You’ve probably heard from friends and family that life insurance can provide your beneficiaries with money when you die. That could be important if you’re responsible for a lot of your household’s income.
Buying life insurance for the first time can feel overwhelming. But it doesn’t have to be that way. We can make the process a lot easier with these helpful tips.
Remember why you need life insurance
Life insurance can help financially protect those you care about when you’re no longer there to support them. It means there could be money when it’s needed the most, so your loved ones can spend more time helping each other through a difficult time, and less time focused on how to pay the bills.
Life insurance can help:
- Cover everyday living expenses
- Settle debts
- Cover mortgage payments
- Fund an education
There are 2 kinds of life insurance:
Term life insurance
Temporary insurance coverage that you buy for a set period (common terms would be 5 to 50 years.) When that time’s up, coverage can be renewed or converted without having to answer further health questions.
Permanent life insurance
This form of life insurance typically costs more but lasts a lifetime and includes features that can grow money inside your policy over time, called cash value. You can access this money while you’re alive or leave more money for those you care about. Once you know what type of life insurance you want, you’ll then want to determine how much your family will need to continue their lifestyle after you’re gone.
There are 2 basic types of life insurance coverage: term and permanent. Each has unique features designed to meet different needs.
What to look for when buying life insurance
When buying life insurance, here are some important things to consider:
Coverage amount
Determine how much money your loved ones would need in case of your passing. This amount should cover debts, and funeral expenses, and provide financial support to your family.
To start, add up your:
- Monthly household expenses: Groceries, bills, mortgage, loan payments, etc.
- Planned expenses: RRSP or contributions to your children's education, for example.
- Expected one-time costs: Funeral expenses.
With an idea of expenses for a full year, multiply that by how many years your loved ones would need to rely on this money. It’s a good starting point to get an idea of your insurance needs. An advisor can help you finalize this and help you better understand how much life insurance you'll need.
Type of policy
There are 2 primary types of life insurance: term life and permanent life. Term life insurance provides coverage for a specified term (e.g., 5 to 50 years), while permanent life insurance lasts your entire life. Choose the type that aligns with your needs and budget.
Premiums
Understand the cost of premiums for your chosen policy. Ensure it fits comfortably within your budget, as missed payments can lead to policy lapses. Additionally, your monthly or annual rates can fluctuate due to rate changes.
Riders and add-ons
Some policies offer additional features or riders, such as critical illness coverage or disability riders. Evaluate if these extras are necessary for your circumstances.
Health assessment
Be prepared for a health assessment, as your health can impact the cost of premiums. Quitting smoking or improving your health habits may lead to lower rates.
Beneficiary designation
Designate beneficiaries clearly and keep your policy up to date if your circumstances change (e.g., marriage, divorce, or the birth of children).
Find an insurance provider that meets your needs
Your insurance is only as good as the company behind it. After all, insurance must be there when you need it – and that could be today or later. That’s why it’s important the company providing you with insurance is strong, stable and able to support their guarantees.
Canada Life has been in the Canadian insurance business since 1847. Contact an advisor if you’re looking for life insurance.