Life Insurance Guide

Why do I need life insurance?

Life insurance pays out a lump sum to your loved ones to remove the financial stress when you pass. It can help with estate fees, outstanding mortgages or credit card debt and burial costs, among any other financial obligations.

What types of policies are there?

Most life insurance falls under two categories, ‘Term Life‘ and ‘Permanent Life‘.  There are variations of each type (like Universal, Term to 100 or Joint Life ), but policies usually fall under these terms.

What is the difference between “TERM” and “PERMANENT” insurance policy?

Term life insurance differs from permanent primarily through two factors: cash value and length. With a term life insurance policy, it does not accumulate cash value, which can be used to take a loan against, and is set for a particular, predetermined period. Permanent Life Insurance guarantees cover for the rest of your life and accumulates cash value. There are various options under each type, which can include investment and different plans.

What happens if I want to cancel the policy?

A life insurance policy can be rescinded at any time. Stopping your plan will also stop any premiums payable, but any cash value built up may be subject to tax that you are obligated to pay.

What happens in case of a missed payment?

Since permanent policies build up cash value, this may be used to pay any missed premium payments. Term policies generally offer a 30-day grace period for payments to be made, but a medical assessment may be required after this time.

How do I get coverage?

You can get coverage through a broker, like us at Life Insurance Pro. Once we both agree on a plan suitable for you, we’ll submit your application to the insurance company. This may be subject to a medical carried out by a third party, as well as a doctor’s report as part of the process. After a few weeks, the underwriting process will be finished, and your policy will be in place.

How much does it cost?

Life insurance costs vary from individual to individual. They are dependent upon health and age, as well as other small factors like profession or family history. If you are old, a smoker and are of poor health, you can expect your premiums to be higher than someone who is young, a non-smoker and in good health. In some cases, life insurance may even be declined to someone with very ill health.

How do I pay?

Payments can be made monthly, bi-annually or annually, typically through automatic withdrawals from your bank.

Can I buy a policy on someone else’s life?

If you have their permission and an insurable interest (if the insured died, there is a direct financial obligation), then a policy can be taken out on this person.

Under what circumstances would a life insurance policy not payout?

If the insured commits suicide within the first two years of their policy being in place, dies in the act of a criminal offence, dies during war or made a false claim on their initial application, they will not be entitled to a payout.

What is Critical Illness?

Critical Illness insurance protects your income should you suffer a critical illness, like a heart attack, stroke or cancer, and survive 30 days (90 days for cancer) after diagnosis. Policies can cover up to 25 illnesses and be bought as ‘term’ or ‘permanent’ plans.

What is disability coverage?

Should an accident happen and you become disabled, disability coverage can provide a monthly income if cannot perform the duties of your job.  Your pre-disability income provides the base of the benefits, and therefore coverage never exceeds it. Policies typically last until 65 years old.

What is an Annuity?

An annuity provides tax-preferred monthly payments after the investor pays a lump sum to the insurer. A set time frame is agreed, and payments decrease as the length of time increases. In some cases, if the investor dies, a beneficiary can carry on receiving the payments.

Can Term Life Insurance be converted to Permanent Life Insurance?

With most policies, you can. Many term and permanent policies are issued as R&C (renewable and convertible), with convertible meaning that term life policies can be transformed into a permanent life insurance policy without any other medical requirements. However, this can vary from company to company, with some offering conversion up to 60 and others up to 65. Converting your coverage will be more expensive than buying a permanent life insurance policy in the first place, as it is based on your age at the time of conversion.

What are the advantages and disadvantages of No Medical Exam Life Insurance?

Very little effort is needed to take out a No Medical Exam plan. As all health questions are answered ‘no’, the insurer has no or limited information about you and can therefore easily insure you. However, premiums tend to be more expensive than a regular policy, as any mitigating factors you may have are excluded.