Who needs life insurance?
If a loved one is at risk of financial problems as a result of your death, it is very likely that you will need life insurance. Whether they are young, single or married, with or without children, or even retired, the vast majority of people should have life insurance.
The basic question you need to ask yourself is: if your death took place today, would someone close to you be financially affected?
At a minimum, someone should be responsible for paying for your funeral. The cost of a funeral varies between $ 8,000 and $ 15,000, depending on the requests and choices you have made in your will. You probably don’t want your family or friends to have to pay these costs because you were negligent in not purchasing life insurance.
And what about all the other costs that could be added, for example: your taxes on your death, your unpaid debts (mortgage, car loan, cards and lines of credit), your tax, electricity and other accounts?
If you think your loved ones might be in financial trouble as a result of your death, then you need life insurance.
Who doesn’t need life insurance?
Some people don’t need life insurance. Here are some examples :
- If your financial liquidity far exceeds your debt, you don’t need insurance. If you have enough cash so that your loved ones can cover your funeral expenses, pay off your debts and pay your taxes on death, life insurance is not essential;
- If you don’t have children or a spouse, have no debt, and have accumulated enough savings to pay for your funeral expenses, you don’t need life insurance;
- If you’re retired and have accumulated enough debt-free assets and cash, and your kids are financially self-sufficient, you don’t need life insurance.
The decision whether or not to take out life insurance should be made taking into account age and state of health. In fact, the cost of life insurance increases with age. In addition, if your condition deteriorates, you may no longer be able to purchase an insurance policy.
Definition of life insurance
Life insurance is a contract (policy) agreed between the owner of the insurance policy and his insurance company. In exchange for a premium paid by the owner of the policy, the insurance company undertakes to pay, in the event of the owner’s death, a sum (death benefit) provided for in the contract. This amount is paid to the designated beneficiaries of the insurance policy.
Types of life insurance
When it comes to shopping for life insurance , there are two basic types of life insurance you can choose from: term insurance, which is easier and more affordable, or permanent life insurance.
Term insurance is generally the cheapest type of life insurance to buy. It is designed to meet temporary needs. This type of life insurance gives you protection for a specified period (a “term”), such as 10 years or 20 years. The amount of life insurance is payable only if you die during this period.
If you only need life insurance protection for a certain period of time, term life insurance is the way to go. For example, if your kids have moved out of home, finished school, or you’ve paid off your mortgage, you may no longer need protection.
Example of the cost of term life insurance: male non-smoker, $ 250,000 in insured capital.
|40 year old male||50 year old male|
|10 year term||$ 18.34 per month||$ 39.60 per month|
|20 year term||$ 30.07 per month||$ 73.93 per month|
The permanent insurance is more expensive, but it provides protection for life, since you pay the premium. In addition, permanent life insurance usually has a cash value that its owner can use in different ways. With this type of life insurance, you can be sure that your beneficiaries will, one day or another, receive the amount of life insurance purchased.
What is the best insurance? Temporary or permanent?
One of the questions most often asked by Quebec consumers looking for life insurance is surely:
Temporary life insurance is always the right solution to cover financial needs that will one day disappear, such as a mortgage. Term insurance is also a good choice for getting coverage in the event of death, until your children are 20 years old.
Permanent life insurance will be the right choice if you want to leave enough money for your loved ones to cover your funeral costs, or to leave a significant inheritance to your children or your spouse.
A combination of the two types of life insurance, term and permanent, is also an interesting solution.
Comparative table of term and permanent life insurance
|Least expensive premium||YES||NO|
|Premium that does not vary||NO||YES|
|Cash value with tax-free growth||NO||YES|
|Possible loan from the policy||NO||YES|
|Tax-free death benefit||YES||YES|
|Usually used to leave an inheritance||NO||YES|
How much should I be insured for?
The best way to calculate your life insurance needs is to assess your current and future financial obligations against your current holdings. The difference between the two is usually the amount of insurance you need.
