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I was wondering what people did when asked if they wanted to have insurance on the line of credit (ie. if something happened the bank would cover the line of credit owing). I wasn't sure what to do...

 

Do you have dependents? Someone that is relying on your current support or future income?

 

If the answer is NO then you don't need LIFE insurance (disability insurance is another matter). It is just that simple (except for one minor exception - it is nice to have enough money to have a proper funeral - as you know that is going to likely happen regardless with someone else ?parents fitting the bill - a dedicated insurance policy of some small amount covers that).

 

Do not buy insurance to protect the bank from default on your loans due to your death - you are supposed to protect YOUR interests, not the banks. The risk the bank is taking on with their loan is already reflected in the interest you are paying - the bank takes a risk, the interest is the reward. More risk, higher interest and so on. You don't need to add to that factor. That is not your job. If the bank is worried in theory THEY should take out and pay for insurance on you (which in effect is exactly what they are doing with the interest payments and having a massive amount of loans under their control).

 

Slimy insurance people always want you to buy the wrong insurance or the wrong amount. I don't like slimy insurance people :)

Edited by rmorelan
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Thanks

 

Do you have dependents? Someone that is relying on your current support or future income?

 

If the answer is NO then you don't need LIFE insurance (disability insurance is another matter). It is just that simple (except for one minor exception - it is nice to have enough money to have a proper funeral - as you know that is going to likely happen regardless with someone else ?parents fitting the bill - a dedicated insurance policy of some small amount covers that).

 

Do not buy insurance to protect the bank from default on your loans - you are supposed to protect YOUR interests, not the banks. The risk the bank is taking on with their loan is already reflected in the interest you are paying - the bank takes a risk, the interest is the reward. More risk, higher interest and so on. You don't need to add to that factor. That is not your job. If the bank is worried in theory THEY should take out and pay for insurance on you (which in effect is exactly what they are doing with the interest payments and having a massive amount of loans under their control).

 

Slimy insurance people always want you to buy the wrong insurance or the wrong amount. I don't like slimy insurance people :)

Thanks guys! Great answers from both of you

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Once again, rmorelan, excellent summary, you have covered all the ground. :P

 

Airline pilots are particularly vulnerable as they die in a crash to often and their heirs who have accepted the Estate find themselves personally liable for far more than they thought they inherited, once the pilot is blamed for the accident. So, life insurance will name say the spouse as beneficiary, and the death benefit does not form part of the Estate. And the spouse will accept the Estate "under benefit of inventory" - so in the event that the pilot is found as negligently having caused the accident and therefore, liable for $300,000,000 in damages, by accepting under benefit of inventory, once the debts are greater than the assets, there has been no acceptance. 

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I had my account manager at the time tell me that I should pay for the insurance on my LoC because otherwise, if I died, my parents would be responsible for the debt.  She's a liar though, and fortunately I did my research.  

 

refer back to my comment on silly insurance agents :)

 

or actually sometimes I have run into agents that simply didn't know how it works. Not actually sure which is worse (incompetent or slimy - the slimy ones at least become non slimy when they know you know your stuff. Incompetent is just incompetent universally).

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refer back to my comment on silly insurance agents :)

 

or actually sometimes I have run into agents that simply didn't know how it works. Not actually sure which is worse (incompetent or slimy - the slimy ones at least become non slimy when they know you know your stuff. Incompetent is just incompetent universally).

 

Mine at Scotia very clearly told me that if I didn't get life insurance and I died, my parents will have to pay back my debt. This is not true?

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Do you have dependents? Someone that is relying on your current support or future income?

 

If the answer is NO then you don't need LIFE insurance (disability insurance is another matter). It is just that simple (except for one minor exception - it is nice to have enough money to have a proper funeral - as you know that is going to likely happen regardless with someone else ?parents fitting the bill - a dedicated insurance policy of some small amount covers that).

 

Do not buy insurance to protect the bank from default on your loans due to your death - you are supposed to protect YOUR interests, not the banks. The risk the bank is taking on with their loan is already reflected in the interest you are paying - the bank takes a risk, the interest is the reward. More risk, higher interest and so on. You don't need to add to that factor. That is not your job. If the bank is worried in theory THEY should take out and pay for insurance on you (which in effect is exactly what they are doing with the interest payments and having a massive amount of loans under their control).

 

Slimy insurance people always want you to buy the wrong insurance or the wrong amount. I don't like slimy insurance people :)

Couldn't agree more... 

 

also watch out when you buy your first home.. practice etc...  NEVER NEVER insure a loan with a bank.  Get adequate life insurance to cover the costs of the loan.  The beneficiary should be your spouse, parents etc

 

Even with respect to disability insurance on a loan.  The insurance usually only covers the payments!  not the balance.  A personal disability insurance policy would replace your income which would ensure that you have money for servicing the loan, and more importantly, your day-to-day expenses.

 

I would never ever buy insurance from someone who is loaning me the money.  Even if insurance is a requirement of the loan, get the insurance and independent advice elsewhere.

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Mine at Scotia very clearly told me that if I didn't get life insurance and I died, my parents will have to pay back my debt. This is not true?

 

wrong - just plan wrong.

 

No one is responsible for your debits but you. Now as I mentioned since your estate would massively negative, there would be no money for funeral costs etc. In reality that is the cost likely that your parents would pay.

