Insurance World

OK, thinking about your own mortality is not a topic anyone enjoys, but our own death is one of the few certainties in life. So why do 35% of Canadians not insure their own life to make sure their family or loved ones are financially protected? While the number of reasons likely match the number of people not insured, the following are the most commonly heard.

Reason #1 – I don’t have a need for life insurance:
Let’s be honest, this reason is by far the most common and for most people untrue. Unless you are an individual who does not have children, has money on hand to cover all debts and funeral expenses, and does not feel the need to offset the loss of their income to a spouse, leave any additional money to family, or to a charity, then it may be true, you don’t need life insurance. But few people have the funds readily available to fulfill all their wishes or meet their obligations after their death.

At the very minimum, if you have anyone who relies on your income for their day-to-day needs like a spouse or children, or if you have debts like a mortgage, then you likely need life insurance.

Reason #2 – Life insurance is too expensive:
If in the past people have found life insurance to be too expensive it could be because of the type of coverage they were seeking, like whole or universal life insurance. Term life insurance is the most affordable of all the products and is very popular because of it.

Term 10 Life insurance, the most popular Term product in Canada, offers a premium guaranteed not to change for 10 years.

A male non-smoker seeking $100,000 in coverage could be paying as little as*:

1
$125 for a 30 year-old
2
$129 for a 35 year-old
3
$157 for a 40 year-old
4
$207 for a 45 year-old
5
$281 for a 50 year-old

A female non-smoker seeking $100,000 in coverage could be paying as little as*:

6
$106 for a 30 year-old
7
$112 for a 35 year-old
8
$133 for a 40 year-old
9
$163 for a 45 year-old
10
$219 for a 50 year-old

As you can see, for very little money a year, you can get $100,000 in life insurance coverage.

* Lowest quote online from October 2005 for a Term 10 policy, one of the most popular life insurance products in Canada. Premiums shown are the rates if paid annually.

Reason #3 – I don’t know anything about life insurance and don’t know where to start:
A number of free online tools have been developed to help you decide which term life insurance product is best for your specific situation and how much life insurance coverage you should get.

1
Term Life Insurance Analyzers. By answering a few simple questions, these tools will assess your needs and let you know what product is most commonly recommended for people with similar lifestyles.

2
Term Life Insurance Calculators. These tools will help you put a dollar value on the amount of coverage you need in order to ensure that your family, loved ones and your debts are covered in the event of your death.

Reason #4 – Life insurance is a hassle to get:
Thanks to the Internet, getting term life insurance quotes is now fast and easy. If you want to shop around first, getting quotes online means you can avoid hard-sell tactics by someone sitting across from you. There is no sales pressure or obligation to buy when you get quotes online. It’s easy, can be done any time at your convenience and is simply a better way to shop for life insurance because of it.

Most individuals have some form of insurance, whether it is for their vehicle, home or health. But it is important, however, not to overlook the benefits of life insurance, which pays money to beneficiaries when the insured dies.

HOW LIFE INSURANCE WORKS

Typically, the insured person makes payments into the plan - called premiums - in exchange for a “death benefit,” the money that is paid at the time of death. If you are considering purchasing life insurance there are a few potential problems you need to be aware of.

DIFFERENT TYPES OF LIFE INSURANCE POLICIES

There are numerous types of policies you can choose, but life insurance policies generally fall into three categories - protection, long-term savings and estate conservation.

Many people purchase life insurance for the purpose of providing for their dependents in the event of their death, thus protecting your existing stream of income. If you are in the protection category you may want to consider term life insurance, which offers only a death benefit for a specified period of time such as until you retire.

If long term savings is your reason for purchasing insurance, you may consider a cash value policy. With this type of life insurance, your beneficiaries receive a payment upon your death based on the full amount of coverage , not the cash value of the plan. The value of these plans is usually tied to an underlying investment portfolio and that is how funds accumulate.

Another added benefit is that these policies usually allow a holder to borrow from the accumulated funds in the plan without taxes or penalties. Depending on the policy, you can typically withdraw a portion of cash value and not pay it back, or even cancel the policy and receive the money that has been accumulated over the years.

USE LIFE INSURANCE FOR ESTATE PLANNING

Life insurance can also be used as an estate planning tool, especially if your goal is to preserve wealth for future generations. This type of policy covers one or two lives; the cash generated by these plans typically helps your heirs pay estate taxes and provide otherwise.

Now you have to decide how much coverage you need to provide the amount of income your family will need in the event of your death. After all, your goal in purchasing life insurance most likely is to ensure that income continues for those who are now dependent upon your income.

WHO NEEDS LIFE INSURANCE?

It also is important not to ignore the need for life insurance protection in a single or dual income family. The death of either spouse could create a financial strain on your family.