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Nov 1, 2022

When Insurance Coverage Is Not There To Pay A Benefit!

by Milan Topolovec

As a professional insurance advisor for the last 40 years, I have delivered millions of dollars in life, executive/professional disability and critical illness claim cheques. Being an insurance advisor never gets easier, and having a tough skin is a necessity.

Our commitment to serving clients is hindered by things such as COVID, people being busy, etc. Insurance conversations are uncomfortable for many people, and perhaps you can relate.

I am writing this article as a result of a sad incident that happened several weeks ago. A business owner client cancelled her $5,000,000 policy, and she subsequently passed away.

We always advise our clients to get a full medical check-up with their personal physician before cancelling any policy. This is to ensure that nothing is medically lurking in the background that would affect the decision to cancel coverage.

Here are examples where insurance coverages did not pay out and what you need to be careful of:

  1. 1.     An insurance “salesperson” was replacing a life insurance policy for his client and did not advise her to keep her old life policy until a new one was issued and placed. The old policy was cancelled and because of an underlying health condition which was disclosed to the “salesperson”, the client was refused new coverage.
  2. 2.     We were working with an existing client to secure $1,000,000 of Critical Illness insurance, which was not applied for over a year. The client was busy travelling all over the world and told me we would apply when he returned from one of these trips. When he asked us to follow up, we found out that on that trip, he suffered a heart attack and survived. We would have delivered a $1,000,000 cheque had he applied and secured the policy.
  3. 3.     A long-time friend and client had critical illness and life insurance coverage that he had acquired from us while he was healthy. Over the years, we advised the client several times that he should secure proper professional disability insurance. We created reports, and he was shown different plan designs for his review. His spouse called us several months ago from southern Ontario to advise us that he was in the hospital working through mental burnout. The spouse asked me if he had disability insurance, and I had to inform her that he did not. Did you know that 33% of all disability claims are stress and mental disorder related?
  4. 4.     A client’s ten-year renewable and convertible term critical illness policy was renewed, and the premium was going to increase. We spoke with the spouse, suggesting a medical be done on her husband to make sure he was healthy before he cancelled his critical illness policy. We were not told that he had completed a CAT Scan, and the results were not in yet. The policy was cancelled as per the client’s wishes. Four weeks later, we received a call asking if that policy could be reinstated, which made us ask the question as to why the change of heart. We were advised that her husband was diagnosed with Stage 4 cancer which they found out when the CAT Scan results came back. We went back to the insurer to see if there was a possibility of reinstating on a pre-existing condition; we were not successful, which is understandable.
  5. 5.     We were working with a potential client completing a TK Insurance audit. This audit allows us to review a client’s existing coverage and provide an opinion on what we have reviewed. We noticed that she was leaving a hole in her existing coverage. A full customized report was created showing three leading insurers with various product designs and comparisons for her review. After numerous meetings when we were to finalize the coverage, the client said she would proceed after seeing her investment/financial advisor. After seeing her advisor, she informed us that she had decided to use the dollars she was going to invest in a critical illness policy and was going to invest it with her advisor. Not even six months later, she contracted cancer, and someone had to create a GoFundMe page.
  6. 6.     We worked with a business owner who reduced his $10,000,000 to $3,000,000 life policy because he felt he did not need that much. We delivered a $3,000,000 life insurance cheque to the beneficiary, and to this day, I still wonder if there is anything more beyond what I had tried that would have convinced him to keep the full $10,000,000 policy.
  7. 7.     While working with a professional client, we presented him with insurance coverages he should consider—professional disability, critical illness and life coverage. He was busy with his law practice work and decided that he would apply in 6 months when he was to become a partner in the firm. When we followed up with him in 6 months, he said, “I wish that I would have listened to you. I can’t get insurance because of my current health condition.”

When Critical Illness insurance came to Canada, I was at the first conference held in Vancouver and one of the first group of advisors to get the designation of Registered Critical Illness Specialist. I was a type 2 diabetic and applied with numerous insurance companies for $1,000,000 of Critical Illness insurance and was declined coverage. At age 51, I worked out regularly, and karate was one of the sports I engaged in. While in the ring sparring with my sensei, I suffered a heart attack. If that policy had been in place, I would have received a cheque for $1,000,000 dollars.

We are licenced with 18 insurance companies and work with senior underwriters, which is extremely important as our relationship with the underwriters is helpful in getting policies issued when people are told they will never get coverage; however, there are no guarantees and asking for a quote for insurance coverage is a “guess” at best because the final rate will be determined by the insurance company applied to.

It’s important to work with an advisor that represents several insurance companies, who are knowledgeable on product and has relationships with the underwriters at the insurance company. Ask the advisor if she/he has had claims where they directly helped their clients through the claims process.

When your advisor calls you to meet for a review, please do yourself a favour and meet with them. Statistics point out that 55% of financial advisors don’t ask their clients about their insurance coverage, so appreciate an advisor that is trying to give you service.

Feel secure when you take the time to review your current life insurance contracts and know that nothing is missed.

Milan Topolovec, BA, TEP, CLU, CHS, RCIS President & CEO, TK Financial Group Inc.,