How I Became a Life Insurance Convert

The information provided in The Kinder Way Podcast is for educational purposes only, and is not intended as a substitute for professional advice from a licensed advisor. The content of each episode is the opinion of the host and interviewees, and does not represent the views of Serenia Life Financial or any of its other subsidiaries or affiliates. Please always consult a licensed insurance advisor for guidance. Serenia Life Financial does not endorse any third-party views referenced in this content.

Episode Transcript

Hello and welcome to the very first episode of The Kinder Way Podcast! I’m so glad you’ve tuned in – because I am here to share the inside SCOOP with you – and not from the perspective of a salesperson or advisor – but from a pretty typical middle class Canadian mom.

In our first show, I’m going to tell you why I became a life insurance convert and share a little-known way on how you can build your children’s future wealth.  I’m also going to do my best to use words we can ALL understand. Promise.

Because, if you’re anything like the old me, even the word life insurance makes you want to run and hide under your bed. But worse, terms like “underwriting,” “20-pay whole life” “dividends”, and “premiums” just seem to go over everyone’s heads, no matter how smart you are. And no wonder – they’re pure jargon! Plus, the idea of financially benefitting from our loved one’s death can make our minds go to dark places.

Maybe you saw that made for TV movie, Wife Mother, Murderer, that scarred me back in the 90s – you know, the one about the woman who poisoned her husband and attempted to do the same to her young daughter, all to get the money from their life insurance policies. I mean, if that’s what comes to mind when you think about life insurance, can its reputation get any worse?! Lucky for all of us, I’m here to clear its name and translate the jargon.

But… you may be wondering… What can a writer teach me about life insurance? Well, as someone who started working in this industry just a few years ago, I’ve been where you are when it comes to understanding life insurance. I get how complicated – and creepy – it can feel. Not to mention, my mindset did a complete 180 when I finally understood how important life insurance was for me and my family.

Let me explain…

It was only about 3 years ago that I got a policy for myself, my husband, and my son – something I hadn’t even considered before working for Serenia Life. But now I fully get why it’s not just a smart move, but why my family couldn’t live without it at this stage in our lives. See, about a year after I got my current job, my husband and I bought our forever home – with a mortgage that will haunt us til we’re old and grey – I’m sure that’s a familiar story to many Canadians. And while we are able to make the payments on our two salaries, if our income were suddenly halved due to one of us dying too soon – knock on wood that doesn’t happen – we’d have a very big problem if it did… one that might lead us to sell the house and transplant our happy kiddo from everything he knows and loves (his neighbourhood, his school, his friends) to a cheaper home and area. While that sounds bad enough, add to that the fact that, in this scenario, he would have just lost a parent, and suddenly it’s not just bad – it’s traumatic. I would never wish that much trauma on my child… or yours!

So that’s why both my husband and I each got a Term 20 policy – that means that we make some pretty affordable monthly payments for 20 years (that’s when the term is up) at which point we can renew or convert to a policy that would be around until we die (hopefully when we’re very old and very grey). The money we would receive is not “benefitting from the other’s death” but simply money to replace the lost income until we get back on our feet.

Now you may be wondering why in the world we’d get a life insurance policy for our son. Well, this decision had nothing to do with the fact that we think he might die anytime soon – and everything to do with the fact that we’d like him to live a long, healthy life and be able to afford a down payment for a home one day… without coming to his poor old retired parents asking for help. If that sounds like a strange reason to get life insurance, I promise, it’s not! It’s actually very similar to the reason you’d pay into a child’s RESP over their lifetime.

See, unlike my and my husband’s term policies, my son’s whole life policy comes with an investment component called a “cash value.” So not only does the value of his policy grow over time, but he can actually access that money later in life if and when he needs it. If this is news to you, you’re not alone! I had NO IDEA this was a thing until I started working in the industry.

