Canadian Guide to Life Insurance

There is never a better time to prepare for the inevitable than right now. Life Insurance is a means to protect your family and loved ones, in the case of an unexpected death.  Losing a loved one in a household is hard. It can also leave behind serious unexpected costs and financial hardships for your loved ones. Life insurance policy can help pay for funeral costs, childcare and education fees, legal fees, outstanding debts and bill payments, and safeguard the future of your family.

So, what exactly is Life Insurance?

A Life Insurance contract is a legally binding contract held between you and the insurer. The Insurer guarantees payment of death benefits to the named beneficiaries of your choice if something were to happen to you. Simple, right?

Whether you are married, or single, life insurance is a means to help those you leave behind. Life Insurance is a way to help ensure household expenses, the family’s standard of living, and unexpected costs that come with death, are taken care of. Life insurance provides you with the opportunity to prepare for the unexpected event of your death.

Once you find a policy that is right for you, you will contribute monthly premiums to the insurer. An insurance premium can range in their monthly investment depending on the type of coverage you are looking for, and your personal circumstances. Even a small policy can help cover some costs that might ease further loss for your loved ones during a time of grief.

There are so many types of coverage. Which one do I choose?

It can be confusing trying to find the right coverage for you. The easiest way to get started is to understand that there are essentially 2 kinds of insurance:  Term and Permanent.

Keep in mind that there are more insurance plans that fall into these 2 categories, each with their own pros and cons.

What is a Term Life Insurance?
Most people tend to steer towards Term Life Insurance because of its affordability and accessibility. This type of insurance provides a set amount of coverage for a fixed term of 10, 20, or 30 years, and comes with a fixed monthly or annual payment. However, a term life insurance is only a death benefit.

If you die within the duration of the term, your beneficiaries will be paid the death benefit which does not include cash value. However, if you don’t die during the term, the insurance company keeps your premiums, and you get nothing. It may seem useless to pay month after month for insurance you may never use, but this is why term life insurance is so affordable.  If you decide to get a Term Life Insurance, make sure you select a term that will cover the amount of years you might need.  For example, if you are in your 30’s and you select a 10-year term, this policy will only cover you until you turn 40.  That means that if you die at 42 years of age, your dependents won’t see a dime, and you would have had paid 10 years of premiums on your policy!

While the premiums stay the same during your plan’s term, it will increase when you renew your plans at the end of the term. Some Term insurance can be converted to Permanent insurance without having to re-qualify by giving new medical evidence. 

Is Term Life Insurance Right For Me? 

If the sentences below apply to you, term life insurance may be the right choice.

  • I need some temporary protection (eg. child’s education, a mortgage, business loan)
  • I don’t have a lot of money right now, and need affordable insurance options now.
  • I need to check my budget to determine how much I can afford.

What is Permanent Life Insurance?

A Permanent Life Insurance does not expire. As long as you continue to pay your premiums, your life insurance stays in effect.

Your beneficiaries can get payments at any time while your insurance policy is in effect. It has death benefits and an ability to accumulate cash value on a tax deferred basis. 

The insurance cash value grows over time, with accrued interest at a predetermined fixed rate each month. Some plans also get cash value (less than the amount you paid in premiums for the insurance cost) if you cancel your policy. Premiums are averaged over your entire lifetime, and will never go up. Initially you’ll have to pay a bit more, but as you age you’ll actually pay less.

There are three main types of permanent life insurance: Whole, Universal, and Variable. Learn more here

Is Permanent Life Insurance For Me?

Permanent life insurance is for you, if you are looking for a permanent guarantee that will protect your family, cover the cost of your funeral, and let you make plans for your estate, regardless of how soon you die.

What do companies look at while calculating your Premiums? 

Every insurance company has requirements that typically involve several factors when calculating your premiums:

Age: Your age is the most important factor in determining how expensive your life insurance premiums will be.  Purchasing an insurance policy while you’re young and healthy will get you a more affordable rate for a larger amount of coverage. The healthier you are the less likely you are to need medical care. Older people have a lower life expectancy, therefore no matter how good their health is, they will always pay more than a younger person.

Health: If you are in good health, not a smoker and have no underlying health complication, you most likely will qualify for a lower rate. However, if you have any health problems, or history of critical issues, or family history, such as, cancer, high blood pressure, or high cholesterol, or have a high BMI, you’ll be listed in a lower higher rate.

Gender: Women have a higher life expectancy than men, and are considered low risk, which means they will generally pay lower rates.

Occupation and hobbies: People who work in a high-risk work environment (like construction workers, drivers, roofers, etc) are more likely to die within a given term than people working in an office or school. High-risk workers will be charged a higher rate. This also applies to people who engage in extreme sports.

Smoking Status: Being a smoker is easily one of the things that will cause an increase to your premiums. Whether you’re smoking cigarettes, vaping, or smoking cannabis, these will ALL count as smoking. Best thing you can do is quit now (your body will also thank you!). You will need at least 12 months without smoking to register as a

Who should I name as my beneficiary?

In most cases, you would name your spouse as your primary beneficiary. You could also name your kids, or other trusted loved ones.

If you name a minor, it is recommended you name a trustee to receive the funds for that minor, with proper instructions on how to use the funds on the minor’s behalf. You can also hold the funds until the minor is of age. You should consider naming a contingent, or secondary beneficiary in case you outlive your primary beneficiary.

The most important thing to remember, is to update the beneficiary named on your life insurance policy. Be specific. In the event of a claim, you wouldn’t want the benefit to be paid to the wrong person. Who knows, maybe during your term, you and your spouse may have separated, but they still appear as your primary beneficiary.

When is the best time to apply for Life Insurance?

Life is constantly changing, and we have no control over what might happen in the future. The best time to get life insurance is now.

Secure the future of your loved ones with a policy that can alleviate financial burden. Life insurance doesn’t just ease financial burden, it also gives you and your loved ones peace of mind during the most difficult time in life.

For more information on the subject, please contact Frank Restorick at easyinsured2@gmail.com, or by clicking here.

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