scott Campbell: That's right. Chris Scheele: of different options you can do with it, but regardless, in any case, when you enter into a contract for a term policy, you are getting a fixed amount of coverage for a fixed set amount of time. Scott Campbell: Mm-hmm. Chris Scheele: Either a 10-year period or 20-year period. And your cost for that insurance is set for the f for the full duration of that coverage. Right? So pretty straightforward. Scott Campbell: Yep. And we have to the reason why we're big proponent proponents of a term life insurance policy is that essentially the insurance company is pricing the risk of like if we're thinking about say a 35-year-old male looking for a couple million dollars worth of insurance and you get a ten-year term policy. The insurance company is essentially determining what their risk level is for that 35-year-old male to pass away prematurely, sometime between the ages of 35 and 45. Outside of like a freak accident or illness, it's unlikely, and that's why the cost for that million or two million dollars of coverage for that 10-year period of time, generally speaking, is pretty low. we're talking what, maybe 40 or 50 bucks for that million or two coverage for that 10-year period of time. Chris Scheele: Yeah, forty or fifty dollars a month. Yeah. Pretty pretty pretty common. On the flip side, Scott Campbell: Yeah. For sure. Chris Scheele: if you're a fifty-five year old male and you still have a need for insurance and you need to enter into new a new policy, your cost of insurance is going to be significantly higher because you pose a significantly higher risk to the insurance company of of having a premature death between the age of fifty five and sixty-five compared to the age of thirty and forty or thirty five and forty five. So pricing Scott Campbell: Mm-hmm. Chris Scheele: based on three kind of main criteria. One of them, well, we can't control any of them really. It's it's your gender. Male males are more expensive to insure because we do silly things. unfortunately. Scott Campbell: Fortunately. Yep. Yep. Chris Scheele: we get a break on the disability insurance side. So it's a we're a little bit cheaper than women on that. Scott Campbell: Yeah. Mm-hmm. Chris Scheele: the next thing is your age. That's a big indicator of of your cost of insurance. And then the last last one is your health. So if you're Scott Campbell: Yeah. Chris Scheele: if you're female, young and healthy, that's the cheapest insurance you can get. Scott Campbell: Yeah. If you're a old old male that smokes and has some health issues, could be pricey. Chris Scheele: most expensive insurance you get. Yep. Scott Campbell: Yes. Yeah. And then everything in between. Yeah. Chris Scheele: Love it. Scott Campbell: Yeah. Chris Scheele: All right. So we've talked about like a little bit about how much, a little bit about potential costs and term lengths and and how a term policy works. Should we explore policy that doesn't like an insurance type that does not have an end date, a permanent insurance? Scott Campbell: Mm-hmm. Let's just talk about broadly what permanent life insurance is. Permanent life insurance in Canada is typically sold in one of two ways. You'll hear the term either a whole life insurance policy. So terminology is pretty straightforward. It's your whole life that you're covered for, covered for the face value that you're insured for. Another term that you might hear is what's referred to as universal life coverage. Kind of similar. You're typically covered, You're covered for your whole lifetime. but there can be components in both these whole life vehicles and universal life vehicles for the product type that there can be an investment component tied into the policy. But if we just think about it from a base level before we touch on the investment side is that you are typically in either case insured for a face amount of insurance, half million, million dollars of coverage, and you're insured for that polic insured for that amount for your whole lifetime. So if you live even to a hundred and two years old, whenever you do eventually pass on that benefit amount will be paid out to your beneficiary. Therefore, the premiums are going to be more expensive because we do know that there is going to be exchange of I have to pay a much higher premium, but I know with certainty at some point I will pass away. Even if I live to my late 90s, at some point this benefit amount will be paid out by the insurance carrier so long as I keep the policy in force. Where that's you can't say that about a term life insurance policy that you're paying a normal amount of coverage for because you're essentially just renting insurance for that set period of time. Chris Scheele: Yep. Yep. That's Scott Campbell: Is that a good way to describe anything you'd add to that? Chris Scheele: a that's a great way to describe it. The only thing I would add is I I often give the analogy of like paying your paying for your auto or home insurance. It's like you're paying an annual or monthly amount to have that coverage in pace in place, to have that peace of mind that you know if you get in an accident, you're gonna get your vehicle replaced and you're gonna be able to continue to get to the places you need to go. You hope that you never have to use the policy. You hope to never have a claim and you're never