Life Insurance Guide

Life Insurance Guide

Life Insurance Guide

A life Insurance policy provides the much needed financial protection to one’s family in the event of death of an individual. The tax-free proceeds from a life insurance policy can be used to pay off debts, final expenses, mortgages, or to leave money to your loved ones. Protect your family with much needed cash when they need it most.

In fact, a life insurance policy can do much more for an individual that we may guess. This guide tell you all about it.

What Is Term Life Insurance in Canada?

Term life insurance is ideal for covering debts or other short-term insurance needs in the event of your premature death.

For example:

  • To cover the education costs and ensuring the financial security of your kids until they leave home.
  • Pay off the mortgage on the family home or cottage, where your kids had so much fun and which are full of memories.
  • To pay off your student loan.
  • To pay off other debts, such as a car loan, credit card balances, etc.
  • To buy the shares of a deceased business partner without putting the financial health of the company at risk.
  • To provide a short-term alternative when you cannot afford long-term coverage.

Term life is sold on its own or combined with other kinds of life and health insurance coverage. It’s also possible to get term life coverage through a universal life product and thereby enjoy more advantages and flexibility. We, at Life Care, provide impeccable, trustworthy, fair and unbiased advice to get you the cheapest term insurance rates available in the market. We represent all major Life Insurance companies and guarantee you best term insurance rates in Canada. Our advisers are licensed and fully trained to calculate your need for insurance to suggest best term insurance policy.

What does Term Mean in Term Life Insurance?

The term is the duration of the temporary insurance coverage. The terms most frequently offered on the market are 1, 5, 10, 20, 30, 40 and 100 years. We also special product which is called Pick A Term. Under this plan you can buy coverage for specified years life 10 years, 13 years, 15 years any term up to 40 years. You have full liberty to pick any term. This is the best way to customize your own life insurance plan based on your needs. Our step by step process will help you create best insurance portfolio for yourself and your family.

Features of Term Insurance:

  1. Renewable Term Insurance: Renewable means you can renew your insurance coverage at the end of each term for another one. This can be repeated up to a certain age, at which time the coverage will cease. You should check:
  1. Whether you have the right to renew and, if so,
  2. Whether you can renew without having to provide evidence of insurability, and
  3. The age up to which coverage can be renewed.

2. What do you Mean by Convertible/ Is Term Insurance Convertible into Permanent Life Insurance?

Convertible means you have the right to convert the term life coverage into permanent coverage that will cover you for as long as you live without having to provide evidence of insurability. You should therefore check:

  1. • Whether you have the right to convert and, if so, up to what age, and
  2. • Whether permanent coverage premiums are preset and guaranteed for life.

3.  Can you Insure other Family Members in the Same Policy?

Perhaps you want other people, such as your spouse or business partners, to be insured under your term life coverage. If so, make sure you have the flexibility of the following options, just in case:

  1. • Each person can be insured individually, but under the same term life policy;
  2. • Each person can be insured jointly with the others on a first-to-die or last-to-die basis.

4.  Are Premiums Guaranteed in a Term Life Insurance?

What exactly does a guaranteed premium mean? To determine if your premium is guaranteed, answer the following questions:

  1. Are the term premiums fixed and locked in for the duration of the selected term?
  2. Does this apply each time the term is renewed? Note that with term life, the premium rises with each renewal to reflect the insured’s age at the time of renewal.
  3. Do you already know what premiums will be payable at each renewal? Are they guaranteed?

5.  What Are Preferred Rates:

Some companies may also offer discounts on premiums because of the insured’s good physical condition and good overall health. If you think you’re in good health, it’s important to find out whether the company offers preferred rates. You may pay less. Don’t forget to find out what criteria are used to get preferred rates, as they vary from company to company.

6.  How are Premiums Paid for the Term Policy?

Insurers offer a variety of premium payment methods:

  1. • Can the payments be made on a monthly, quarterly, semi-annual or annual basis? It’s important to compare premiums with the same frequency because one policy may be more competitive than another at one frequency, but not at a another frequency.
  2. • Can you make your payments by preauthorized bank withdrawals, credit card, check, etc.?

How to Compare Premiums when buying Term Life Insurance?

When comparing term insurance costs, you should check for the features mentioned above. Some are automatically included in the price or available for a surcharge. The same company may also offer different premiums depending on the sex of the insured, their health, whether they’re a smoker or a non-smoker, how risky their occupation is, etc. A set fee reflecting administration costs for your insurance policy is also usually included in your total premium.

Special Features and Optional Benefits of Term Life Insurance

  1. Companies sometimes offer special features. One of the most common is the accelerated benefit or living benefit, which is payment of a portion of the insurance amount when an insured is diagnosed with a serious illness and has only a certain time left to live.
  2. Companies may offer several optional benefits besides term life insurance.
  3. If you decide to take a term life insurance, make a point of dealing with a specialist at Life Care Insurance by calling at 1-877-495-2525. Given the wide range of options available, it’s worth seeking professional advice on how to best customize universal life insurance for your specific needs. We always strive to get best coverage for your Term Life Insurance need at best rates.

Permanent Insurance:

There are two types of Permanent Insurance Policies available in the market: Universal Life Insurance and Whole Life Insurance Policies.

