What Everyone Should Know About Life Insurance
What you’ll discover in this report:
- Why you need to consult with a seasoned insurance professional
- What you should consider when purchasing Life Insurance
- Why you should make sure you have an adequate death benefit
- When to use different types of Life Insurance policies and what they’re good for
- How to select the best policy
Consult A Seasoned Insurance Professional
Life insurance is a simple concept — you buy a policy that pays to your beneficiary or beneficiaries when you die. But when it comes to making decisions about what kind Life Insurance to purchase, how much of a death benefit and how much to pay, it can become extremely complex.
* Note. According to the Canadian Life and Health Insurance Association in 2009, there were just over 100 life and health insurers in Canada. There are government regulations on how insurance services and products are distributed as well as a requirement for the level of capital they’re required to hold. That doesn’t mean you’re fully protected from fraud. By contacting your trusted broker at Secure Insurance Solutions, we’ll ensure that you only get insurance from a reliable, financially sound insurer.
Make sure you consult a seasoned insurance professional.
It’s More Than Just Deciding How To Buy Life Insurance
Depending on your financial situation, Life Insurance can be used for a variety of purposes, such as:
- Estate planning
- Accumulating cash
- Transferring wealth
- Achieving estate tax liquidity
Life Insurance is like Auto Insurance — you can buy a lot of it or not very much of it. It’s different than Auto Insurance because depending on the type of policy you buy, you can pay a lot or a little for basically the same death benefit.
Keep in mind, that the younger and healthier you are, the less you’ll pay for coverage. Life insurers like to have their policyholders around for a long, long time.
* Tip. So how much Life Insurance do you need? It depends. One common benchmark says your death benefit should be about six to eight times your annual earnings, but there are a variety of factors to consider:
- Other income sources
- The size of your family
- Whether your spouse works and his or her earning capacity now and in the future
- The number of people who are financially dependent on you and for how long
- The death benefits your family will receive from Social Security and any Life Insurance plan through your employer
- Any special needs such as mortgages, university or college education funds and estate planning
Do You Have An Adequate Death Benefit?
What kind of Life Insurance should you buy? That also depends. But keep this very important principle in mind:
Whatever type of policy you buy, make sure it provides enough of a death benefit to meet your family’s needs if you aren’t there. When you consider buying Life Insurance, calculate what your family must have in terms of a death benefit. Don’t lose sight of this number.
What Kinds Of Life Insurance Policies Are There?
There are two basic types of insurance in Ontario.
- Term Life
- Permanent Life Insurance.
*TIP: Keep in mind that the terms and costs of the policies vary widely among insurers.
Term Life Insurance
Term life policies provide coverage for specific periods of time, generally 5, 10 and 20-year terms. Often younger families with budget concerns purchase Term Life Insurance. The amount you pay for the policy as well as the sum insured won’t change during the term of your policy. The insurance company determines the premiums based on your general health status. While you usually can renew term life policies for one or more terms even if your health has changed, there’s potentially a big risk if you get sick during the term.
* Tip. If your health does change, you probably won’t be able to buy another term without watching your premium skyrocket. Ask your insurer or agent what the premium will be if you continue to renew the policy.
Permanent Life Insurance
There are actually two types of Permanent Life Insurance:
Permanent, Whole Life Insurance is often treated as an investment. It gives your family financial protection if there’s a premature death. A portion of the premiums goes into an investment account creating a cash value of the policy. With four permanent options to choose from (10-year, 20-year, 65-year or 100-year terms) the sum insured as well as the cost of policy are guaranteed for the term. The cash value of the policy is also guaranteed.
Young couples who can afford to pay a higher premium more quickly and those high-income earners looking for a tax benefit generally buy Universal Life Insurance. The cash value accumulated is tax sheltered. In other words, you’re getting Life Insurance protection and a tax-sheltered savings account. You can even make withdrawals or take out loans against your cash value and you can modify your insurance amount cost and your payment frequency.
I Have To Make A Decision. What’s The Best Type Of Policy For My Situation?
In general, if you have significant assets, it’s better (and less risky) to have a Permanent Life Insurance policy. But which one? It’s more important to buy the coverage from an insurer that has:
- The best chance of performing well in the future
- Low actual expenses and mortality costs
Such an insurer will be able to offer you better terms, including higher death benefits, higher cash value and lower premiums.
*Tip. It’s imperative that you have a trained insurance professional analyze your financial situation and determine what kind of policy, from which insurer, is best for you.