 

Adults are not responsible for other adults debits in some automatic fashion. It just doesn't work that way. If it did parents would also be responsible if their kids went bankrupt - another thing that isn't true.

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Couldn't agree more... 

 

also watch out when you buy your first home.. practice etc...  NEVER NEVER insure a loan with a bank.  Get adequate life insurance to cover the costs of the loan.  The beneficiary should be your spouse, parents etc

 

Even with respect to disability insurance on a loan.  The insurance usually only covers the payments!  not the balance.  A personal disability insurance policy would replace your income which would ensure that you have money for servicing the loan, and more importantly, your day-to-day expenses.

 

I would never ever buy insurance from someone who is loaning me the money.  Even if insurance is a requirement of the loan, get the insurance and independent advice elsewhere.

 

I agree! Look you have to shop around here, and make sure you are getting something that is flexible.

 

We all do need disability insurance - look, med students all hope to be docs, and docs make a very good living. The only real threat to that now is you get injured or sick etc and cannot continue. Then you are stuck with a high loan, and no income - bad idea. This is EXACTLY what insurance is for - to cover highly unlikely but horrible events if they happen. Hence disability insurance. Personally (and this is just me) I have the max coverage - something like 8K a month tax free if I cannot be a doc due to a disability. Plus I can still take a job in anything else and keep that money too. Plus it is indexed so it bumps up with inflation

 

If you have no dependents and you die, from a purely financial point of view who cares? There is no family suffering in your absence that needed and hoped for your income to carry forward. When there/if there is OK now you need life insurance.

 

This is all again that basic financial planning - and why a bit of knowledge helps preventing you from being ripped off in countless ways.

 

and in case I wasn't clear I HATE people in professional positions lying about the need for and usefulness of financial products. It is a betrayal of trust and thus just wrong on so many levels. It is the equivalent of me as a doctor lying to a patient for my personal interest/gain. Grrrrrrrrr.

Edited by rmorelan
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I agree! Look you have to shop around here, and make sure you are getting something that is flexible.

 

We all do need disability insurance - look, med students all hope to be docs, and docs make a very good living. The only real threat to that now is you get injured or sick etc and cannot continue. Then you are stuck with a high loan, and no income - bad idea. This is EXACTLY what insurance is for - to cover highly unlikely but horrible events if they happen. Hence disability insurance. Personally (and this is just me) I have the max coverage - something like 8K a month tax free if I cannot be a doc due to a disability. Plus I can still take a job in anything else and keep that money too. Plus it is indexed so it bumps up with inflation

 

If you have no dependents and you die, from a purely financial point of view who cares? There is no family suffering in your absence that needed and hoped for your income to carry forward. When there/if there is OK now you need life insurance.

 

This is all again that basic financial planning - and why a bit of knowledge helps preventing you from being ripped off in countless ways.

 

and in case I wasn't clear I HATE people in professional positions lying about the need for and usefulness of financial products. It is a betrayal of trust and thus just wrong on so many levels. It is the equivalent of me as a doctor lying to a patient for my personal interest/gain. Grrrrrrrrr.

Do you mind sharing where you ended up getting your disability policy?  It sounds like a good one.

 

I'm older so I'm concerned about the costs of insuring myself against disability but I realize its money well spent if it ever did happen.

 

I can only imagine after making it this far to have my hand crushed in second year or something ridiculous like that.

 

Also, were you able to insure 8k of income despite not having 8k of current income?

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  • 3 weeks later...

Is the CFMS disability insurance a good policy?

 

My ScotiaBank advisor told me that my parents would have to pay my debts if something happened to me and told me I should sign up for life insurance through Scotia. Good to know that's not the case.

 

another one - really don't know where that is coming from.

 

It isn't bad at all but more importantly you have to get informed about what a good insurance policy is so you can decide that yourself :)  You cannot ever trust anyone else really to set up your finance the right way for you. If you do then you basically end up with the equivalent of someone at a bank telling you need something you don't need or WORSE not telling you do need something when you do actually need it (like disability insurance). The more I see about things like this the MORE I just think you have to protect yourself and get the basics done (why, oh why, isn't this taught in school).

 

things to look for:

 

indexed for inflation - you just have to have this. Nothing worse than earning LESS year after year after year........as inflation erodes your income. Inflation is the big enemy of any fixed payment system. No the amount has to rise each year to match inflation

 

own occupation - you need it to insure you if you cannot be a doctor. Many policies will insure you only if you cannot work. Well that isn't good enough - if you get MS and cannot be a surgeon you don't want them to say well you can work at a call centre so you don't need insurance money. Hell no on that one.

 

guaranteed renewable - you want to be able to renew the insurance policy regardless of you health state at the time of renewing - You don't want to find out you have MS 3 days before your policy is due up, and then have to disclose that followed by them not renewing. Oh no, you want that renewal.

 

right to increase it without requiring a medical as you advance in training. For instance as a med student the amount is often capped a relative low amount, rises to over 4K a month in residency, 9K as a fellow and 25K a money as a staff - all tax free money. You want the ability to pay more to get more as you decide in your policy. Otherwise you can have all the above but it is still locked at say 4K when you are a staff. Nope. Not good enough.

 

does your policy have those things? Then and only then start comparing the costs between policies. Get that and being disabled would at least not be financially destructive.

You won't be stuck on the side lines with a 200K debit and no way to pay it off. Reading the fine print is a bit boring but you only have to do it once and then you are set for life. One less thing to worry about.

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