Practice Tip: Rounding out your offering

The importance of offering life insurance to your line-up.

By Susan Yates
 
You’re going shopping for insurance. But whom do you buy from? The choices are bewildering for clients. There are brokers and agents and underwriters. Some are “captive” employees of a single company, others are independent (sort of). Most have an alphabet of initials and designations after their name. To help clear up some of the fog, and help you help those consumers make the right choices, I’ve prepared this consumer’s buying guide to insurance product providers and their services.
 
Life insurance products come in three forms: life insurance; accident and sickness insurance (A&S); and investments.
 
Licenses and designations
 
There are two types of life insurance licenses. A life insurance license enables its licensees to sell life insurance, A&S insurance, and investments in the forms of segregated funds and annuities. An agent with only an A&S license is restricted to selling only A&S products, including travel-medical and disability insurance. They cannot sell insurance investments.
 
In order for a life agent to sell mutual funds, he or she must acquire a mutual funds license. A life agent can also acquire a securities license to sell securities, such as stocks and bonds. However, very few do so. On the other hand, those with a securities license often become licensed insurance agents so they can sell segregated funds.
 
Learn how to get a mutual funds licence in Canada in this article.
 
Life and A&S agents must complete the Life License Qualification Program (LLQP). However, they cannot advertise that they have taken the program by putting LLQP after their name. For this reason, many life agents proceed to obtain the Certified Financial Planner (CFP) designation.
 
The CFP connotes a level of education and professionalism that has been attained through a rigorous course of studies. CFPs are top-notch personal financial advisors, and many CFPs also hold a combination of insurance, mutual funds, and securities sales licenses.

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Licenses must be current
 
A license to sell insurance is granted by provincial agencies, with proof of competence in the field. Failure to maintain proper life insurance licensing is a common agent-related violation cited by the insurance licensing and discipline authorities. When dealing with an insurance agent, it is essential to establish that his or her license is valid. Insurance licensing is regulated provincially, and a call to your provincial/territorial insurance office can confirm licensing status.
 
A license is granted when the necessary course of studies is completed, a criminal background check has been successful, and fees are paid. Continuing education is required to maintain a license, except in Nova Scotia, New Brunswick, PEI, and Newfoundland and Labrador. These provinces do not require agents to keep up or refresh their knowledge through ongoing education.
 
In some provinces, error and omissions (E&O) insurance is a requirement for licensing. However, this is not true across the board. Ask your prospective agent about whether he or she carries E&O, and how much.
 
An exception for licensing is made for those who sell insurance products through banks. Bank employees sell life insurance in the form of mortgage insurance, travel-medical insurance, disability insurance, and annuities. They offer only the bank’s products, and do not need to meet any of the insurance licensing requirements.
 
It is essential to compare the bank’s product with similar products sold by a licensed insurance agent before making a commitment to buy. You’ll want to check the difference in price between similar products as well as differences in the structure, features, and benefits of the products themselves.
 
Courtesy Fun data Canada Inc. © 2014. Susan Yates is president of the Centre for Life Insurance and Financial Education (CLIFE). This article is not intended as personalized advice.

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