A floor is not a forecast

A product review of Foresters Advantage Plus with the Enhanced Insurance Option, and why I changed my mind about it.

A male 37 non-smoker pays $1,232.80 a year for twenty years. When he dies — at forty or at a hundred, it makes no difference — his family receives $90,000. That is the entire transaction as he experiences it. Twenty payments, then nothing more to pay, and one number at the end.

So he knows exactly what it costs. Twenty-four thousand six hundred and fifty-six dollars in total, three dollars and thirty-eight cents a day, and after the twentieth deposit he is finished. And he knows exactly what it buys: $90,000, guaranteed, whenever it happens. On the premium survey I run, that is the lowest-cost guaranteed twenty-pay available in the Canadian market today. Everything else in this article is about how a company can do that.

Because underneath those two numbers the contract is doing something he will never see unless he reads the fine print. The $90,000 is not one amount. It is $51,426 of basic insurance, guaranteed outright, plus $38,574 of what the contract calls the enhanced amount — and the enhanced amount is bought every single year with a dividend that is not guaranteed.