What is Life Insurance?
Life insurance is the type of contract that an individual buys to significantly reduce the financial impact their death may have on their family or beneficiaries.
- Term Life Insurance
- Whole Life Insurance
- How is the Cost of Life Insurance Determined?
- Who should get Whole Life Insurance?
- Do you need Life Insurance?
Life insurance is the type of contract that an individual buys to significantly reduce the financial impact their death may have on their family or beneficiaries. Without a doubt, life insurance gives you peace of mind because you know that your dependents will be financially supported in the event of your death. One of the best ways you can protect the future of your family is by buying a policy.
Here are some key facts that every individual should know about life insurance:
- The younger you are at the time of buying a life insurance policy, the cheaper the premium, irrespective of the amount of the coverage.
- From the moment you signed up for a policy and made the first monthly premium payment, your beneficiary(s) is entitled to the full coverage amount of the policy when you die. This coverage is referred to as the death benefit. In other words, if the policyholder dies at any time during the coverage period, the total amount assured will be paid to the beneficiary. However, you have to pay your premium for this to happen regularly.
- There are two main categories of life insurance. These are term life insurance, and whole life insurance, also known as permanent life insurance
- There are professional and licensed insurers and brokers that can help you make an informed decision on the type of policy that will be best for you. Emma is one of such reputable and licensed companies that you can contact in Canada.
Basically, the type of policy that an individual should opt for will depend on their goals and needs. Term life insurance is designed to offer protection for a specific period, whereas whole life insurance provides lifetime coverage. The choice between these two types of coverage will be based on their goals. Irrespective of the decision, the lump-sum payments, also known as death benefits, paid to beneficiaries at the demise of the policyholder fall under the category of tax-free income. Let's take a closer look at the two main types of life insurance.
Term Life Insurance
This insurance offers a fixed premium as well as a level of the death benefit for a specific period, like 10, 15, or 20 years. It is ideal for younger people who need financial protection against the loss of income that comes from the death of the primary caregiver over a specified period. This type of insurance is the most affordable. It is essential to mention that this kind of insurance doesn’t build cash value. In other words, whatever money is invested in the policy cannot be reclaimed. It means that at the expiration of the policy, there will be no benefit accrued to the beneficiaries if the policyholder is still alive. However, the policy can be renewed for another term. When this happens, the premium will significantly increase. An added benefit of term life insurance is that it is elementary, and therefore, you can easily compare policy plans among different insurance companies. The fact that the market for it is also very competitive offers a great alternative and excellent value to the potential policyholders.
It is also possible to have a term policy with a conversion privilege. It allows you to convert the policy to whole life insurance, without any proof of insurability, and you may retain the same rate class you started with at the beginning of the policy. Emma can be of great help in ascertaining your opportunities in this regard.
Whole Life Insurance
Also known as permanent insurance, whole life insurance offers both cash surrender value and a death benefit. The premiums of this option are usually higher than that of term life insurance for an equivalent death benefit. In certain types of permanent insurance, a part of the premium is invested, which ultimately provides a build-up of cash value. There are different kinds of permanent insurance, which include Term 100 (no cash surrender value), whole life (participating or not), and universal life. All three offer lifetime protection for the entire life of the policyholder. The last two options generate cash value, and the policyholder may use it for other goals or retirement. However, the premiums for whole life insurance are often higher at the initial stage when compared to term life insurance.
How is the Cost of Life Insurance Determined?
Different factors determine how much an individual will pay for his life insurance premium for life insurance. There are a variety of factors used in determining the premium to be paid, including risk related categories and rate classes, among others. Usually, the rate class is determined by factors, such as overall health, lifestyle, and family medical history. For instance, the use of tobacco would increase the risk of death, which definitely will make your premium payment more than what someone that doesn’t use tobacco will pay.
As mentioned, your overall health plays a big role in determining your premium, whether term life insurance or whole life insurance. To determine your state of health, the insurer may request that you undergo a medical exam in the course of the underwriting process to be able to evaluate your current health. This is in addition to your medical history. This medical exam will help them identify the risk factors that may show the possibility of not outliving the policy.
Normally, the healthier and younger you are at the time of purchasing a policy, the cheaper your premium will be. This means that if you want to buy life insurance, the best time to take the step is in your 30s. This is mainly because age and health are very important factors that will determine the rates. By buying a policy in your 30s, you will get better coverage at a reduced monthly fee. According to research, the average cost of life insurance increases by 63% from the ages of thirty to forty.
Who should get Whole Life Insurance?
The most common type of policy that people opt for is the term life insurance. This doesn’t mean that whole life insurance is not relevant. However, it makes more sense to some groups of people than others.
Whole life insurance will be ideal for individuals that want to leave behind a larger estate and those concerned about the protection of their assets. Additionally, it has a component of forced savings, which has an attraction to it.
Do you need Life Insurance?
This question will pop up in your mind at some critical point in your life. Well, the answer depends on your specific circumstances. If you have a spouse, children, or other beneficiaries that depend on you financially, having a life insurance policy may be a great way to protect them in the event of your death. If you have any questions or concerns about life insurance and if it is the right time for you, you should contact Emma Life Insurance.
There are many who believe that they don’t need to buy life insurance since they don’t have children. Without a doubt, having a child is a significant reason to start considering a policy, but there are other reasons that should prompt you into buying at least term life insurance. For instance, if you have a mortgage on your home that your partner may struggle to pay if you are no longer there, you should consider taking up a policy.
If you are still not sure if applying for a life insurance policy is for you, or if you don't know the specific life insurance policy that suits your needs, the best option is to discuss it with a licensed insurance company or broker. You may want to contact us on Emma.ca to discuss with one of our expert advisers. They will be able to give you a comprehensive analysis of what will be suitable for you based on some factors and your circumstances.
If your family depends on you for financial support, you should consider buying a policy. Both term life insurance and whole life insurance are designed to pay a lump-sum, also known as death benefits, to your loved ones at the event of your death. This can help them deal with financial worries, like childcare costs, mortgage payments, or household bills when you are no longer there to provide for them. You can choose the coverage you want and the duration. You can also take up a term life insurance under joint names with your spouse and pay the premiums annually or monthly. The amount you pay for your policy will depend on the type of policy you need, the risk factors, and how much coverage you want. It would be best if you spoke with a professional insurance broker by chatting with one of our experts to know the best way to go about this. Emma is at your service. You should visit our website to learn more about the company and all we have to offer.