SYNERGY. New combined insurance plan, which includes a combination of 3 types of risk
As of July 2011, the largest insurance company, Manulife Financial, has developed a product, which in it self includes 3 insurance occurrences (insuring life, health and inability to work). The 3 different insurance policies are included into one contract to receive a discounted rate. You chose a coverage of a $100,000 to $500,000. Creating such a contract can be done between the ages 18 and 50. The cost of such insurance can be obtained in the “Insurance Price Calculator” section.
The contract works in the following way:
An individual chooses the amount of coverage, for instance $500,000.
- Insurance payout in case of death is the full amount of coverage, in this case $500,000.
- If the individual becomes disabled, the company will make payouts equal to 0.5% of the total amount of coverage, in this case $2,500, beginning 90 days from incident. Contract does not end until full $500,000 is paid out.
- If the insured gets a serious illness, the insurance company will immediately payout 25% of the total amount of coverage, which in this case will be $125,000, to the individual and, this is important, the insurance contract does not end. It remains intact for the remaining $375,000.
Coverage amount $500,000 is the single amount of coverage for different types of insurance risks. In other words, if the person got sick and the insurance company has paid out $100,000 in the form of disability insurance, the $400,000 remains in the policy for the other insurance needs, life insurance, health and disability, if again required.
The tables below, compare this product to obtaining individual contracts and allow you to better understand how it works and, understand whether this insurance product is for you.
Let’s compare SYNERGY contract with the most common Life Insurance contract.
| Various Situations | Life Insurance | Synergy |
|---|---|---|
| $100 monthly premium for a 40 year old non-smoking male | Insurance coverage amount$1,537,000 | Insurance coverage amount$330,000 |
| If the insured has a serious illness and returned to work after a few months | No Payout | Payout of $82,500 |
| If the insured has a serious illness and is unable to return to work | No Payout | Immediate payout of $82,500. Monthly payout after 90 days of $1,650. For the next 150 months. For a total payout of $330,000 |
| If the insured has an illness, not included in the list of critical illness or gets a serious trauma and unable to return to work | No Payout | After 90 days and thereafter a monthly payment of $1,650. For the next 200 months. For a total payout of $330,000 |
| If the insured has one of the serious illnesses included in the contract and dies within 30 days | Full insurance amount of $1,537,000 | Immediate payout of $82,500. As there is no waiting period in this contract, remaining $247,500 is received by beneficiaries. For a total payout of $330,000 |
| If the insured dies | Full insurance amount of $1,537,000 |
Beneficiaries will receive full insurance amount of $330,000 |
| What happens at the time of renewal, in 10 years? | Company automatically offers you renewed premiums at 5 times the premium of a 50 year old non-smoking male. You are required to undergo a medical examination to reduce the premium. If you have started smoking, your premiums can not be decreased, as for the 50 year old smoker the premiums will actually be slightly higher. Similarly, if there are other changes to insured health, there will be no decrease at all and the monthly premiums will continue by the original scenario | The insured’s premiums will change to an equivalent of 50 year old non-smoking male. No medical exams needed. Regardless of whether you began to smoke or your health has changed |
As you can tell there are significant differences between the insurance programs. The Life Insurance program has noticeable lower premiums for the first 10 years in comparison to cost of having coverage with Synergy, which of course includes three different insurance contracts. There are some nuances, which come up at the time of automatic renewal every 10 years as the table above shows. Now, let’s compare SYNERGY contract with a very popular Critical Illness Insurance.
Description of a Critical Illness contract is as follows: if an individual becomes critically ill (list of 22 illnesses), than after 30 days (waiting period) insurance company pays out full amount of the coverage and the contract ends.
| Various Situations | Critical Illness | Synergy |
|---|---|---|
| $100 monthly premium for a 40 year old non-smoking male | Insurance coverage amount$212,675 | Insurance coverage amount$330,000 |
| If the insured has a serious illness and returned to work after a few months | Paid out in 30 days $212,675 | Paid out immediately $82,500 |
| If the insured contracts a serious illness and is unable to return to work | Paid out in 30 days $212,675 | Paid out immediately $82,500. Monthly payout, starting in 90 days $1,650. For the next 150 months. For a total payout of $330,000 |
| If the insured contracts an illness, not included in the list of critical illness or gets a serious trauma and unable to return to work | No Payout | In 90 days the insured will begin and continue to receive monthly $1,650 for the next 200 months. For a total payout of $330,000 |
| If the insured contracts a listed illness but dies within 30 days | No Payout, the insurance contract stipulates that the payout is received after 30 days and is given to the insured | Paid out immediately $82,500. As there is no waiting period, the remaining $247,500 will be received by the beneficiaries. For a total payout of $330,000 |
| If the insured dies for any reason | Beneficiaries will only receive return of premiums | Beneficiaries will receive full amount of coverage for a total payout of $330,000 |
| Insured has health problems | Contract may be not issued, it is harder to obtain a Critical Illness coverage than Life Insurance. A person can live long but get sick often |
Synergy insurance contract will be issued if the individual qualifies for a Life Insurance contract |
Let’s compare Synergy contract with a Disability Insurance (insurance against inability to work).
