During the last few months, the word insurance got more popular than ever. It is easy to understand why. The climate of uncertainty that we are currently experiencing due to COVID-19 is working as a wake-up call for many Canadians, triggering a stampede to pick up life insurance to protect their loved ones.
As we start to think about mortality, illness, and job security, we also realize how vulnerable our lifestyle and stability actually are. Consequently, the idea of having a financial safety net feels more necessary than ever.
That is what life insurance is all about.
No matter what might happen, with a life insurance plan, you know that your family will have financial stability in your absence.
Regardless of their needs (pay for a mortgage, higher education, or simply to survive on a daily basis), the benefit of a life insurance policy can cover all of that - and even more.
But as you understand the benefits of having an insurance plan in place, many other questions arise: Do I really need it? And if so, which option is most appropriate for my family and me?
Independent of how much you have saved or your monthly income, an unexpected event can easily jeopardize your family’s financial future. Therefore, having an insurance plan is one of the best ways to be prepared to face life’s unpredictability. As for the plan, the answer might be harder to disclose. Nonetheless, there is a type of life insurance that is perfect for those that seek a simple and affordable solution: term life. In this article, we will tell you all about it and how TermLite can provide you with the protection you and your family deserve.
So let’s start with the basics.
As the name reflects, term life insurance provides coverage for a specific period, known as a term. Lengths of 5, 10, 20 or 30 years are the most common and popular ones, depending on each individual need.
By paying a monthly premium to the insurance company, you and your loved ones will be protected for the policy’s entire duration. If something unexpected happens during said period, your loved ones can submit a claim and receive the policy’s benefit (commonly known as a death benefit or survivor benefit).
The benefit can be used in whatever way the beneficiary (or beneficiaries) find appropriate. Most of the time, families use it to cover dependent care, college education, final needs and funeral costs, and mortgages.
Summing up, for those that don’t want (or don’t have the budget to afford) permanent lifelong insurance, this is an option worth considering.
Insurance can be confusing, and it is hard to know what you need. However, term life, like we will explain in the next paragraphs, is usually quite straightforward. Considering that people purchase this product to get protection for a specific length of time, some particular situations and individuals can benefit greatly from this form of coverage. Here are some examples:
If you are sure that your needs are temporary, then a term plan is probably the right choice for you. Just make sure you carefully consider how long you will need the coverage.
However, if you are not so sure of your needs, it is worth exploring other coverage options. For instance, if you have a long-term perspective and wish to accumulate a cash value over time, a permanent plan might be best for you.
In either case, the best way to consider whether a plan is right for you is to examine four essential factors: debts, income, mortgage, and education (the DIME formula). Considering these elements and your family’s current situation and future plans might give you many clues about the perfect policy for you.
If you are still undecided, we have collected a list of advantages of term life policies worth considering. Luckily they will help you make up your mind!
Term life insurance is one of the simplest forms of life insurance. However, that doesn’t mean that its protection is limited or unworthy. In fact, term life policies are incredibly popular among Canadians, especially those with a mortgage or a young family to support. Here are some of the benefits of this type of life insurance:
One of the most significant advantages of term life insurance is its lower initial cost than permanent insurance policies. This happens because it is, overall, a simpler product. Unlike whole life insurance, term policies have no savings elements attached to the coverage. It provides pure insurance protection, having no purpose other than to pay a death benefit to the beneficiary if the necessity arises. To give you an example, a 20-year term policy for a healthy non-smoker 30-year-old man can cost as little as $30 per month. A permanent policy, for someone in the same circumstances, can cost around $300 per month.
Nonetheless, there is an important detail that you must keep in mind: at the end of the term length, you can renew your coverage at an increased premium rate for the next period. So here is our tip: before committing to a term life policy, make sure you understand how you can renew it or convert it to a permanent plan.
Needs change over time, and term life insurance can mirror those changes better than any other product. Overall, it is a plan that allows you to purchase the perfect coverage for your temporary needs. For example, you will easily find insurance companies that offer coverage periods that range from 5 to 40 years (or even more). Then, when the term ends, you will also have the freedom to determine whether you want to drop your coverage, convert it to a permanent plan or renew it for another period of time.
These features give you more flexibility and control, which young breadwinners with a limited budget will surely appreciate.
Like we have mentioned, term life insurance is quite straightforward. With this policy type, you will always know what you are paying for and what your beneficiaries can expect if something unexpected happens. Besides, as your premiums and coverage won’t change for the entire term, you won’t have to worry about premium increase surprises.
Considering all this simplicity, it is also reasonable to say that term plans are also excellent to complement other policies you might have in place. For instance, if you have a group plan from work that may not be enough for your needs, a private term life insurance policy might be worth considering.
By now, you are probably wondering: but what will happen when my term expires? Here is where an important feature called renewability comes into play. It does exactly what the name suggests: it gives you the possibility to renew your policy when the term ends. This feature often allows you to start a new term without providing new or additional medical information. However, you will still have to contend with the price hike. Considering that you will be older and more susceptible to suffer health issues, the premiums will likely be higher. As for the death benefit, it remains the same as long as you continue to renew and pay your monthly premiums.
Most term insurance policies have a convertibility feature that lets you switch to a permanent life insurance plan without re-qualifying. Although permanent life insurance comes at a higher price, the policy stays in effect, and the premiums don’t increase, no matter your age or health status. And if you are wondering, “Why would I need to convert to a whole life policy from term?” just think about how life might change. For instance, if you end up suffering from a severe health problem (like heart disease), it may be challenging to apply or get accepted for another policy.
Here is one of the most significant advantages of this type of life insurance: the death benefit proceeds are generally not subject to federal income taxes. This means that, regardless of the size of your policy, your beneficiary will not have to report life insurance proceeds as taxable income on their Canadian tax return.
If you are a young adult, a renewable term life policy is the perfect choice for your immediate needs. With these policies, younger people can acquire substantial face amounts of coverage at a relatively low immediate cost - perhaps even more than their immediate needs. And that is a great thing. It means that, as time passes, you will guarantee that your level of coverage is sufficient, especially if your family obligations increase.
So, if you plan to get married, start a family, or even start up a small business soon, you can begin to plan your financial future with term life insurance.
Even if everything seems like "business as usual," you never know what is waiting just around the corner. Just looking at what this year has been like, we can quickly agree on how unpredictable life is. That is why it is always a good idea to be prepared beforehand with the right plan.
To find the best plan to protect your family and your estate, you need to understand the different kinds of life insurance coverage available and how they can benefit you. If your budget isn’t very flexible and your needs seem temporary, a term life insurance policy might be the right choice for you.
At TermLite, we know that life moves fast and that a split second can change everything you once knew. That is why we offer term life policies that match the needs of anyone that wants to protect their loved ones in an uncomplicated and affordable way.
If you are a Canadian resident between the ages of 18 to 70, you can apply for our term life plans, which offer cover for 10, 20, 30, or 100 years. And the best part is that we don’t require medical exams to apply for our plan - only a short qualifying questionnaire to understand your health status and lifestyle.
Simple, isn’t it? If you are interested in knowing your ideal coverage amount and term, fill out our quick quote form and find the best plan with our expert advisors’ help. If you wish to receive more information about our policies, feel free to get in touch with us.
Written by Raquel Dias