gonna get any benefit out of the policy other than that peace of mind and getting your car fixed if you have an accident. If you go your whole life without having an accident and you pay into your auto insurance that whole time, is it a waste of money? No, it's the cost of doing business. If you want to drive, you need auto insurance. Term insurance is the same thing. If you if you Scott Campbell: And the and also before you continue, the cost of the cost of of pushing that risk from from from you to an insurance carrier at a c at a at a much smaller cost than you taking in that full risk. Right? Like that's the reason why we're doing Chris Scheele: Hundred percent. Yeah. What if Scott Campbell: that. Chris Scheele: what if you get in a huge accident and you know you cause undue harm to all kinds of different people and and maybe the cost of all of that is is one point five million. Well, do you want to pay that out of pocket? No, that's why we have auto insurance. Right? Same thing Scott Campbell: Mm. Mm-hmm. It makes Chris Scheele: on the on the term insurance side. It's like you keep referring to like you're renting the policy. And I think a lot of people can take that negatively, but I really want to encourage you, that's not the case. Like We're not saying that in a negative connotation in any way. Like Scott Campbell: Mm-hmm. Chris Scheele: ideal ideal outcome with with insurance, with life insurance, is you take out the policy, you pay your premiums, as long as you have the policy and and you continue with it as long as you need it and you never ever have to use it. And you pay as little in premiums as possible, and you enjoy optimal peace of mind, knowing that you're covered, and you get on with life. That's insurance Scott Campbell: Yeah. Chris Scheele: in a nutshell. Scott Campbell: Yeah, for sure. It yeah. Chris Scheele: Life insurance. Scott Campbell: It's inter it's interesting when c you brought up home and auto, something that I've I've always thought about in terms of we have to have those types of insurance in place. We're required to have home and auto in in place. I think if you had the option not to be insured for home and auto, I'd be curious what the percentage of population would be to say, I'm I'm okay with not insuring my home for for f fire or flood or or hail damage or whatever, or or my vehicle. I think a lot of people would say, No, I would I I'm gonna insure my home in case it burns down to the ground. Right. But then they don't think about the same way same kind of they don't think about from that lens from the r the risk of not insuring their own life and and your human capital in terms of something happen you prematurely and especially if you have liabilities and people that are depending on your income. Right. Chris Scheele: Yeah, for sure. Yep. So back to the permanent thing. Again, yeah, it's not it's not a negative thing to rent your insurance and, have term insurance. Permanent insurance, on the other hand, it's not a scam. it's a legitimate product. I think the reason that we are s often so negative on permanent insurance is because of the way it's presented and the marketing and sales tactics that insurance salespeople use in our industry. To try to sell this stuff and the incentives that they have to sell it. That's the issue we have, right? So permanent insurance, maybe you need it. It's one one day, it's probably something worth having a conversation about with your advisors. But when an advisor or insurance agent approaches you, and the first thing they're pitching you is insurance, and they're talking about a story about tax savings or investment growth wrapped into your insurance, that's a sales pitch. That's not a Scott Campbell: Mm-hmm. Chris Scheele: plan. That's not part of a structured financial plan. Scott Campbell: They are a hammer and you are the nail. And everything that they see in front of them is a nail to to to hammer the idea that everyone needs a permanent insurance policy with some sort of investment or tax strategy wrapped into it. Chris Scheele: And why do ins some insurance agents rush to sell permanent insurance, Scott? Scott Campbell: Permanent life insurance, like we talked about, because of the inherent the risk there that the insurance company's taking on to say, hey, for a higher face amount of insurance, it's gonna cost you a lot more in premium to cover for this amount of insurance because we're gonna uncover you for your whole lifetime. So what happens is premiums are higher, the commission that the insurance sales man or woman earns is also that much higher than selling a much more cost effective term life insurance policy. So The industry, especially if you are one hundred percent insurance focused, your incentive is to sell insurance policies that have higher higher premiums, right? So then they get coached and trained and and taught how to sell these more expensive higher premium policies to everyone without asking and d Chris Scheele: Whether they need it or not. Scott Campbell: whether they need it or not. Doesn't matter if you've maxed out your RSPs or your TFSAs or how you're currently investing, or if you have debt or not the all the things that should be discussed and thoroughly planned through before you even consider the idea of, hey, we've done this robust financial plan and we see there's a clear need here