In 2017, there were almost 29 million Canadians who carried some form of insurance policy. In the same year, insurers paid a whopping $92 billion in total for claims.
Of those insured, 22 million owned a life insurance policy. Together, these policyholders own a staggering $4.7 trillion in coverage.
That should tell you how life insurance has become such an integral part of Canadian life. After all, no one wants to leave their mourning loved ones with even more financial worries to think of.
So, if you aren't part of that 22 million, buying life insurance online should now be on the list of your priorities. The younger you are when you get life insurance, the cheaper your premiums will be. And if you get a policy with a cash value feature, the more wealth you can build.
We'll show you the lowdown on how to get life insurance, so keep reading!
Determine First How Much Life Insurance You Need
When shopping for life insurance, one of the first things to consider is how much of it to get. Remember, the death benefit is the lump sum your insurer will pay out to your beneficiaries. So, it should be enough to cover your family's needs, funeral and burial expenses, and your debts.
Your Family's Needs
If you're the family's breadwinner, then your policy can be a form of income replacement. But you don't want it to cover only a year's worth of your salary -- it should be between six and 10 years.
So, let’s say you're making $75,000 a year. Let's also say you want your family to keep living the same quality of life even after you're gone. Your policy's worth should then be at least $450,000 to $750,000.
If you have kids, you likely need more. After all, raising a child in Canada until the age of 18 costs about a quarter of a million. You'd need an even bigger policy if you're considering helping them go to college.
If you're like the majority of Canadians, then you have some form of a loan under your name. In fact, the average debt balance per Canadian was at $22,837 in the fourth quarter of 2017.
Now, you won't be passing your debts over to your family when you're gone. But lenders can still "repossess" your property if you have secured loans that go unpaid. These include your mortgage and car loan.
That said, be sure to factor in your debts when calculating how much life insurance to get. It should be enough to cover remaining loan payments, especially for your house and car loans. That way, your loved ones don’t have to worry about paying the mortgage, or worse, becoming homeless.
Funeral and Burial Expenses
The cost of dying in Canada continues to rise, and these days, a basic cremation alone can already cost up to $3,000! But that's not all -- there are other funeral home fee services that can add another $5,000 to the bill.
So, passing away means leaving the family with exorbitant funeral and burial expenses. That's why you want life insurance to cover such costs, even if you're not leaving the family with loans to pay back.
Decide on the Kind of Life Insurance to Get
Now that you have an idea of how much life insurance coverage to get, next is decide on the exact type of policy. There are many types of life insurance, with term life and permanent life being your two main options. Under permanent life, you'll also have to choose between whole life and universal life.
Let's break these four down further for you to have an idea which one best suits you and your family.
Term Life Insurance
Term life insurance is life insurance that comes with an expiring term. The term you pick, which can be from five to thirty years (or even longer), dictates when your policy expires. So, if you buy a 20-year term policy today, it'll cover you for the next 20 years.
Because it "expires", term life is the most affordable type of life insurance out there. It's also the least complicated since you only have to choose a term and a death benefit amount. So long as you keep paying your monthly premiums, you'll remain covered.
Your insurer will pay the death benefit to your beneficiaries if you die during the coverage. But what if your passing happens after the term, say the 20 years mentioned above? Since the policy has already expired, your family won't receive anything.
The good news is, many term policies come with a feature letting you convert them into permanent life. You can convert a part of your term life or even the entire policy into a type of permanent life policy. But make sure you know your insurer's rules as most of them have an age limit when it comes to policy conversions.
Permanent Life Insurance
Permanent life insurance is, well permanent! It doesn't expire, so there are no terms to worry about. It'll cover you for your entire life, so no matter when death occurs, your family will receive a death benefit.
But it's also because of this feature that makes permanent life more expensive than term. Another reason it's pricier is that it comes with a cash value feature. How you build and use that cash value depends on whether you get whole life or universal life.
With a whole life policy, you pay consistent premiums on a monthly basis. It also comes with a guaranteed accumulation of cash value.
Whereas universal life insurance is more flexible, so you can choose how to pay your premiums. You can also adjust the death benefits and savings component of your policy.
No matter which type of permanent life insurance you get, you can build wealth through it. You can withdraw against the cash value to use for whatever you want to! It can be personal spending, home renovations, or even to pay back your debts.
Get Insurance Quotes Online
Before you decide to purchase life insurance online, get several quotes first. That'll help you figure out if your budget can afford the higher premiums of a permanent life policy. It'll also give you an idea of how much the price difference is between a term and permanent policy.
The price difference shouldn't make you drop permanent life insurance though. Granted, it'll be more expensive, but you can make it more affordable by getting a lower death benefit. You can do this if you have existing investments and savings.
Let's say you've already started saving for retirement, like 65% of Canadians in 2017. Or you have other investments, like real estate, stocks, bonds, or ETFs. This means you have other sources of funds to leave your family with, so you can choose to get a lower death benefit.
The lower death benefit will then make your life insurance premiums lower too. And remember, permanent life insurance comes with a cash-building component. You can withdraw everything and put it into your savings account for your family's use.
Compare Offers before Buying Life Insurance Online
Once you have that list of quotes, be sure to compare the features of each offered plan. Especially if you'll get permanent life -- you want the highest interest rate for your savings. If you're getting term, it's a good idea to choose one that has a convertible feature.
Make sure you delve into the payout process too, as you want your family to get that right away. Many consumer reviews talk about this, so look up online testimonials and complaints. They'll give you an idea on which insurers take the longest to finish the payout process.
Getting Life Insurance While You’re Still Young
Now that you know how to get life insurance, you should consider buying it as soon as possible. The earlier you buy life insurance, the lower your premiums will be.
First, because age is often the biggest factor insurers use when determining rates. To them, a young person still has many years to live, which means they have the lowest possibility of making a claim. So, charging lower premiums is their way of "giving back" to younger policyholders.
Also, keep in mind that most chronic conditions have something to do with aging. In fact, 80% of Canadians older than 65 have at least one chronic disease. 70% of those in this age bracket even suffer from two or more chronic conditions!
This higher risk of developing health problems as one gets older means higher odds of making a claim. That's why life insurance becomes more expensive the older a person is. So, consider buying while you're still young to secure better rates and pay lower premiums.
Purchasing Life Insurance Online Made Even Easier
There you have it, the most important things you need to know when buying life insurance online. Equipped with all this knowledge, it'll be easier for you to find the best policy to meet your family's needs. But be sure to follow all our insider tips, so you can rest assure your budget can afford your premiums.
So, exactly where to buy life insurance then? Well, right here! But of course, we'll help you find the lowest quotes first so you can compare them before shopping!