Term Life Insurance Canada
If you are thinking of buying a house or have just recently purchased a home you may have been advised that it may be a good idea to get a life insurance policy to cover the mortgage in case an income earner should pass away. Life insurance is a way to help protect your family and other dependents against any financial hardship survivors and dependents in the event of your death. A Canadian life insurance policy offered by life insurance companies guarantees payment of the face value of the policy or coverage amount upon death in return for premiums or regular payments for this policy.
How much life insurance do I need?
One of the first questions many people ask is how do I know how much life insurance I need? Do I need permanent insurance or term life insurance? The best way of course is to speak to an expert in the field such as a licensed life insurance agent or broker, but an approximation typically used is between 5 - 7x current net income. It really depends on your own financial needs and situation whether you want a permanent or term life insurance policy which will cover you for a certain period of time, but it gives an idea of the capital your dependents would need to continue living as they do currently. It's a matter of looking the assets that are available, liabilities they would have to deal with including the funeral costs etc, and then the continuing need for income. We've provided a income replacement calculator which may help you work out some ballpark figures, but again, a qualified life insurance agent will be able help you work out a comprehensive analysis.
Life insurance types
There are many life insurance policy types, categories, names, and jargon but there are really only two types: permanent life insurance or term life insurance. Permanent means, as you would expect, permanent, while term insurance means it is temporary coverage for a term (ie. 5 or 10 years). Term life insurance can be used to cover temporary obligations such as a mortgage or home loan or business obligations. You can view our mortgage life insurance page for more information on comparing that versus term life insurance. Permanent needs could include funeral expenses, supplementing a survivor's income after your death, making sure you cover any capital gains or inheritance tax from your estate, as the last thing you want to do is lump your survivors with a huge bill!
Canadian term life insurance policies provide coverage for a specified period such as a certain number of years or a set age and then it expires, requiring you to get a new policy. The coverage, or what is also known as the death benefit, is paid out only if you die during the term of the policy. There are many different types of term policies that are commonly available and such as one, five, ten, twenty or thirty years or until the age of 60 or 65, for example. When you compare term life insurance quotes on RateSupermarket.ca you will see the product names such as Term-10, Preferred-30 or Term-15 and the numbers are referring to the life insurance term. The premiums or payments made for the coverage typically remain level during the term but can increase if the term is renewed later on. You can imagine that life insurance would be higher for a 45 year old rather than a 40 year old, so that's why some people choose to go with a longer policy, again a term life insurance agent can help you with this. There is a type of policy which is called Term to 100 that is often categorized as a permanent life insurance policy but is actually a term policy that covers you to the age of 100. The main types of permanent life insurance include whole life, universal life, variable life and are designed to provide insurance protection for your entire lifetime, as long as you keep the policy in force. The majority of the life insurance quotes on RateSupermarket.ca are for term life insurance policies, but you can fill out an online life insurance application if you're interested in a permanent policy and we'll get a licensed agent to contact you to discuss your options.
Other things to consider
Things to consider when looking at your life insurance needs are who will be the beneficiary? That is who will receive the coverage if you should pass away, many people choose their family or put the proceeds into a trust. You also need to decide if you'd like to pay the premiums for your term life insurance policy annually or on a monthly basis. RateSupermarket.ca enables you to compare term life insurance quotes using both types of payment options. You'll also want to see whether you should take out a renewable or convertible insurance policy where renewable means that you can renew your policy at the end of its term, many times its for a higher premium as a result of the insurance company having to provide coverage for an older person, but you wouldn't have to provide any medical or other evidence of insurability. Once you get to around the 70 year mark, renewable policies are harder to get so you many not be able to renew. Convertible life insurance means you have the option to swap your term life insurance policy for a permanent one without having to submit evidence of insurability.
As you can see there are many things to take into consideration when you compare term life insurance quotes in Canada, so be sure to compare carefully, get good expert advice from a life insurance agent and, although no one really wants to plan for it, you'll be well on your way to protecting the people you care about should you pass away.
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