Is Decreasing Term Dead
- Thread starter 1manshow
- Start date
- 1,405
Decreasing term is out there, but why would anyone buy it when a level policy is less money?
- 1,900
Mortgage disability is still pretty common, all the agents I have worked with always sold level term.
- 180
- 1,405
We do in Canada but I have not yet had any customers in the U.S. request that or provide me with rates for a product that they think should be added. Happy to consider doing so, but keep reading.
We introduced a decreasing term category in Canada, because some of the competitively priced level term products, were modified by a couple of Quebec companies, to offer a lower premium for a decreasing face amount variation during the level period. This offered a reduction in premium.
Some observations.
Competitive level term products in the U.S., by contrast to Canadian variations, are generally much cheaper. Run a sample case at www.term4sale.com and then the same case at www.term4sale.ca.
NOTE: When running a Canadian quote, use N2M as the postal code. Canada has an alpha/numeric mailing code system.
ALSO NOTE: We do not quote the decreasing products at www.term4sale.ca. I think the cost savings in premiums, versus the same products with a level premium, do not warrant the consumer considering those products by contrast to the level alternative.
Example: Male 50, preferred plus non-smoker, $500,000 face amount.
30 year decreasing term premium (Canada): $700
30 year level term premium: - same company (Canada): $935
least expensive company (Canada): $876.50
by contrast, same level product in U.S. least expensive company: $625
Now the first question in analyzing this: Why do Canadian's have to pay $876.50, when Americans can get the same thing for $625?
The answer is not currency exchange rates. While the American dollar is worth more than the Canadian dollar, and so the American premium costs more, THE AMERICAN FACE AMOUNT/BENEFIT IS WORTH MORE. The difference is a wash.
The answer is also not that American's live longer. Further, preferred plus rates in Canada are generally tougher to qualify for than American preferred plus rates.
So why do Canadians pay more? Because Canada is a much less competitive market with fewer companies. I think the Canadian companies are much more inclined to not prod each other into dramatically lowering rates, and are happy to conspire to keep premiums higher. The same sort collusion tends to exist in the Canadian banking system.
Two American companies used to offer less expensive term products through their Canadian companies as opposed to their Canadian competition. Both had much lower premiums. The first was Reliable Life, a subsidiary of Old Republic. When Old Republic withdrew from the U.S. market, it also withdrew from the Canadian market.
CNA used to have a Canadian company, but at it's peak it sold its life business to a Canadian company.
When both companies were active, Canadian agents typically sold AGAINST the U.S. style term products. On another note, Canadian agents also tend to sell against Preferred Plus and like to quote only regular (standard) premiums arguing that virtually no one can qualify for preferred rates.
And finally, you will note that the decreasing term variation in Canada is still more money than the U.S. level product. I would argue that the cost savings to the company, offering a similar variation, would not warrant a consumer buying it.
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- 180
Wow. That is great stuff right there, Bob!! Thank you!!
- 24,967
You can get pretty close to the amortization table with Protective. DT after the level period.
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