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How To Choose The Right Life Insurance In Canada?

A life insurance policy is like the life jacket in your boat, it helps you come out of a dreadful situation. Life insurance is not for you, but your family. You would not want your family to feel distressed, correct? There is a saying that goes,

“Don’t call it “Life Insurance,” call it “Love Insurance. We buy it because we want to leave a legacy for those we love.”

Let us see how to choose the right life insurance in this post. 

Importance of a Life Insurance Policy 

A life insurance policy is an agreement that gives your family financial support when you die. The insurance cover is a tax-free amount that your family gets, but in return, you need to pay a certain amount on a regular interval like monthly, quarterly, annually, etc. 

The policy makes sure that you are with your family even when you are not around. It helps with various costs such as estate frees, funereal cost, daily expenses, debts, the mortgage payment on your house, your child’s education, taxes, and much more when you are not there to fulfill your responsibilities as you used to. And thus, knowing how to choose the right life insurance is very crucial. 

There are various types of life insurance, but the two main categories are term life insurance and permanent life insurance. I will get into them shortly, but for now, let us see some stats. 

As per a survey done by PolicyMe, 49 percent of Canadians got a permanent life insurance policy when purchased via an advisor (not employee benefits). Out of which 40 percent were between 18 to 34, 41 percent between 35 to 54, and 62 percent aged more than 55. Out of all the respondents, 86 percent thought that they made the right choice. Though many may not have needed a permanent life policy and the reason is that it is very concentrated and expensive. Also, the reason advisors try to pitch them more is that they get 5 to 10 times higher commission on that. Thus, it is significant that you know how to choose the right life insurance policy. 

Let’s talk about the various types of life insurance policies now.

Types of Life Insurance Policy

Term Life Insurance

Term life insurance is taken for a specific time period like 10, 15, 20 years or till you attain a certain age number. In case of demise during this period, a lump sum amount is given to the beneficiary. Though, you may not get anything if you are healthy and safe. 

There is no cash value attached to this policy and thus you can’t borrow money by pledging this and would get nothing in case you cancel it. Also, if you don’t pay the premium on time, you would lose your policy and benefits. It is a lot cheaper compared to a permanent life policy. 

Two Categories of Couple’s Term Life Insurance

The below are the two types of term insurance policies for couples. 

1. Joint First-to-die Term Insurance

  1. You and your partner can get insured under one joint term policy. 
  2. The policy gives death benefits when one of the partners dies.
  3. You and your partner get the same coverage. 
  4. Compared to buying two separate term insurance policies, this is not expensive.
  5. It can get complicated in case of separation.
  6. It covers just the first individual’s death in consideration. So, if one partner dies, the other has to get a new life insurance policy. 

2. Single Term Insurance

  1. You and your partner get a separate life insurance policy.
  2. The coverage amount is also separate for each partner. 
  3. Compared to a joint policy, this policy is quite expensive. 
  4. In case of a separation, the change of beneficiary is easier.

Permanent Life Insurance

With this plan, you get coverage for the long term until you die. This policy holds a cash value which suggests that you can borrow money against it and can get money back if you cancel it. In case of your unfortunate demise during the policy period, your beneficiary would receive the sum amount. 

The below are the two types of permanent life insurance.

1. Whole Life Insurance

In whole life insurance, you get life coverage until you die. This will give you a guaranteed minimum amount as cash value. 

2. Universal Life Insurance

Universal life insurance is suitable for people looking for benefits of investments in their life insurance. You can withdraw money or can borrow against your investment account as it acts as a cash value. Your investment account’s cash value would depend on two main things – I. total investment amount II. the return on investment.

But you get the flexibility to decide how and how much to invest. The lower the return, the higher the premiums and vice versa. 

What Affects Life Insurance Policy Premiums?

The following factors are sensitive to life insurance plans. 

Age: The higher the age, the higher the premium amount would be. 

Coverage: The higher the coverage amount, the more premium you would have to pay. 

Gender: Yes, gender, too, impacts a life insurance plan. It is a little higher for men in terms of premium in comparison to women. 

Policy Category: As I said in the previous section, a term plan would cost you less than a permanent life plan. 

Health: If you are suffering from any diseases, or if you are a smoker or do drugs, you will have to pay higher premiums. 

How to Choose the Right Life Insurance?

There are certain things you can consider for choosing the right type of life insurance policy. Number of Dependents

If you are not dependent and have enough savings to look after your funeral expenses and have no debt, you may not even need life insurance. However, that’s not the case with everyone. The more the number of dependents, the higher coverage you would need. And in such cases, while a permanent life insurance policy would give benefits, it would be costly. While a term life plan would be cheaper.

1. Number of Life Insurance You Have

If you already have a life insurance policy as a benefit from your job, and if it covers most of the required sum, you can have an add-on policy that may work as an investment, or maybe you can also just have a term plan to invest savings somewhere else. Decide your preferences and based on that choose a plan. 

2. The Total Coverage You may Require

This is also an important point to focus on. You need to calculate how much your current expenses are in terms of daily costs, bills, mortgages, debts, if you have kids then of their education expenses in the future, etc. Based on that decide a coverage amount. Calculate your savings, and check out the available options that are in your budget for paying premiums and would secure your family. 

3. Consider Your Preferences 

This would refer to just wanting a simple life cover like a term plan, if you are married then it can be choosing the best option for you and your partner such as if you want a separate policy or a joint one, a policy with an investment option, or a cheap policy to invest more money, if you would like to pledge the policy in future than a policy with a good cash value, etc. Based on your preferences, choose the right one in your budget. 

The Last Thought

There are also chances that a single policy may not cover all your needs, in that case, you should consult an advisor, there are also many online policy websites that can provide you with a free consultation and guide you on how you can opt for the best life insurance. You can customize your needs and can have a single group plan for your entire family.

So, take your time, compare various policies, consult an expert if needed and then make an informed decision that you and your family won’t regret. Best of luck!


Devanshee Dave

Devanshee is a staff writer at YourFirst.ca. She is a finance enthusiast and has completed her Master’s degree in Mass Communication & Journalism. She is currently pursuing CFA (Chartered Financial Analyst) and has worked as a journalist in a local business newspaper, multiple start-ups as well as finance and economy-related online media houses.

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