life insurance quotes

Life Insurance: Complete Beginner’s Guide

Imagine you’re a builder, constructing a sturdy and secure foundation to make sure that no matter what happens, your building is well protected.

Well, having a family is pretty much the same–having a solid foundation is essential for their well-being and financial security.

But it’s important to ask yourself: Is my foundation sturdy enough?

In this guide, we’ll explore the different types of life insurance and their benefits, as well as how to choose the right coverage for you and your family. 

Let’s jump right into it!

What is life insurance?

Life insurance is a contract between you and an insurance company. You pay them (the company) a certain amount of money, called a premium, and they agree to pay a set amount of money, called a death benefit, to your beneficiaries in the event of your death. 

This money can help your loved ones cover expenses, such as funeral costs, outstanding debts, but mostly, living expenses.

Is life insurance worth it?

In most cases, yes. But whether it’s worth it really depends on your situation. Let’s say you have dependent (children) who rely on your income, or you have debts (or other financial obligations), then life insurance could provide valuable financial protection in the event of your death. In fact, it would make sure that your loved ones are able to maintain the same lifestyle they wouldn’t be able to achieve without the right coverage–Or without any coverage.

On the other hand, if you don't have any dependent or significant financial obligations, life insurance may not be necessary.

Benefits of life insurance:

Here are some common potential benefits to having life insurance:

• Financial security for your loved ones: The death benefit provided by a life insurance policy can help to ensure that your family is financially protected in the event of your death.
• Debt protection: If you have any outstanding debts, such as a mortgage or credit card balances, a life insurance will make sure the ones you love won’t have to pay a dime.
• Flexibility: Life insurance policies come in a variety of types and options, allowing you to customize your coverage to fit your financial needs and budget.
• Investment opportunities: Certain life insurance types, such as whole life, can also serve as a source of cash value that can be borrowed against or withdrawn in the future.
• Tax benefits: In some cases, the death benefit from a life insurance policy may be tax-free for your beneficiaries.

Types of Life Insurance

Choosing the right life insurance

Having life insurance without the right coverage can have consequences.

Your loved ones may face financial challenges without your income to support them, which can be really stressful!

The following steps will help you choose exactly what you need, so that you can offer security and peace of mind to your family in no time! 

1. Determine how much life insurance you need

When deciding how much coverage you need, there are a variety of factors to consider: 

• Current income
• Debts (mortgage, car loan)
• Future financial obligations (e.g. college tuition for your children). 

Different tools and calculators are available to help you determine the amount of coverage that is right for you.

2. Factors to take into consideration

Several factors can affect your life insurance price, including your age, gender, health, and lifestyle. Your occupation and hobbies can also have an impact on your life insurance rates. Make sure to consider these factors when comparing life insurance quotes.

3. Choose the right type of life insurance

Like mentioned above, There are several different types of life insurance available :  including term, whole life, universal, and mortgage insurance. Each type has its own unique features and benefits, so it's important to consider your own needs and goals when choosing the right policy for you.

• Term life insurance vs whole
• Whole life vs universal life insurance
• Life insurance vs mortgage insurance

4. Choose the right experience for you

This one’s really important! There are different life insurance experiences out there that could make the process far more enjoyable for you (and easier too!). 

Some require medical exam, while others don’t. No medical exam policies may be more expensive, but they can be a good option for people who are unable to take a medical exam due to health reasons. 

You can even do everything online, and protect your family from anywhere, at any time. 

So make sure you take everything into consideration before starting an application. 

Understanding Life Insurance Policies

If you don't fully understand your policy, you may be unaware of its limitations or exclusions, and you may not be able to take full advantage of your coverage in the event of your death.

With the following sections, you will be able to get a better grasp on your (current or future) life insurance policy. 

Let’s jump right in!

Life insurance riders

Life insurance riders are optional add-ons to your life insurance policy that provide extra benefits and protection. 

They can be customized to fit your specific needs and even provide additional coverage (e.g. child rider and long-term care expenses). 

By adding riders to your life insurance policy, you can enhance your coverage and provide even more protection for the ones you care about.

Cash value

Cash value or cash surrender value only features in a permanent life insurance policies. It works as a saving component that accumulates a cash value over time. 

This cash value is a portion of the premiums that you pay for your policy, and it can be accessed by taking out a loan or by surrendering the policy for its cash value. The cash value of your policy can be a useful source of funds for things like emergency expenses or long-term financial planning.

Tip:  It's important to carefully consider who you choose as your beneficiaries and to update your beneficiary designations if your circumstances or wishes change. 

