We all know that there certain things in our life that are unpredictable where we almost have no control. Death is the best example of these aspects. No one knows how, when and where we will die and no one can control it, unless someone decides to suicide. Other example are illness and accidents. They can happen to anyone in anytime, and no one can predict it. However it can be said that death is one of the most ‘crucial aspect’ since it can also affect our family situation.
While we can control it, we know that death is a sure thing, we all will die afterall. And while we don’t have any control on it, we can actually have an option to set a plan on it. This is not to avoid the death, we can’t, however proper plan will ensure that our death will not really affect our family too much, at least on the financial factor.
This in essence is what life insurance is all about. It’s our positive response to a negative risk. For this response to be effective, however, we must be sure it is the right one.
Simply put, our life insurance policy can only guarantee our beneficiary’s future as far as we allow it to. We need to make sure therefore that we purchase one that is well suited to our needs. More importantly, we need to understand the provisions of our policy.
This is the bitter lesson Barry Norman learned too late as illustrated in the case of Avco Financial Services Realty Ltd. V. Norman, a decision of the Ontario Court of Appeals.
Barry Norman and his wife Yvonne secured a one-year second mortgage loan from Avco in 1988 and arranged for a life insurance coverage as an addendum. His belief was, should anything happen to him or his wife, the policy would serve as settlement. Things went smoothly at first. In 1989, the mortgage and insurance were renewed for another year but in 1990, Norman’s wife no longer qualified for the insurance. She had fallen ill with cancer and died the following year. When the mortgage went into default, Avco sued Barry Norman for payment of the loan. He counterclaimed for negligence, alleging Avco failed to inform him that the insurance expired with each one-year term of the mortgage and had to be renewed. The court ruled in favor of Avco. Barry Norman should have informed himself of the insurance details when he renewed it for another year.
The lesson here is crystal clear. Don’t just purchase a life insurance policy. Talk to a licensed professional and make sure you get a policy based on what you want and that you understand all its provisions. If you are a mortgage borrower, don’t sign up for life insurance from your lender. This is not their main concern. If you worry about the mortgage, then get a higher coverage that will be able to cover both the mortgage and the needs of your family. Take charge of your insurance policy. This is one aspect of your life you need to have control over.