for some form of permanent life insurance because we've already crossed off X, Y, and Z from a from a planning perspective. But if you're starting off with here's a prescription for a permanent life insurance policy with a tax or investment strategy component tied into it without talking about any of that other stuff first, you're probably being sold. You you in that situation y you're the nail and you're you could get smoked by the hammer here if you're not careful. Chris Scheele: Our general philosophy around this is insurance should be used for insurance sake, and investments should be kept separate from insurance and used for investment sake. And both of those components should be clearly connected to a structured financial plan. Scott Campbell: Yep, for sure. For sure. Chris Scheele: Yeah. Scott Campbell: Yep. Chris Scheele: Anything else you want to say about permanent insurance before we move on? Scott Campbell: I'll say that as an example of of why you may need it. Like there is there is a use case for permanent insurance. You know, there's probably what, maybe 5% of the population after they've done some some good planning, they're maybe later in career, there's tax planning opportunities where a properly placed permanent policy could be the right decision. So I'll give you just an e an example. Say you are, 20 years into your career, you have your principal residence, you bought maybe you're out in I don't know, say in Ontario, you got a cottage, you're in cottage country. You have a you have a second property that you vacation at and you own that as well. So now you own two properties. You have a principal residence that you live at, and then you have a cottage that you that you vacation at, maybe rent that out, and that's appreciating in value as well. Along over the years with that appreciation and value comes a tax bill. Whenever you do pass on, there's going to be a capital gain if you say wanted to pass that cottage down to your children, say you bought it in the I don't know early 2000s, late late 90s, and there's been you know a million or two of a of of capital gain appreciation over that time period. At time of death, that triggers a capital gain. There could be a significant tax bill associated with passing on that asset to your beneficiaries. Maybe it's your children, If the if your children want to keep that cottage in the family, then they need to pay the CRA the capital gain, that tax bill. And what do you do if you don't have the cash without selling the the asset? You have a couple options, right? You could potentially take out a mortgage on the on the cottage, remortgage them remortgage it and pay the tax man using the funds of the mortgage. Or maybe that's a good good reason to get a permanent life insurance policy, maybe in your fifties or sixties, to say, hey, I'm gonna be enjoying this cottage for the next twenty, thirty years. And whenever I pass on, I want to make sure that the tax bills, tax bills fully paid off. Full and clear, can be passed along to my children and they're and they can enjoy it. Sounds like a great, great reason to pay a higher premium for a permanent insurance policy that will eventually pay out a large life insurance benefit so the beneficiaries can carry on. Is that a good example of why you might need one? Chris Scheele: Great, great example. We're passing on that risk. We know we know there's a permanent need at some point upon death. There's gonna be a tax bill coming. We can get a an insurance policy to directly address that need and cover it off so that it does not add undue stress to the beneficiaries we want to pass the asset on to. Scott Campbell: Yeah, for sure. Chris Scheele: Cool. All right, let's move on quickly. Talk about mortgage insurance, line of credit, crep credit card. It's becoming more and more common that any product, these are all products by the way, right? All products that banks or lenders sell, anything, they want to add on life insurance, disability insurance components to those loans and assure you that don't worry if you if you become disabled, you know, you have this policy attached to your line of credit or your mortgage and it and you don't have to pay it if that happens. What's the problem with those with those types of policies, Scott? Scott Campbell: Yeah, it's a well first of all it's an it's an additional revenue stream for the bank to sell you, say they sell you a mortgage, they're gonna have they're they want the opportunity to sell you an additional product to now cover you for life insurance on that mortgage. Starting with mortgage life insurance is an easy one. At time of application, you get approved for the mortgage, you'll be offered life insurance and/or life and disability insurance on the mortgage. The The easy thing to do is to say yes, because you have to answer very few in most cases, you answer very few medical questions to be approved and start paying the premium for that life insurance to be covered on the mortgage. But I wouldn't Chris Scheele: No medical questions, in my experience. Scott Campbell: be surprised if there's situations where you have to answer no questions like, yep, I want the Chris Scheele: It's just Scott Campbell: life insurance coverage. Chris Scheele: Yeah. Well they're not they're not underwriting the coverage at the time of application, right? So they're just