Almost two-thirds of Canadians have some sort of insurance. Despite this, 48% of them still feel that their finances won't cover serious life events. What's more, they admit they won't be able to handle expected or unexpected life events.
So, where do you stand? Does your family have the financial means to cover expenses in the event you pass away? Do you have enough in the bank for your family to pay for your loans and support themselves?
If you're unsure, then it's time to start looking for the best term insurance. Term life insurance can protect your finances and your loved ones. It's one of the best ways to prepare for the inevitable.
In this post, we'll cover the most important facts you need to know about this type of life insurance. So, make sure you keep reading!
Why You Even Need a Life Insurance
You may think that it's too early to think of your passing. But the truth is, accidents can happen, and they can happen to anyone. If you're unprepared, it can leave your family in a devastating financial situation.
For starters, there are the ever-increasing costs of a funeral.
In Canada, that averages a whopping $6,000. Casket prices alone are already more than US $2,000. In CAD, that's more than $2.5K! Now, add thousands of dollars more for funeral services, embalming, and a grave site.
All that goes to show that passing away is very expensive. So, as unpleasant as it may be to talk about, it's one thing you need to prepare for. After all, you wouldn't want to leave your family with more things to worry about as they mourn, would you?
Now, even if an accident doesn't result in your passing, it can still leave you unfit to work. Whether in the short or the long run, inability to work means inability to earn money. It's one thing if you don't have a family, but it's a whole different story if you're the head of one.
The medical and hospital bills alone after an accident should be enough worries. Okay, so the public health care system may give you free access to most health care services. Or, you're one of the two-thirds of Canadians with private/employer-sponsored health insurance.
That doesn't mean you'll get coverage for everything. Nor does it mean that the coverage you'll get for loss of work is enough for your household's expenses.
So, rather than keep worrying about all the effects of serious life events, why not prepare for them? That's something that life insurance can help you with. It can help ease some of the financial (and mental) burden that your loved ones will face in the event you pass away.
The Lowdown on Term Insurance
You most likely know that term insurance is one type of life insurance you can get in Canada. But, what is term insurance policy exactly?
At its core, term life insurance pays out a death benefit to your beneficiaries. That's if you die within your policy's term. The term is the length of time you agree to stay covered.
In other words, there's an expiration date. Once your policy expires, the insurer won't pay out.
But, don't let that get in your way of considering one. You still get to enjoy several benefits when you buy term insurance.
For starters, it's often cheaper than permanent insurance. It's the main reason behind the 54% increase in individual life insurance sales in 2016 from 2006.
Also, because it's straightforward, it's easier to understand than the permanent type. You choose a term, keep paying the premiums, and get covered throughout your chosen term.
That's pretty much the process, but that won't guarantee you the best term life insurance. This brings us to the next topic.
What Makes for the Best Term Insurance?
In case you're still unsure between term vs permanent insurance, here's a more detailed guide. Then, once you've decided that term is the better choice for you, next is to start looking for the best term policy. Here are a few tips to make your hunt easier.
Ensure the Policy Duration Matches Your Needs
One of the best features of term insurance is that you can choose from a long list of "term" options. You'll find them in five, 10, 15 - all the way up to 30 years. If you're one of the 55% of Millennials who don't have a policy, you may want to go for a longer term.
Of all the term coverage types, the "level-premium term insurance" is the most common. By getting this policy, you don't have to worry about increases in your premiums. You'll pay the same amount throughout the life of your insurance coverage.
To ensure the term meets your needs, factor in the number of years your family will rely on your support.
For instance, if your kids are still young, then a 25- or 30-year policy may be the better option. This allows you to continue supporting them as they grow up. At the same time, it's long enough to also cover their college education.
Make Certain the Death Benefit Is Enough
How much coverage you should get depends on your family and financial situation. Here are some of the most important factors to consider:
- Financial obligations (mortgage and other loans)
- Household expenses
- Age of your children
- Support for your kids
- Your spouse's age
- How much your spouse makes
This'll give you an idea of how much your family would need to survive in the event you pass away. Make sure you also consider the length of time your family would need to get back on their feet once you're gone. This is especially true if your kids are still young, since your spouse would handle all finances.
A good rule of thumb here is to get a coverage that's at least eight to 10 times your yearly income. Let's say you make $50,000 a year. That means your policy's payout should be at least $400,000 to $500,000.
Now that you have an estimate, try subtracting the above-mentioned expenses. Is the amount left enough to cover your family's expenses until they can support themselves? If not, then you'd need to invest a little more on your term insurance.
Also, factor in any savings or other life insurance policies you may have. Your employer may be paying for a life insurance under your name as part of your benefits. Don't depend on this solely though; it's better if you get your own private life insurance.
The above is only a standard computation. How much coverage you need exactly still depends on your unique situation. This said, it's always best to over-insure a little, since there's also inflation to think of.
Shopping Around Is Key to Securing the Best Deal on Term Insurance
Now that you know what and how much term insurance coverage to buy, you're ready to start shopping around. As with all other big-ticket items you'd buy, comparing term life will help you find the best deals in the market.
Here are some of the best places to start:
The good news is, there are reputable websites that offer such comparison services. Don't worry - they're free! All you need is some time to shop and compare offers.
Many of these websites are from insurance brokers. Insurers pay them to get consumers to buy policies from them. That's why they can offer these comparison services for free.
Also, brokers have an extensive network of insurance companies. They have access to various policies, offers, and rates. By using their service, you'll have an easier time finding a term policy that best suits your needs.
Your Current Insurer
Already carrying home insurance or auto insurance? In that case, it's worth asking your insurer about term life insurance. If you like the quality of service they provide, then it makes sense to get your term coverage from them.
Plus, they may even give you a discount if you purchase more products from them.
You're Not Too Young to Get Life Insurance Coverage
The bottom line is, there's no "young" or "old" when it comes to accidents. That's why as early as now, it's best you already consider getting life coverage. That way, you and your loved ones can feel more at ease.
Besides, the best term insurance policies allow for conversion to the permanent kind. That means you can have a policy that accumulates a cash value. This makes it even more useful, since you can use that money while you're still enjoying life!
Looking for more insider tips on life insurance? Then head over to our blog! We have other insurance-related guides for you to check out.