What this means is, he could use the cash value to help supplement the money he gets from his RESP one day…. to help pay for tuition or something totally different, like a first car, a wedding… or even use it to travel the world. (But we’re crossing our fingers he’s more practical than his travel-loving parents were when we were young!)

Back to that down payment I mentioned… my hope is that he will let the cash value in his policy snowball until he’s ready to buy a house. Because we all know that housing in Canada is in crisis… and I recently read that 58% of Gen Zees (or is it Gen Zed?) in Canada believe they won’t be able to afford a house when they’re ready to settle down. Ugh.

Back to the present – I wanted to take a step back and explain what I meant when I said I wanted my son’s cash value to snowball. I deliberately used that word instead of simply “grow” because of a little trick called “compound interest.” Excuse the jargon, but what that really means is making interest on your interest – which is exactly what my son’s policy is doing because I made sure to take advantage of a feature that ensures as much growth as possible.

Think of it like this: You could get a basic policy at about $30 a month for a healthy 6-year-old boy, which could lead to the following growth:

• At age 25, he could have just over $7K to borrow from his policy.
• At age 40, it could be little over $20,000.
• At age 65, it would be closer to 90K.

Not bad, but also not amazing, right?

So I decided to go for the “Additional Deposit Option,” which brings my monthly cost up to about $100 each month, BUT here’s what I’ve worked out he’ll have earned at different stages of his lifetime:

• At age 25, he could potentially withdraw up to $30,000 from his policy to buy a car, help pay for a wedding, or – gulp – travel the world for a year.
• Or if housing is still ‘in crisis’ by the time he reaches adulthood, maybe he’ll opt to save this money until he decides to buy his first home at – say – 40 like I did, at which point he’ll have about $90,000 to put towards a down payment.
• Or he could go through life never having to worry about the fact that fewer and fewer jobs come with a pension since his retirement could be VERY nicely funded… like in the several hundred thousand range!

90K at age 40 and maybe $400,000 by the time he retires? These are pretty significant numbers. And I’m paying less than half the price my husband and I spend when we eat out at our favourite restaurant – don’t ask me how often we do that – I’m serious. (Plus: we don’t really need to worry that my son will come asking me us to borrow $90K for a downpayment in 30 years.)

Okay. So.

if you like this idea, but don’t like the thought of adding another expense to your never-ending list, do what we did and get your kids a 20-pay policy – that jargony term I mentioned earlier – which really just means there’s an end in sight when it comes to the payments. After 20 years, you stop paying. But your child is covered for the rest of their life (which becomes more important the older they get because, at some point, our kids are going to have families of their own — and life insurance will be more necessary and a lot more expensive).

Sooo…

I’ve just given you the ‘quick and dirty’ version of why I’m a life insurance convert, but I promise to go into more detail and more practical tips in later episodes – especially when I invite some experts on to share their wisdom. And just to be clear… in case I scared you earlier with talk of that horrible made for TV movie… the Canadian life insurance industry has MANY checks and balances in place to make sure that this type of thing does NOT happen.

I promise I’ll keep breaking down the complexities and share outside-of-the-box tips with Canadians looking for new ways to manage their money. So tune in! And don’t forget to subscribe to The Kinder Way Podcast if you haven’t already!

If you want more information on how whole life insurance can act like an investment for your kids, check out the links in the description for some related content you may find helpful.

Last thing – before I go – I promised I’d sprinkle a little bit of kindness into each episode, and the way I plan to do that is by sharing (or by having my guest share) an act of kindness we observed recently.

In my case, I have to say that it’s been seeing what my fellow colleagues are doing with the money they’ve been receiving as part of Serenia Life’s new Pay It Forward With Kindness initiative. From making handmade blankets for a local SPCA to delivering an arts and crafts kit to a homeless shelter for youth, I find it really heartwarming to see the different ideas that have sprung out of this new tradition. What about you? Feel free to share an act of kindness you’ve observed in the comments!

See you next time!