saying, Scott Campbell: That's right. Chris Scheele: Are you are you a human being? What's your date of birth? What's your gender? And that's it. And then they're giving you the coverage, but they're not gonna check that you qualify for the coverage until you go on claim. So that's one of the Scott Campbell: We pass away. Chris Scheele: biggest red flags, right? That like, hey, I I go I got mortgage insurance coverage, but you know, not until you pass away do do you find out if the coverage actually gets approved versus term Scott Campbell: Yeah. And there Chris Scheele: life insurance where it's the exact opposite. You go through the medical underwriting up front, you're a hundred percent approved for the duration of that term, regardless of what happens between now and that and the end of the term. Scott Campbell: Mm-hmm. Two things to note on when it comes to the mortgage life insurance side. like you're saying, Chris, like you basically get it instantly. You don't have to answer any or very few questions to get the coverage in place. If you were to pass away prematurely, then it's your obviously your your spouse or or beneficiary that has to go through the process of making a claim. And that's when the insurer on the mortgage insurance side could potentially, potentially, for whatever reason, if they do an investigation and say, Hey, based on XYZ medical history, like We're not approving the claim, That's not a that's a that's the last situation that you want to see your loved one in, to see a a a mortgage provider deny an insurance claim, The other problem with mortgage life insurance too is one or a couple, I'll point out real quick. One, the cost of the insurance is typically a lot higher than getting a fully underwritten term insurance policy. And it's because they aren't asking you all the medical questions to get the coverage in place. So they're broadly saying, I don't even know the the insurer is not has no clue what kind of risk they're bringing on by insuring you because they're answer asking no medical questions. And two, the other problem I see with this mortgage insurance coverage is the beneficiary is the bank. You pass away, even if there is a successful claim, the mortgage is paid off free and clear. Like that's gone. And maybe that's that's fine in nature, but on a typical term life insurance policy that you own and pay for, the benefit the benefit amount is paid to the beneficiary, and then they have the options and decision of whether or not they want to pay off the mortgage that in many cases has been going down in terms of how much you owe, where it Typical life insurance policy, you get the full benefit amount, even if the mortgage has been paid off slowly over the years. They have the option of paying off the full mortgage if they wish to or not. Right. What else you want to hit on when it comes to this this world of mortgage and line of credit coverage? Chris Scheele: Yeah, to s to summarize, I would just say you you don't need you don't want any of these coverages. Instead, you Scott Campbell: None of it. Chris Scheele: the ideal outcome is to be adequately insured through prop proper term life insurance policy, a proper professional level disability contract, and have critical illness insurance if if you wish. that's that's the ideal outcome is like have your coverage in place and decline all the sales cover coverage that's presented to you when you get a mortgage or a line of credit or a new credit card. Scott Campbell: Mm-hmm. One quick, quick story, because I think this is probab I I would bet that a lot of our listeners might be in a situation they're not even aware of it. We we have we had a client I've been working with for a while, and they had a good term life insurance policy in place. Like they were well insured, no issues there whatsoever. But at one point another we had to review some bank statements. And I noticed on the bank statement that there was this constant insurance charge being being being applied to their account month over month. And I brought up to the client, I'm not really sure what what that's all about. It was it was wasn't cheap. I think it was a hundred and eighty or ninety dollars per month that they were paying for this loan protector insurance that he wasn't even really aware. Like maybe he was aware at one point. But forgot that he that he said yes to it. And a lot of people are just unaware of the things that they're paying for each month. And it's like, hey, well, you you have a term life insurance policy in place. You're already well insured. Let's save you a couple grand a year in this case, cancel that policy. You don't need that that line of credit insurance that he was paying for in this particular situation. So if you if you are in a situation where you already feel like, yeah, I've checked that box, Scott and Chris, I got that term insurance policy in place. Make sure you don't have any of these lingering mortgage life insurance or line of credit or credit card life insurance policies in place if you are adequately insured through a policy that you own. Yeah. Chris Scheele: Yep, for sure. That's a great great reminder of yeah, go check your statements, see if there's any charges that are coming up in there. And if you do need to make a change and and you don't already have like or you're not confident in how much in life