Calculation of the amount
Ask yourself the following question : if my death occurred tomorrow, what would be the immediate and future financial needs of my loved ones? Would these financial needs be the same if my death occurred in 20 or 30 years? Currently, you may be the primary financial support for young children. In 10 years, will this still be the case? Similarly, the amount of your monthly mortgage repayment is surely too large for your spouse to be able to afford it on their own. But in 15 or 20 years, you will surely be finished paying off your loan.
Income multiplier by 10 method: Although imperfect, the income multiplier by 10 method is a good starting point for calculating the amount of life insurance you need. This method involves multiplying your income by 10. So you might need $ 800,000 of life insurance if your salary is $ 80,000.
First needs to be met : the repayment of debts and the payment of other expenses following the death
- Mortgage, car loan, lines and credit cards
- Taxes on deemed disposition of property
- Funeral expenses
Other needs : the amount to replace your income
- Do you have children? If so, what standard of living do you want to offer them?
- Do you have a spouse? If so, will their income be sufficient to meet all the family’s financial needs, should you leave?
Health issues and non-standard policing
Healthy people from families with no medical history usually get a better price when it comes to purchasing life insurance. On the other hand, do not be surprised if your request is dropped or if you are offered an insurance product without a medical examination if you have one of these conditions:
- Arterial hypertension
- Overweight or obese
- Depression or anxiety
- High cholesterol
Factors other than health are taken into account when calculating a life insurance premium. You will pay more if you have a job involving risk factors (construction worker, firefighter, police officer, airplane pilot), if you smoke or if you practice a dangerous activity :
- Car race
Be aware that some insurance companies specialize in various types of risks or offer non-medical insurance to provide life insurance to people who otherwise could not be insured. If you have health concerns, work in a potentially life-threatening occupation, or play a risky sport, talk to an experienced independent financial security advisor. He will be able to direct you to a company that more easily accepts the type of risk in question.
How do you compare the bids?
The most important information to collect from one submission to another is:
- The name of the insurance company : Each insurance company has a different pricing table, but each person’s quotes should be consistent from source to source (assuming you are placed in the same risk class ).
- The source where you got the quote : For example, a life insurance quote comparison site such as Picki Assurance, Infoprimes, Karma Assurance, or your friendly neighborhood life insurance advisor. This lets you know where you got the best life insurance quotes so you can come back to it later. It also helps you determine which source is the most accurate.
- The submitted risk class : your risk classification directly affects your submission. If a quotation platform does not assign you the correct risk class, your submission will not match the offer that the life insurance company will make to you after reviewing your request.
- The amount and length of coverage : These items also have a direct bearing on your life insurance quote. If you only consider the quotes that are ultimately offered to you, without assessing the length of time or the amount of coverage compared to previous submissions, you will end up comparing apples to oranges.
- The names of any additional guarantees (riders) added, if any, and their cost. A good way to do this would be to compare the quotes, at first, without taking into account any additional guarantees.
- The amount of the monthly premium : if you start to compare the quotes taking into account the amount of the monthly premium, always keep this method.
Once you’ve chosen the life insurance product that’s right for you, you can apply for insurance from the source you got the quote from or anywhere else. The best source (captive agent, insurance broker, insurer contacted directly by phone) to obtain life insurance is the one that will give you the best customer experience with the fewest surprises possible.
Life insurance underwriting process
You generally need to follow these five steps to purchase life insurance.
- Complete and send the request
- Take your free medical exam
- Take the phone interview
- Wait for the acceptance of the request and the establishment of the final premium
- Sign the police
Depending on your health profile, this process may take some time, which can vary from a few weeks to two or three months. Your financial security advisor must guide you through the process, keep you informed of the stage at which your request has reached, the opinion of the insurer and underwriters, as well as when measures are required. impose on your part. During most of this process, you will be waiting: for a doctor to sign a form, for the date of your medical examination, for the life insurance company to review the documents.
