While 70 percent of Canadians have life insurance, only about 37 percent of these people review their policies each year.
While no one really wants to think about their own death, it's essential for you to set up protection for those you are leaving behind. Your family will have plenty to deal with, financial hardship should not be one of these issues.
If you have never put much thought into buying life insurance, you may wonder how to get started. Here you can find life insurance tips to help you find the right policy for your needs.
Keep reading to get started.
1. First Things First: Do You Really Need Life Insurance?
Before diving into tips for buying life insurance, you need to answer a critical question - do you really need it?
Believe it or not, the answer may be "no."
Are you healthy and young? Are you free from dependents who rely on your income? Are you debt-free?
If so, then you may not have to purchase life insurance.
Life insurance is designed to protect those you leave behind. If you aren't sharing debt with anyone, and if no one relies on your income, then you don't have to purchase life insurance.
It can still be helpful to purchase now, rather than when you are older since the price goes up, it may not be absolutely necessary.
However, if you have people who rely on you, then life insurance is a must-have. This way, if you pass, your dependents can still pay the bills, take care of the funeral and live a comfortable life.
2. Get to Know the Basic Types of Life Insurance Policies
When you begin looking for life insurance, you will find two basic types of policies. There are term policies and whole life or permanent policies. To determine which option is right for you, you need to know what's different about them.
Term Life Insurance
This type of policy provides basic insurance for a certain amount of time. In most cases, term policies last 15, 20 or 30 years. If you pass away within that period, your dependents/family receive the benefits.
If you happen to outlive the term, the policy expires, and you purchase a replacement life insurance policy.
Permanent or Whole Life Policies
This type of life insurance is designed to last your entire life. While the premiums are higher, they are divided into a death benefit and an investment. The investment component is called cash-value.
3. Figure Out How Much Coverage You Need
For a first-time life insurance shopper, you may find it challenging to figure out how much coverage is enough. Using the information here may help.
Add Up Your Debt
Did you know, if you pass away, you may pass on some of your debt to your loved ones? One example is shared credit card debt or student loans you have co-signed for.
There are other long-term debts, too, such as mortgages and auto loans. While your beneficiary isn't obligated to pay them, not doing so can have serious consequences.
You need to account for all the debts you will leave behind when figuring out how much life insurance you need.
A decade down the road, the cost of college may go up significantly. While a 529 plan can be beneficial for affording college, if you pass away, you can't continue contributing to it.
If you don't have the funds to afford college for all your kids yet, then add those costs to your life insurance policy.
Day to Day Living Expenses
When thinking of your dependents, you likely think of your kids. While they can be expensive, your partner may also need funds for daycare and other similar costs.
Also, consider your aging parents who may need additional support as they continue to age. The cost of caring for all your dependents should be considered carefully.
Take the time to add up all potential costs. Once you have this figure, you know how much life insurance you need to purchase.
4. Understand What Affects the Cost of Your Policy
Your life insurance can last for decades and may even pay out millions of dollars in the long run. However, do you know what you are going to pay over the years? There are several factors that impact your overall month-to-month cost, which include:
- The term and the amount of your policy
- Your age when you purchase the policy
- Your current health
- Additional factors
Knowing what impacts the price of your policy can help you understand the premium you pay. Keep in mind, while premiums may go up, buying a whole life policy while you are young can help you save money in the long run.
5. Find a Reputable Insurer
When you buy insurance, you need to find a company that's going to outlive you.
Take a look at the company's financial stability and their customer service ratings. There's more than a few reviews and ratings online to help you choose the right company for your needs.
Don't Ignore These Helpful Life Insurance Tips
When purchasing insurance, it's crucial you don't ignore the life insurance tips found here.
You need to protect your loved ones and ensure they have the financial support needed if you were to pass away.
While it's not pleasant to think about, it's a fact of life you can't ignore.
If you are ready to purchase life insurance in Canada, then visit our site for a quote. We are also available to answer any questions you may have if you contact us.