5 questions to ask before buying Life Insurance
- Do I Require Life Insurance?
The primary purpose of life insurance is to ensure the financial well-being of your dependents in the event of your demise and the subsequent loss of income. If you are the primary wage earner with young children or have outstanding loans like a mortgage, life insurance is highly advisable to prevent burdening your partner with debt after your passing. However, if you are debt-free, mortgage-free, and your family is financially independent, the need for the death benefit may be minimal. Individuals who are adept savers and already have sufficient funds to support their dependents may find the additional expense of life insurance unwarranted, though determining the necessary amount can be a complex task.
- Do I Need Term or Whole Life Insurance?
If life insurance is deemed necessary, the crucial decision lies in choosing between term and permanent insurance.
- Term Life Insurance: Offers coverage for a specific period, typically between 10 and 30 years. It proves cost-effective, with premiums usually fixed throughout the policy term, making it suitable for those who need coverage for a defined period, such as until a mortgage is paid off or children complete school.
- Permanent Life Insurance: Provides lifelong coverage with generally fixed premiums, albeit significantly higher than term insurance. There are three main types: Term to 100, Whole Life Insurance, and Universal Life Insurance, each offering distinct features such as coverage until age 100, an investment portfolio managed by the insurance company, and more flexibility in investments and premium adjustments, respectively.
- How Much Coverage Do I Need?
Once the type of policy is determined, assessing the required coverage is crucial. To avoid unnecessary expenses, the goal should be to account for debts like mortgages or student loans and provide for dependents until they can independently support themselves. The Government of Canada suggests coverage worth seven to 10 times one’s annual salary and provides a calculator to aid in personal planning. For term insurance, the policy length should align with life milestones, considering factors such as children’s graduation or mortgage duration.
- What If I Don’t Die?
While one can’t cheat death, holders of term life insurance policies can outlive their coverage. If the policy term concludes without the policyholder’s demise, the death benefit won’t be paid out, and the premiums won’t be refunded. Although not an investment, if the need for insurance diminishes due to financial independence and debt-free status, planning for the future is essential. Most term life policies include options for renewal or conversion, allowing for policy continuation without a new medical exam. Alternatively, purchasing a new term life policy down the road might be the most affordable option, albeit with potential increases in premiums.
- How Can I Find the Best Rates?
After carefully considering policy options, obtaining the right policy at a budget-friendly price is paramount. PolicyMe, an online life insurance provider using automated underwriting technology, offers low premiums by keeping overhead costs minimal. With a simplified application process, applicants can receive instant quotes by answering basic questions. The application process, which takes about 15 minutes, provides immediate approval for most healthy applicants, eliminating lengthy waiting periods and the need for follow-up medical exams.