The time between each step can vary, but it takes at least a week between each important step. Anything that involves planning, such as the medical exam and phone interview, can also take longer, depending on the availability of your underwriter or doctor.
Let’s take a quick look at what you will do during the application process.
Complete and send the request
Expect to answer many questions about your health and have to prepare documentation that can be viewed on your salary, such as your last tax return. You will be asked to sign authorization forms that will allow the life insurance company and its underwriting partners to access medical information about you.
Take your free medical exam
Your free life insurance medical exam takes about half an hour. It fits into your schedule and can take place at your home or office. It is designed to be as convenient as possible for you. Getting a free medical exam does not commit you to purchasing the policy. However, be aware that if you cancel your request, other life insurance companies will be able to view the results of your exams. This means that if you decide to choose another insurer, you will not have to undergo a second medical examination.
Take the phone interview
A nurse from the insurance company will ask you basic questions about your lifestyle and your medical history. The life insurance company will usually provide you with a list of questions in advance, so you won’t be caught off guard. A few tips: allow about twenty minutes for the phone conversation and write down the name, address and telephone number of your attending physician and any other physician you have seen in recent years beforehand.
Wait for the acceptance of the request and the establishment of the final premium
Continue to live normally while you wait for the insurer’s decision. Above all, try to relax, even if you know that, during this time, your insurance company decides on the approval of your request and, if necessary, establishes the final amount of the premium.
Sign the police
Your insurance company will send your policy to your financial security advisor, who will deliver it to you. Your advisor will ask you to sign the policy as well as the documents that will allow the insurer to make the bank withdrawals for the payment of the premium.
5 tips to save on the cost of life insurance
Here are 5 tips to save money on the cost of life insurance.
- Subscribe early. It is better to buy life insurance at a young age, but with less death benefit, than to wait until you have the budget to buy a $ 1,000,000 policy. The earlier you buy life insurance, the lower your premium will be. You can always purchase a second policy later to meet all your needs. If you wait too long, your condition could deteriorate, leading to a significant increase in the premium. Procrastinating is the worst thing you can do when it comes to life insurance.
- Reduce the length of the term. A longer term generates higher premiums. It is better to buy several policies with different durations than a single policy. For example, if your youngest child is 10 years old and you have 20 years left to pay off your mortgage, instead of purchasing one (1) 20 year term life insurance for all of your needs, instead buy two ( 2) Term life insurance policies: one for 10 years for your children and life insurance for parents only for the mortgage. This strategy will cost you less than purchasing a single 20-year term policy.
- Reduce the amount of life insurance . If you think you need a million dollars in life insurance, you may be able to lower that amount if you calculate your actual needs with the help of an experienced financial security advisor. If your budget does not allow you to pay a certain premium amount, the solution is to buy a little less insurance. Better less insurance than none at all.
- Improve your health . Did you know that insurers calculate the price of premiums based on your health classification ? There may be a 50% difference between the premium of a person classified as “privileged” and that of a person classified as “standard”. It is therefore to your advantage to improve certain aspects of your health in order to rank in a higher category. Lose weight, lower your cholesterol levels, take steps to control your blood pressure, quit smoking. Take care of your health!
- Shop around. As with everything, it pays to shop around. Use web- based online life insurance quote platforms like AIG Assurance or speak to a financial security advisor who will help you find the life insurance protection that’s right for you and at the best price.
Dos and Don’ts of Life Insurance
- Not to do
- Purchase a cash value life insurance policy as an investment.
- Rely on the cash values of your life insurance policies instead of investing for your retirement.
- Lying to insurers.
- Being insufficiently insured.
- Drop protections to save a few dollars a month.
- To do
- Insure yourself at the youngest possible age.
- Have a healthy lifestyle.
- Shop your insurance online.
Picki assurance is there for you!
The AIG insurance team has been trained to professionally analyze your insurance needs, but also to seek out the best products on the market.
Picki’s advisers are professional and thorough. Tireless, they tirelessly pursue the same goal: to find the insurance product that best suits your needs.