Insider Look At Top 7 Insurance Tricks That Keep You Overpaying

Today we have insurance industry insider, Laura McKay on the show, who reveals some of the top tricks and tactics used in the insurance industry, to keep us overpaying. 

She covers what to look out for, and what we can actually do on our end to make sure that we get the best rates possible, and aren't overpaying for insurance that we may not even need. 

Laura used to work as an actuary, and is now the Co-founder and President of PolicyMe, which is a great tool for Canadians that you can use for free to see how much insurance you actually need.

It also tells you if you are overpaying for insurance, or if you are underinsured and taking on a lot of unnecessary risk in case something was to happen to you. I also really like how it lets you comparison shop different insurance providers without having to fill out countless insurance forms for each individual insurance company that you want a quote from. 

Enjoy the episode. You'll learn a lot of actionable insider information that can potentially save you thousands of dollars long-term.

Resources from the Episode:

PolicyMe's free tool to find out how much insurance you need and find out if you are overpaying or are underinsured. The tool also lets you easily comparison shop between different insurance providers to ensure you get the lowest rate.

Top Tools and Resources for Financial Independence (for Canadians): All the top tools and sites that I’ve personally used to help us achieve financial independence in our early 30s. They’re also what we use now to optimize and manage our finances, and ensure that we’re paying the lowest fees while getting solid returns on our investments. 

Canada’s Top ETFs Guide & Top High-Interest Savings Account: In the guide, I go over what I personally invest in and why I invest in it. The investments that I talk about ​are literally where we have almost our entire net worth (apart from our house), and is what we are primarily living off right now in our early retirement. At the very least you’ll learn about some great ETFs to consider for your portfolio, and if you are new to ETFs, it’ll give you a nice list of some top ETFs to consider from the thousands that are out there. 

The guide is available for free to any listeners that that use this link to sign up for a free savings account with the bank that I personally use, EQ bank. 

The reason that I personally use EQ bank, is that they have one of the highest interest savings rates in Canada (they are currently offering 2.3% which is more than double what the major banks are offering).

It’s also free to sign up and keep an account with them, so you’re not paying a monthly fee like you do with many of the other banks out there. You also get unlimited transactions, unlimited Interac e-transfers, and can take out your money at any time if you need it, and there are no minimum balances.

Because of those reasons, I’ve been with them ever since they launched in Canada years ago, and it’s where I keep my entire emergency fund and spending money. 

To get the free high-interest account and the free guide on the top ETFs in Canada, just go to buildwealthcanada.ca/eq, open the free account, and once you’re done, forward any email that you get from EQ to bonus@buildwealthcanada.ca and I’ll send you the full comprehensive guide for free. 

Questions Covered: Can you tell us a bit about your story and experience as an insider in the insurance industry, and what caused you to leave that standard insurance career path?

One of the most common tricks that I’ve seen insurance providers use over the years, is making it sound like everybody needs life insurance, no matter what.

What I found different about you guys, is that you actually do a great job explaining why not everyone needs insurance. Can you take us through what kind of person or family would need life insurance, and when they wouldn’t?

Also, when can we get rid of life insurance so we can save some extra money every month?

Another trick that I’ve heard about is companies telling young people to get life insurance even if they don’t really need it yet, because the younger you are, the lower your rates will be. 

This can sound appealing as it’s a way to lock-in those low rates for decades. Can you talk about this strategy and is it worth it?

For example, would someone be better off just taking the money that they would be paying to insurance, and instead investing it in their TFSA, RRSP, or paying off debt?

One of the types of insurance that I see people get talked into is permanent life insurance. But, out of all the personal finance experts that I’ve talked to, I have yet to hear anybody recommend it (unless they sell it, in which case they do suggest it because they get paid a commission from it).

Can you talk about permanent life insurance vs term insurance, what each of them are, along with the pros and cons of each one.

One of the arguments that I’ve heard for permanent life insurance is that it invests some of the money that you pay them, and that money is able to grow tax-free. This sounds appealing as it starts to sound a little bit like a TFSA. How is this different though, than investing in a TFSA?

When investing through a permanent life insurance policy, how do the fees and rates-of-return compare to instead doing index investing using low-cost ETFs or using a robo-advisor?

One of the tricks that I’ve noticed you bring up on your site is how many insurance providers us the “x times income” rule. Can you explain what that is, and how you can end up paying for more insurance than you need if you let a provider use this rule?

Obviously there are a lot of things that we can’t control that impact how much we pay for insurance, like our age. But, what are the things that we can control that can lower our rates?

Under what conditions would someone’s premium change? For example, if somebody develops a heart problem after the person has already become insured. Would it be adjusted based on this new information?

Should you disclose such things to your insurance company if it happened after the policy is already in effect?

Another common trick I see, is companies not telling us when we no longer need that higher coverage. This makes sense of course as the larger our coverage, the more money they make from us.

In what cases should we actually lower our coverage, and what’s the best process for doing so? (i.e. Kids out of the house, no more mortgage, No debts, other?)

If you are a couple, what are the pros and cons of buying one joint policy vs buying two individual policies?

Can you tell us a bit more about your tool and what you factor in when making those recommendations on how much we actually need?

When you pull the rates from the different providers, how many different providers do you actually pull the prices from?