On June 3, Quebec City-based Industrial Alliance Insurance and Financial Services Inc. (TSX: IAG) will launch a new universal life product that will allow clients to take advantage of premium reductions should long-term interest rates go up.
IAG says the new product, Trend, provides clients with the protection they need, all the while saving them money.
Policyholders benefit from a guaranteed premium discount for the first 10 years of the contract, and they can save even more starting year 11 if long-term interest rates are higher at that time.
IAG says Trend is turning things around to the benefit of the consumer. Over the past few years, guaranteed level-premium permanent life insurance products have seen several price increases given the persistently low level of long-term interest rates. The coverage currently provided by these products offers no opportunity for clients to regain ground and pay lower premiums in the future should interest rates go back up.
“Interest rates are currently at an all-time low,” explains Clément Gignac, senior vice president and chief economist, IAG. “But Canadians can expect them to rise once the U.S. economic recovery has firmly taken hold.”
“We have designed an affordable permanent life insurance product in comparison to the level-premium permanent solutions currently on the market,” adds Marie-Élaine Gaudreault, senior director of marketing in individual insurance and annuities.
“Right from the start, clients get a rate discount that is guaranteed for 10 years. Then, in addition to this savings, policyholders can benefit from potential further savings should interest rates increase down the road.”
After the first 10 years, the premium is adjusted using a formula specified in the initial contract and based on a reference index. The index value is equal to the average of long-term provincial bond yields over the previous five years.
When the Trend contract is issued, a maximum premium is also established and guaranteed to the client. This guaranteed maximum premium acts as a buffer for the insured, who will never pay more than the amount specified in the contract. Trend also offers the opportunity to take advantage of tax-sheltered savings.