Money Insights

 

July 2011


Synergy Part II – Overall coverage limitations

Jul 3, 2011 3:05 PM
Rona Birenbaum

This second entry seeks to further explain how Manulife can offer a package of coverage (life, disability, critical illness) for up to 30% less than if you purchased individual policies.


In Part I of this blog, I highlighted some of the differences between the disability coverage within the Synergy product as opposed to individual disability coverage that Manulife offers. Those differences explain, to some degree, the lower price point for the Synergy bundled product.


Lower Cost reason #2 – Manulife’s maximum exposure


Let’s assume that you qualify for the maximum amount of Synergy coverage. The maximum policy coverage is $500,000.

The amount of coverage is reduced by the amount of benefits paid out over the life of the policy.

  • Life Insurance $500,000
  • Disability Insurance $2,500 per month maximum
  • Critical Illness Insurance $125,000 maximum

If you had bought individual policies with the above coverage limits, and you are age 45, the insurance company would potentially have to pay out $1,225,000 in the event that you experienced a qualified critical illness that disabled you totally and you ultimately died prior to age 65.

With the Synergy product, the benefits would max out at $500,000. So the bundled product should be less expensive.

Just because you purchase $500,000 Synergy coverage, does not necessarily mean that you are eligible for the maximum disability benefit of $2,500 per month. Your income must justify the benefit. If you have taxable income below about $46,000, you may not be eligible for the $2,500 monthly disability benefit. You may want to structure the size of your Synergy policy based on the maximum disability coverage that you are eligible for given your income level.

Lower Cost reason #3 – Age limits


Synergy cannot be purchased after age 50 and the policy expires at age 65.

The expiry date is an important one. The risk of death or being diagnosed with a critical illness increases dramatically after age 65. It is at that point when the Synergy product expires as compared to stand alone Critical Illness policies that can be purchased to age 75 or for life. Product warranties have this down to a science. This allows Manulife to price Synergy at a discount to stand alone policies that may extend beyond age 65.

As always, I recommend that you make insurance purchase decisions in the context of a comprehensive financial plan. The best solution is obvious when considered in light of cash flow, debt and retirement planning considerations to name just a few.

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