First of all, it is important to recognize that insurance benefits received under SYNERGY will not combine with any other insurance payout and will not be reduced if you have another source.
The concept of Disability Insurance is as follows, once disabled, an insured cannot receive payouts from different sources, as that may create desire to fake disability. With SYNERGY, the money will be paid out monthly without any restrictions, except one – doctor’s note.
What happens is, an individual will be receiving payouts from his auto-insurance after the accident, or WSIB (Work, Safety and Insurance Board), or EI (Employment Insurance), or group insurance pay outs, but even with all these compensations, SYNERGY pay outs do not decrease.
With this contract, it is not required to prove employment at the time of the accident or prove an income, which is an obstacle for a lot of people. As well, these are not required at the time of creating the contract. This is especially important to those that are self-employed and show little taxable income.
I would like to formulate the terms of pay outs under a regular Disability Insurance.
If an insured is unable to perform 1 or 2 duties of their job due to a trauma or an illness, an insurance company begins to pay a contract specified benefit after a contract specified waiting period (common used period is 90 days as it makes the contract premiums significantly lower) for as long as doctor’s note is provided, recognizing the fact of inability to work, to a maximum of 65 years of age or other duration, pre-specified in the policy (shorter duration resulting in lower premiums). Don’t forget that the insured is obligated to provide proof of income, net or gross, at the time of creating the contract or at the time of the claim.
I will chose a common profession as an example – Construction Worker. Employees of bigger companies often have benefits that include disability insurance. However, employees working in the renovation and construction side most often have no insurance. Such a construction worker decides to purchase a traditional disability coverage, in which, the payouts begin starting 90 days after the incident resulting in trauma or illness and pays a $100 per month.
| Various Situations | Disability Insurance | Synergy |
|---|---|---|
| $100 monthly premium for a 40 year old non-smoking male | Insurance coverage amount $1,120 | Insurance coverage amount $1,650 |
| If the insured contracts one of the 22 listed illnesses and returns to work, for example, in 6 months | Payout of $1,120 starting 90 days after the illness began for a period of next 3 months Total payout $3,360 |
Paid out immediately $82,500. Starting 90 days after the illness began a monthly payout of $1,650. For the next 3 months. Total Payout $87,450 |
| If the insured contracts one of the 22 listed illnesses and is unable to return to work | Payout of $1,120 starting 90 days after the illness began up to retirement. Total payout is hard to estimate because of possible difference in timing of contracting the illness. | Paid out immediately $82,500. Starting 90 days after the illness began a monthly payout of $1,650 For the next 150 months. Total Payout $330,000 |
| If the insured contracts an illness that is not included in the list or has a serious trauma and is unable to return to work | Payout of $1,120 starting 90 days after the illness began up to retirement | Starting 90 days after the illness began a monthly payout of $1,650 for the next 200 months. Total Payout $330,000 |
| If the insured contracts one of the 22 listed illnesses and dies within 90 days | No Payout | Paid out immediately $82,500. As there is no waiting period, the remaining $247,500 will be received by the beneficiaries. For a total payout of $330,000 |
| If the insured dies for any reason | No Payout | Beneficiaries will receive full amount of coverage for a total payout of $330,000 |
| Requirement to prove income | You are required to provide proof of the amount of taxable income | No kind of proof is required. There are no exceptions to receiving payouts |
| If the insured is receiving auto-insurance payouts (for example after an accident) | Your payouts may be decreased by the amount of auto-insurance payouts. Depending on the amount of taxable amount shown. If there were high deduction, the payouts will be decreased | You receive all of the benefits without any limitations |
As you see, the insurance programs are significantly different from each other.
Why does Disability Insurance cost noticeably more than Synergy? The structure of Synergy uses average risk of professions, it averages risks of professions such as doctors, programmers and builders, which is very beneficial to those with riskier professions. To them, the premiums are significantly lover with Synergy.
Of course all the contracts can be purchased separately, some coverage is not needed, some you may already have, but there is an interesting detail that is hard to ignore. The Contract.
Out of a 100 people, wishing to have Life Insurance coverage, 85% can get it. Another 15% cannot get Life Insurance for health reasons.
Out of a 100 people wishing to have a Critical Illness Insurance, only 65% are able to.
It is even harder to obtain income replacement insurance (Disability Insurance).
In other words, every insurance contract has its own requirements at the time of creation. The person making the decision to issue an insurance policy is called an underwriter. It works out that issuance of a Life Insurance contract has the most liberal demands to health.
Therefore, decision to issue a combination plan (Life, Critical Illness and Disability Insurance) is made by the underwriter, responsible for issuing life insurance contracts. This tells us that there is a higher chance to receive a combination plan, than individual contracts, when there are nuances to health.