Is life insurance on your list of things to do in 2021? Some people avoid purchasing life insurance because they don’t know how it works, or they find the topic overwhelming. In this article, we’ll explain the basics so you’ll be empowered to make the right choices when it comes to life insurance.
Who should get life insurance?
Life insurance is not limited to a specific type of person but what you get depends on your situation in life. Here are a few different examples of situations where life insurance is important:
- If you have people who depend on you financially, such as your spouse and children, parents or siblings, life insurance can give you peace of mind knowing they will have a form of financial security should you pass away unexpectedly.
- Life insurance can be purchased to ensure there is coverage for any debts that you have, including your mortgage.
- If you have plans for your children’s education – your life insurance policy can ensure these can be fulfilled as planned.
If you are under 30, you might think life insurance is an unnecessary expense but it may be necessary depending on your level of debt and your assets. Keep in mind that when you purchase life insurance at a younger age, you will most likely pay a lower premium.
How life insurance works
Here are a few of the benefits you can expect with life insurance:
- Provides financial stability for your family now and in the future
- Covers your mortgage and other debts
- Provides some financial protection for your business
You can also ensure that your funeral costs are covered if you pass away unexpectedly. Funeral costs can be a significant financial burden on your loved ones if you do not have this type of coverage.
Types of life insurance
When it comes to life insurance you can choose a solution that’s right for you as there are many different types of coverage to accommodate different people with various needs. Here are a few of the most common types of life insurance:
Term life insurance
Term life insurance is one of the most common types of life insurance. It pays out if a person dies within a specified time period, usually between 10 to 30 years. If the policy expires and you are still alive, there is no payout. On the bright side, you are still alive! When the policy expires, you may be able to renew, or you may want to purchase a new policy. The cost of a term life insurance policy will be determined by your age and health.
Permanent life insurance
Unlike term life insurance, a permanent life insurance policy does not expire. There is also a savings component to permanent life insurance. The premiums you pay on a permanent life insurance policy go towards building cash value. A permanent life insurance policy can allow you to borrow against the cash value. This is not possible with term life insurance. Some people choose to borrow from their permanent life insurance policy to pay for post-secondary education for their children, or for medical costs.
There are two general types of permanent life insurance: whole and universal. They are similar, but universal offers a bit more flexibility.
Joint life insurance
Joint life insurance is also called first-to-die insurance. How romantic! Joint life insurance insures two people under one policy. This type of policy pays out when one of the parties within the couple dies. Usually married couples purchase joint life insurance. This type of insurance may also be available to common-law partners.
Choosing the best life insurance for you
Now that you know a little bit more about the different types of insurance, you’re probably wondering which one makes sense for you. Here are a few things to consider if you’re thinking about purchasing life insurance:
- Why do you want to purchase life insurance? Are you trying to protect your spouse and/or kids? Are you trying to build wealth? Are you trying to protect your assets?
- What stage of life are you in and how old are you? Are you a student? Are you a newlywed? Are you a parent? Are you approaching retirement?
- What is your financial situation? How much could you afford to spend on life insurance every month?
Carefully considering these questions will help you determine which type of life insurance policy is best for you. You can also seek expert advice from our life insurance brokers. They can help you determine what plan makes the most sense for your life.
You can learn more about life insurance by checking out a few of our previous blog posts and FAQs:
Process of getting life insurance
Once you decide to get life insurance, what will the process look like? The exact steps might vary depending on your insurance provider and your broker. Generally speaking, the process might look something like this:
- Research the different types of life insurance.
- Consider your finances and budget. Determine how much you can afford to spend on life insurance.
- Pick the type of policy you would like to purchase.
- If you are purchasing term life insurance, choose how long the term will be.
- Go through the application process.
- You may have to do a medical exam depending on your provider.
Going with an insurance broker will make this process a lot easier. A broker will compare quotes for you, answer any questions you may have and make sure you have the right policy for your needs.
Contact BrokerLink for your life insurance needs
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2021 Guide to Life Insurance in Canada FAQs
How long does it take for a life insurance policy to pay out in Canada?
Once you have submitted all the necessary paperwork, it can take anywhere from a few weeks to a few months to receive your payout. The insurance company may have additional questions before they issue your payment.
Does life insurance pay for suicidal death in Canada?
Typically, life insurance will not pay out for a death by suicide.
How big should my life insurance policy be?
That depends on many factors! Do you have dependants such as children or a spouse? Are you worried about covering funeral costs? Everyone has different needs, so a life insurance policy can be customized to meet your needs. An insurance broker can help you determine how much coverage you should purchase.