This will ensure that your policy is in line with your current wishes and will provide financial protection for your loved ones in the event of your passing.

The contestability period

The contestability period (mostly 2 years) allows the insurer to investigate and review the policy after the death of an insured person. 

If the investigation uncovers that the insured person lied or misrepresented any facts on their life insurance application, the insurance company may have the right to deny the claim. 

Cancelling or changing a life insurance policy

In some cases, you may need to cancel or change your life insurance policy. This can be due to a change in your situation, such as getting married or divorced, or simply because you no longer need the same level of coverage. 

Life insurance beneficiaries

A beneficiary is the person or entity who’ll receive the death benefit from your life insurance. Before purchasing (or in some cases, after), you will be asked to designate your beneficiaries. You can choose one or more individuals or organizations if you’d like.

Finding the Best Life Insurance Company

Finding the best life insurance company in Canada can be a challenging task, as there are many factors to consider. Here are some key steps you can take to find the company that best fits your needs.

1. Research and compare

One of the best ways to find the best life insurance company is to research and compare the options available. This can include reading reviews and comparing quotes from different insurers to get a sense of their offerings and pricing.

2. Consider your needs and goals

We talked about it in the above section, but it's important to consider your own needs and goals. This can include factors such as the amount of coverage you need, the type of policy that best fits your circumstances, and the additional features and benefits that are important to you.

3. Talk to an expert

If you're unsure about which life insurance company is right for you, consider talking to an expert. A financial advisor or insurance broker can provide valuable guidance and advice based on your unique circumstances and needs.

Special Considerations for Life Insurance

If you participate in a dangerous occupation or have a pre-existing medical condition, the life insurance company will most likely take these factors into account when determining the terms of the policy (and the price!). 

Life insurance for dangerous activities

When applying for life insurance, people who take part in dangerous activities may have to undergo additional medical exams or tests to determine their eligibility for coverage. Here is a list of activities that could be categorized as “dangerous”

Dangerous Activities

Most insurance companies take into account the specific activities that a person engages in, as well as the frequency and intensity of these activities, to determine the risk level and appropriate premiums.

In some cases, the insurance company may even exclude coverage for specific dangerous activities or may require the person to pay higher premiums to offset the increased risk.

If you participate in any dangerous activities listed above, it is important to disclose this information to the insurance company during the application process to avoid any issues with their coverage down the line.

Life insurance for people with pre-existing conditions

For people with pre-existing medical conditions, such as diabetes or cancer, it can be more challenging to find affordable life insurance. 

Insurers may exclude coverage for these conditions or charge higher premiums. 

Make sure to take this into account and find an insurer that offers the best rate possible for your situation. 

Tip: When it comes to life insurance, we know what we're doing. Our fast & accurate life insurance experience will help you get your quote in just minutes.

Life insurance for smokers

Smokers may face higher life insurance premiums due to the increased risk of death associated with tobacco use. 

Some insurers may also exclude coverage for certain conditions that are more common among smokers, such as lung cancer. It's important for smokers to compare quotes from multiple insurers to find the most affordable coverage.

Life Insurance and Planning for the Future

In addition to providing financial protection for your loved ones, life insurance can also be used to help meet other financial goals.

For example, you can use life insurance to help fund your children's education or to provide for your retirement.

Using life insurance as an investment

Before you get all excited, we want to make sure you understand this: Life insurance is built to protect your family’s financial future, rather than a way to “invest” your money. 

However, if you happen to maximize your investment channels, universal life insurance could come in handy, and provide an additional source of income.

Using life insurance to cover funeral costs

The cost of a funeral can be a significant financial burden for loved ones. Life insurance can provide funds to cover these costs and can help ensure that your final wishes are carried out. It's important to consider the potential cost of a funeral when deciding how much life insurance coverage you need.

Life insurance and retirement planning

Life insurance can play a role in retirement planning, as it can provide funds to help replace lost income in the event of the policyholder's death. This can help ensure that your loved ones are financially protected even if you are no longer able to provide for them.

Combining life insurance with other financial products

Life insurance can be combined with other financial products, such as long-term care insurance or annuities, to provide a comprehensive financial plan. This can help ensure that you and your loved ones are protected in a variety of circumstances and can help you achieve your long-term financial goals.

You’re all set!

If you have children or any financial obligations, then you should highly consider getting life insurance. 

But before that, make sure you're taking the steps (all of them!) to choose the one that fits your needs. 

Note that there are different types of life insurance out there (each with its own benefits and drawbacks). 

So make sure you understand these options before making a decision.

Emma offers the most simple way of doing all that. Click here to learn more.