insurance or disability insurance you have in place, like great reminder, book that meeting, go talk to whoever you need to talk to, book with us, talk to your current advisor, whatever. Get it sorted out before you before you make a change. Right. We always say like if you're if you're putting new insurance in place, don't cancel the old stuff until the new stuff is totally active. Right. So Scott Campbell: Mm-hmm. Chris Scheele: that would be my only recommendation on that front. Scott Campbell: My only recommendation to to to further on this, not in terms of that that audit that you just mentioned, I think is important, but like it's it's having doing this audit of what coverage you have in place, how much you like what the product is that you have in place, how much you're covered for. I think that's something that you should be auditing at least one once a year, at least every couple of years to make sure that you are well covered for how much you should be covered for. So often we're bringing or having I just had a conversation this afternoon with the doc. It's like that's considering working with us. It's you know, I have this insurance in place, but it's been so long since I last reviewed this with my insurance advisor. You know, it's not a good thing if it's been five or ten years since you last reviewed your life or disability insurance policy because your life and circumstances have likely changed to a point where you might need more coverage or a or a change in coverage, right? It's not Chris Scheele: Yep, for sure. Scott Campbell: a set it's you typically not a set it and forget it kind of situation. Yeah. Chris Scheele: No. No. Just like when you go to renew your home and auto insurance, you know, every year or two, you take a closer look at it, you go shop it around, get get some more competitive Scott Campbell: Mm-hmm. Chris Scheele: quotes, make sure it's still what you need. Like they're sick. Scott Campbell: Such a great reminder too. I know I've been guilty of that. Like you it's I feel like that's probably even a a big one too for for a lot of our listeners. It's, you know, just stick with the same home and auto provider that you have for the last forever many years because it's easy and convenient. They just keep renewing you year after year without actually doing maybe taking a little bit of time and shop it around, making sure that you that you're covered well and you're paying a fair price for it. Yeah. Chris Scheele: Yep. And we should do the same thing with our rest of our insurance. Our our term, our life insurance, our disability or critical illness. Let's review it. Let's talk about it. Has has your situation changed? Do you need to adjust the coverage amounts? Scott Campbell: Yeah, for sure. Chris Scheele: Better to do it proactively than reactively. Yep. Scott Campbell: Mm-hmm. Mm-hmm. All right. Should we wrap it there, Chris? Anything else? Chris Scheele: Yeah, just in in leaving, I'd say with all this insurance stuff, it's so easy to get wrapped up in like it feeling like sales. I mean, I know I feel that way when we talk about insurance sometimes. It's like, man, we're pushing insurance, but we're not. We're we're helping you cover the risks that you have. And on the other side, I know I've also felt as the as the individual trying to get insurance that like it just doesn't feel great. But In spite of that, like we gotta deal with it. We have to. So have the uncomfortable conversation. Make sure you have a plan first and then get the appropriate policy, right? Getting a policy without a plan, without it connected to anything, you know, I guess it's better than nothing, but it's not ideal. Right? We wanna know, Scott Campbell: For sure. Yep. Chris Scheele: make sure that we have the right amount of coverage in place and we know the reason why we have that amount of coverage. Scott Campbell: Mm-hmm. At the end of the day it's just so you can you can sleep well at night knowing that y you your human capital is is covered and protected for you know when when I think about disability insurance and criticalness and things like that. But also the on the life insurance side to say, hey something, God forbid happened for happen to me. my family's gonna be okay. Like I'm not gonna be it's not gonna be a burden, Tough conversation to have, but a very important one. It's like it's I always say it's the it's the defensive side of your financial plan, not as sexy as us talking about cash flow and investments and and goal planning and future projections, but it's it's it's something that's important to be discussed once it's in place. All right, let's revisit this every year or so, making sure it's all all good. We'll carry on to more exciting conversations in the other areas. Yep. Chris Scheele: Yep. Yep, for sure. Scott Campbell: Cool. Chris Scheele: So if you've never actually worked out what your family would need, what if something would happen to you, or if, you know, you're not confident in the insurance you have, here's your chance. Book an intro call. We'd love to chat about with you and help you find the coverage you need and that aligns with your plan. Scott Campbell: Well said Chris. Thank you for for being here. We'll see you again next week. Right? Same time? Same place? Okay. Chris Scheele: See next week. Yep. Scott Campbell: Cool. All right. See you next week.