December 17, 2017

Leaving Your Employer? Get Your Insurance In Place First.

Courtesy of Michael Schwarzenberger
When you're leaving your employer — voluntarily or not — you have much to consider about your future. You could easily forget or undervalue the employee benefits you've been receiving.

Unless you put similar protection in place, you are transferring risks to yourself. You have other options. 

Health and Dental Benefits

If you act fast, you likely qualify for Manulife FollowMe health and dental without underwriting. You need to apply and pay within 60 days of losing your current coverage (sooner is safer). You can apply for FollowMe through Costco to save money if you don't need guidance.

If you'd like better coverage with fewer limitations, consider Association plans, which are only available through advisors.

Tip: If you're out of time, get FollowMe first and then compare with the Association plans. 

Disability Insurance

Your group Long Term Disability (LTD) will likely end. Personal disability insurance is worth considering if you or your dependants would be heavily impacted if you became unable to work due to a sickness or injury. The cost may seem high but the benefits are valuable.

The best time to apply is while you're still working since a discount usually applies. Upon leaving your employer, a well-constructed plan allows a special one-time top-up to replace the group LTD you're losing.

Tip: Group LTD has limitations. Consider personal disability insurance as a top-up even if you're working.

Life Insurance

You likely have a right to a short period to convert your group life insurance to personal coverage (e.g., 30 days) after your employment ends. Your employer may not emphasize this option because the insurer charges them a penalty on the assumption that some of those who convert are in below-average health. Personal life insurance is likely cheaper but takes time to put into place.

Tip: If you're out of time, convert your group life and then compare with personal life insurance. 

Be Ready

When you're starting out on your own and uncertain about the future, insurance brings stability and peace of mind. Waiting until you're established brings risk.  

Reminder: simplified for clarity. For specific answers to your personal questions, arrange a private chat

February 28, 2015


This blog is switching to a video-first format with a new YouTube series called Question an Actuary (QanA). You can read the transcript (this blog post) or watch the video (embedded at the bottom). You lose nothing and get more choice.
Question: Why do I need insurance?

Answer: Because bad things happen. Even if you’re good. Even if you prepare. Insurance transfers risk.

You — yes you — always have insurance. Even if you don’t want any. How good is your protection?
As a minimum, you are your own insurance company. This is called self-insurance. You transfer the risk to yourself. You might set money aside in a bank account for the projected claims. For instance, you could build a fund to repair broken appliances or to cover expenses during a disability. Self-insurance is riskier if you live alone by choice or because a til-death-do-us-part relationship collapses.
Beyond this, you have OPM: Other People’s Money. That’s terminology from The Millionaire Next Door by Thomas Stanley. Here you transfer the risks to others, often family. Parents, grandparents, siblings. Your rich aunt or uncle. They may willing and able to help. Don’t count on them being happy, though. You may pay them back in other ways: they now have power over you … and may like reminding you and anyone else who listens about their generosity. Charity begins at home. Arguments too.

You may be able to transfer some risks to your employer. Perhaps basic medical, dental, disability and life insurance. Employers often dislike self-insurance and transfer some risk to an insurance company. Employers often pay some or all of the costs. Whoever pays decides what you get. Insurance from your employer is called group insurance.

There’s another source: an affinity group where you're not connected by work. You could qualify through an alumni association, professional association or other group. Do you think affinity groups self-insure? At work, you have no say in what you get. Same here. At work, your employer helps with the costs. With an affinity plan you pay every penny — rarely guaranteed. Part of your premium goes from the insurance company to the affinity group. Employers don’t usually add a markup since they're already profiting from you.

The next stage is personal insurance. This you buy from an insurance company. Now you’re in charge and pay the premiums, which may be guaranteed. The protection stays with you if you change jobs voluntarily or involuntarily. Here you pay the stipulated predictable premiums. In exchange, you get a  contract which states the benefits you get.

Insurance companies don't like self-insuring. They transfer risk to re-insurers who may transfer risk to retrocessionaires.

The insurer of last resort is the government. You may think they self-insure but we taxpayers pay. You may think you’re entitled to benefits because you pay taxes. Other taxpayers may not agree. Also, you don’t have control over what’s available. Rules change.

Do you need insurance?

Yes. The question is who insures you. Since we’re not good at assessing risk, we tend to be optimistic. That’s why people buy lottery tickets and get remarried.

We don’t need car insurance because we’re safe drivers. We don’t need disability insurance because we’ll remain healthy (or think we have enough coverage from work). Who needs long term care insurance? If we need money, we can borrow against the growing equity in our house (if the banks are still lending) or get help from our kids (which means a smaller inheritance for them). There’s the government too. We paid taxes for ages. They owe us!

What if you’re wrong? That’s when you’ll truly know if you need insurance. That’s also when you can’t get any. Sorry. Insurance companies also bet. To minimize their claims, they want low risks. If you’re eager to buy, they’re suspicious. Do you know something they don’t?

Even if you have insurance, you might find you don’t have enough if you have a claim. And feel you have too much if you never have a claim. Maybe something is better than nothing?

If you never have a claim, would you like your money back? This option is sometimes available for an additional cost. The refund takes place at cancellation or death. It’s as if you earned a zero percent return. You’re protected whether you have a claim or not.

You always have insurance. Have you explored your options and optimized your decision? The best time is now.

Do you need insurance? What do you think? Share your thoughts and ask your questions below. For  private personal attention in Toronto, reserve time to Learn About Life.

Reminder: These answers aren’t a substitute for personalized financial advice. The general information isn’t tailored to your unique situation.


PS Why do you need insurance?