Universal Life Insurance Plan Details:

Unlike term insurance which provides pure protection, a UL policy also includes a savings component. This savings component allows for tax-deferred investment growth that can be used in many ways such as supplementing retirement income or helping to cover the costs associated with a disability*. The amount of savings that can be accumulated within this type of plan depends on a number of factors including the age of the insured and the amount of insurance coverage purchased.

These products also include strong guarantees such as the cost of insurance rates1 and the policy fee. Universal life plan also offers a wide range of investment options, a choice of death benefit options, riders, optional benefits and many other features you and your adviser can use to customize your plan to your specific needs.

What can you do with your universal life insurance plan?

The question really should be, what can’t you do with your UL plan? Because it has a built-in savings component, a UL policy gives you tax efficiencies while letting you:

  • Build assets for your children
  • Help protect your mortgage
  • Enhance your retirement income
  • Provide financial options and solutions for small businesses
  • Protect your retirement savings in case of an occupational disability or one caused by 26 critical illnesses, including the need for long-term care.

WHEN should you Consider Taking a Universal Life Insurance?

Universal life insurance not only includes the traditional insurance coverage offered under all life insurance plans, but also tax-advantaged investment possibilities.

Before taking out Universal Life Insurance:

  • you must have a need for life insurance coverage
  • be debt-free, and
  • have no more RRSP contribution room

Generally, Universal Life Insurance is intended for people who:

  • want to establish a savings portfolio that accumulates tax-free, or
  • want to increase their wealth for their estate
  • are looking for flexibility and want to establish their financial security gradually based on their life events, priorities and financial means.

Important Points to Consider when Buying Universal Insurance Plan:

  1. Is the savings component required? In the event of death, are your savings payable to your beneficiaries in addition to the insurance amount?
  2. What kind of investment accounts are available: variable-term, guaranteed investments with simple or compound interest, index-linked investments, etc.?
  3. Is there a guaranteed minimum interest rate?
  4. Can you diversify your savings portfolio through different investment accounts and transfer funds from one account to another at any time?
  5. Can you start or stop saving whenever you wish or change the amount of your contributions?
  6. Can you use these savings to pay for your insurance coverage?
  7. In the case of last-to-die coverage, can the accumulated savings be paid out in the event of the first death?
  8. Is it possible to register these savings as an RRSP? Although it is quite rare, some companies offer this option.
  9. Are you entitled to annual investment bonuses that increase your tax-free savings? You should not only check the percentage bonus offered, but also the factors that trigger a bonus.
  10. In the event of illness or disability, can you access your savings in the form of tax-free disability benefits? 

Loan and Surrender Provisions

At some point in your life, you may run into situations where you need extra resources or cash flow. Find out what the various insurers have to offer and which conditions apply.

Surrendering Savings:

  1. If you decide to withdraw your savings, when and at what frequency can the surrender be made? Can savings be withdrawn in part? What is the minimum and maximum amount you can withdraw?
  2. Is there a surrender fee other than the market value adjustment? If so, over what period does it apply?
  3. Borrowing against or surrendering the guaranteed cash value: If you purchase permanent life insurance that offers guaranteed surrender values, can these values be used to pay for your universal life insurance? If so, what is the interest rate that will apply to the loan?
  4. If you wish to obtain the surrender value, will the surrender lead to the cancellation of one or more of your insurance coverage options or change the insurance amount?

Insurance Costs and Fees

Insurance costs and fees may be leveled or variable, guaranteed or subject to change, and may apply indefinitely or only for a given period. Check which options are available to you.

Insurance Costs:

  1. Insurance costs vary depending on the type of life and critical illness coverage you choose, the number of insured persons, whether it is payable on a first-to-die or last-to-die basis, the sex of the insured, their state of health, whether or not they are a smoker, and other factors.
  2. Preferred rate: Some companies may also offer discounts on premiums because of the insured’s good physical condition and overall health. If you think you’re in good health, take the time to get more information. Don’t forget to find out what criteria are used to get preferred rates, as they vary from company to company.

Fees

Administrative fees may include policy fees. Can these fees be paid in a lump sum? Generally, universal life insurance also includes management fees for the various investment accounts. Is there a guaranteed maximum for these fees?

Whole Life Insurance Policy

Whole Life insurance policy is a permanent insurance plan which provides tax-free funds to the beneficiary at death. The plan runs up to the death of the insured. There are two types of plan:

  1. Participating Whole Life Insurance
  2. Non-Participating Life Insurance

Both plans are permanent and have some unique features:

  1. Guaranteed cash values
  2. Dividends (Only in case of Participating life insurance)
  3. Automatic premium loan
  4. Paid-up additions
  5. Extended Term Insurance
  6. Dividends paid as cash, etc.

Benefits of Whole Life Insurance:

For you:

Whole life insurance is a good option for all stages in life. You choose the payment period, you are insured for your entire life and it also provides surrender value.

For your Family:

Nothing can replace the loss of a loved one. But it’s comforting to know that your loved ones will have the necessary financial support to help them carry on, no matter what. Whole life insurance protects your loved ones’ financial security for their entire lives.

For your Children:

Insurance coverage is also a precious gift to give to your children. By subscribing to coverage at a low price because of their youth, you guarantee them coverage that they can adapt to their needs as they get older.

For your Business:

Your business is your life’s investment, so you want to protect it. To guarantee its continuity, either by financing the purchase of a partner’s shares or giving your heirs the necessary time and assistance to find the right buyer, whole life insurance helps to avoid unpleasant surprises and helps keep your business prosperous.

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