An overview of Life Insurance in Canada
Life can be a blissful and awe-inspiring journey, but it can also be unpredictable. With how unpredictable life can be, you will be amazed at the peace of mind that a solid life insurance policy brings. To secure the futures of you and your loved ones, obtaining a life insurance policy from a reputable provider who understands your family’s needs can go a long way. It’s much easier to obtain life insurance in Canada than you think, especially when you collaborate with AmurLife.
By Gabby Ortega · 26 August 2023
A breakdown of life insurance
Life insurance can be divided into four key components. Individuals looking to purchase insurance can benefit from familiarizing themselves with these terms.
- Premiums — An insurance premium can be defined as the amount of money that an individual or business pays for a particular insurance policy. Premiums are typically paid annually, but can be paid either quarterly, monthly, or semi-annually at a small additional cost.
- Beneficiaries — A beneficiary is an individual that has been chosen to receive payment from your life insurance policy in the event of premature death. In most cases, people name their spouse, parents, children, charitable organization, or trustee as beneficiaries.
- Beneficiaries — Policy riders are add-ons that an individual can implement to personalize their insurance so that their interests are protected. A few common examples of policy riders include Critical Illness, Accidental Death and Dismemberment, Child Term policy, and Disability Waiver of Premium.
- Policy loans and withdrawals — Taking out a loan from your life insurance policy depends on the type of life insurance policy that you have. Term Life insurance policies don’t possess a cash value component however permanent life insurance like Whole Life or Universal Life have the potential for a built-up cash reserve that individuals may access.
How to assess how much cover you need
As you explore the world of life insurance, it’s normal to have a few questions like how much coverage you’ll need. The answer is simple and begins with a brief evaluation of your financial situation. Most financial advisors will recommend aiming for a coverage amount between five to seven times your net income, however this figure can change based on the nature of your finances.
Another factor to consider is whether you are financially responsible for other people like your spouse, children or other disabled or dependent family members. If this is the case, then you may need to purchase an insurance policy that is sufficient to cover their needs.
Perhaps you have a business that means a lot to you, and you want to protect it from being affected by your premature death. Fortunately, there are insurance policies that ensure your business will receive a benefit and continue to operate and succeed to your family unencumbered.
How to buy life insurance in Canada
The process used to be complex and lengthy, but most insurance carriers and brokers work with modern technology and life insurance can be bought by following a few simple steps. You can carry out the process yourself if you feel confident in your research, although most Canadians prefer to enlist the help of a financial advisor as it helps expedite the process.
- Choose a policy type — a natural first step would be to decide which policy type best fits your needs, whether that’s Term Life Insurance or permanent life insurance. Do discuss your options with a financial advisor to gain a better understanding of what you’re being offered.
- Calculate how much life insurance you need — a good starting point is to gauge how much of your income will be supplemented if you pass away. If you make $50,000 a year, you should figure out how many years your family will need this income for. Then, add any amount required to pay off a mortgage or loans and help pay for kid’s education.After that, you can deduct any funds that are already in your savings and plug these values into a life insurance calculator, which will give you the information you need.
- Check your budget — It’s always important to revert to your budget to plan your monthly payments as efficiently as possible. After understanding your income and how much coverage you’ll need, it’s easy to create a budget. Even though you should try your best to secure the best coverage possible, it’s equally important to ensure it fits within your budget.
- Prepare for your medical questions — Most life insurance companies will inquire thoroughly about your health history. Although many life insurance applications are approved without any medical evidence collected, some may require a health practitioner to collect blood and urine. These extra steps can be done in your home, work, or medical facility. Though it adds time to the process, it can sometimes provide a lower rate than the non-medical route.
How to select the right insurance agent
Buying life insurance can be a major milestone in your financial life. Just like choosing the right banker for your banking needs and the right mortgage broker to facilitate your first home purchase, choosing the right insurance agent is an important decision. For you to get the best coverage possible, one that suits the needs of you and your family and is tailored to your financial situation, you will need the guidance of a reputable and reliable insurance agent.
A life insurance agent can help you determine your insurance needs by conducting a simple analysis of your financial circumstances. They can also help broker the purchase of the policy and assist you with any services like changing a beneficiary or even reviewing and updating your insurance policy.
How to maintain and manage your policy
Once you have been able to secure the life insurance coverage that you desire, the next step is to try and maintain that insurance policy by reviewing it at least annually. As part of this policy review, its recommended that you carefully review the terms and conditions of the policy and assess whether it still aligns with your goals and financial capabilities.
Another aspect to remember is that life is a rollercoaster journey that comes with its own unexpected surprises. These surprises can sometimes present themselves in the form of life changes like marriage, having a newborn baby or transitioning into retirement. Considering these changes, it’s a great idea to amend certain aspects of your policy so that it can accommodate these changes.
Conclusion: Is life insurance worth it in Canada?
Life is a rollercoaster journey with twist and turns lurking around every corner. Whether you think you need life insurance or not, the importance of having proper coverage in case of an emergency can be more valuable than you might think. Take a second to consider your personal obligations as a parent or spouse alongside your financial responsibilities towards your mortgage or business. By devoting your time to looking for and purchasing the right insurance coverage for your business or family, you uphold these responsibilities.
You’ve probably asked yourself countless questions about whether life insurance is right for you or not. At the end of the day, only you can recognize your individual circumstances and assess whether they warrant the need for a life insurance policy. Nonetheless, knowing that the financial future of your loved ones and your business are covered can be quite reassuring.
By choosing life insurance with AmurLife, your family and assets are protected. Insurance agents at AmurLife want to know your story and will provide simple insurance solutions specifically for you.
What topics are covered in our FAQs ?
Frequently asked questions
What is the simplest description of life insurance?
In simple terms, life insurance can be described as a contract that exists between a life insurance provider and the individual applying for coverage. The contract stipulates that the insurance provider guarantees to pay the policy owner a lump sum amount to one of more beneficiaries during a life-altering event. In exchange, the policy owner pays the providers according to the repayment terms of the contract.
What are the two main types of life insurance?
Life insurance can be divided into two key components, temporary (Term Life) and permanent (T100, Whole Life, Participating Whole Life, and Universal Life). Both are very easy to understand, Term Life insurance will last for a specific time frame which will usually be around 10- 30 years, however permanent life insurance will last your entire lifetime.
Can you cash out Term Life insurance?
Unfortunately, you will not be able to access cash from a Term Life insurance policy. This is simply because the policy is priced only to cover the death benefit and doesn’t accumulate any cash value during the period where coverage is provided. Although there are other policies which do give owners the option to withdraw a sum of money. However, this is generally for more specific business succession or estate planning only applicable to Whole Life or Universal Life insurance.