You want to buy Life insurance, but like most people you don’t know what you are looking for, what are the different types and what’s right for you. Do I buy Whole Life, Universal Life, or Term Life? How much do I need and for how long? What do I need it for and will it stress me financially? There are other questions that need to asked and at RSA Financial we offer “REAL, SIMPLE, ADVICE.” to all of these questions.
Term Life Insurance
Term Life Insurance, also known as pure life insurance, is life insurance that guarantees payment of death during a specified term.
The longer the term (10, 20, 30, years or term to age 100) the higher the premium, though Term Life is relatively less expensive than permanent insurance. This makes it a good option for insuring an individual or families debt and income requirements in case of the insured’s death. There is no cash account so the only benefit payable to the beneficiary is the actual face value purchased ex: $500,000 purchased, $500,000 paid out. Term Life is usually guaranteed renewable after the term expires until a certain age, average being 85 years old but comes at a significant increase in premiums. Term Life can be converted to permanent life coverage.
Universal Life Insurance
Permanent Insurance that provides more flexibility than Whole Life insurance does. Premiums can be adjusted or increased over time. Policy can be overfunded to build up cash value.
The cash value account can be placed with investments inside the Insurance company such as Segregated funds or an interest bearing account for future growth. This cash value may be used to fund future premiums or can be accessed by withdrawing or borrowing against the policy itself.
Whole Life Insurance
A form of permanent insurance guaranteed to remain in force for the Insured’s entire lifetime provided required premiums which are level are paid up over the course of that lifetime or to maturity on a Limited pay policy.
It can generate cash value inside the policy by overfunding and through annual dividends paid out by the Insurance company. For personal and family use it can be attractive for estate planning, funeral expenses, surviving spouse income and supplemental retirement income. It also has advantages for business owners if the policy is owned inside the business, one using retained earnings which are taxed much lower than personal income to pay the premiums and add cash value by overfunding the policy.
Term Life Insurance vs. Bank Mortgage Life Insurance
Four Key Differences
- Unlike individual life insurance, credit insurance sold through a bank is usually not underwritten until a claim is made. This means the insurance company may determine you are not eligible for a payout even though you have been paying premiums. For instance, a claim may be denied because you did not disclose some past medical history. This referred to as Post-Claim Underwriting. When you apply for individual insurance through a licensed insurance broker your medical history will be examined before a policy is issued and you start paying premiums. The insurance broker will ask detailed questions and may arrange for a registered nurse to conduct a physical. You will know upfront whether or not you are covered.
- Mortgage Insurance sold at a bank is a one size fits all policy. This means everyone who qualifies is considered to be of equal risk. The premiums you pay are a fixed amount based on your age and the amount of the mortgage. There is no discount for non-smokers or for women. With an individual or joint insurance policy, the premiums are based on your individual risk. Your health history and exam will help determine how high or low your premiums are. Non-smokers and women pay a lower premium.
- Mortgage insurance sold at a bank covers a decreasing amount. While your mortgage decreases over time, your premiums remain the same. Mortgage insurance will only pay off the balance of your mortgage should they except your claim. When you purchase an individual insurance policy you pay premiums for a pre-determined amount of coverage. Therefore, if you pay premiums for $500,000 of coverage your beneficiary will receive $500,000.
- Mortgage insurance sold by the bank, pays the bank, not your beneficiary. With an individual policy you choose who the beneficiary or beneficiaries are. Maybe your beneficiary does not want to pay off the mortgage. It’s their choice. Something else to consider is most bank staffers selling mortgage insurance are unlicensed and rarely trained to explain the details and legalities of their mortgage insurance. Using a properly licensed Life Insurance agent doing a proper “ Needs Analysis” can mitigate risk and possibly save you money.
Critical Illness Insurance
Most people do not realize that your chances of having a Critical Illness are much greater than actual death. In Canada 3 out of every 10 healthy males (30%) will become Critically ill before age 65. Healthy females have a 27% chance of becoming critically ill before age 65. Thankfully in many cases with the breakthroughs of medical science your chances of surviving have increased substantially. If this happened to you would you be financially prepared to experience the long road back to health or would the stress of having to worry about finances make your illness worse. With the proper Underwritten Critical Illness policy in place this financial burden could be lessened dramatically.
No one expects to have or be in an accident. But as we all know they happen every day to Canadians, we just hope it isn’t us. The question you need to ask yourself is would I be financially okay if I an accident happened to me. If the answer is yes than you have that comfort. But what if the answer is no, thankfully there is a solution in the form of a Disability Insurance policy you could have in place to cover your financial obligations. There are many variations of these policies and at RSA Financial we have the expertise to help navigate what’s best for you.
Long Term Care Insurance
It might be hard to imagine now, but chances are you’ll need some help taking care of yourself later in life. The big question is: How will you pay for it? Buying long-term care insurance is one way to prepare. Long-term care refers to a host of services that aren’t covered by regular health insurance. This includes assistance with routine daily activities, like bathing, dressing, or getting in and out of bed. When you are healthy these are things we take for granted. The cost of care without a plan can deplete your retirement nest egg quickly. This could place that financial and time consuming burden on your family and also eliminate any transfer of wealth you might have intended for them.
When it comes to Travel insurance most people ask: Do I need it? Why is comparing travel insurance important? What coverage do I need? At RSA Financial we have the answers to these questions and are able to supply you the proper travel insurance at the most competitive prices. We are licensed brokers contracted with major underwriters such as Tugo, Manulife and Pacific Blue Cross. In quick phone call to us will have you insured in minutes.