Don’t know where to get started? Here is some advice to help you.
Are you recently married, purchased a home, or maybe had a child? These significant life changes are a great time to start thinking about protecting yourself, and your loved ones, from financial burden in difficult times. We know that shopping for insurance is not a “fun” process and can be downright intimidating. However, in the event of a claim, you and your family will be extremely grateful that you made the purchase. Let us help you get started on making this important adulting decision.
We highly recommend working with a reputable broker who can help you understand your needs and educate you on your options. There is no additional cost working with a broker compared to going direct.
Here are some things to consider:
- Amount of Life Insurance.Think of Life Insurance as a tool to replace your income, allowing you to financially provide for your family if you were no longer there. To determine how much coverage makes sense, you will need to decide how much of your income you want to provide to your family and for how long. For example, if you determined that you need to provide $60,000 of after-tax income to your family for the next 20 years, you will need approximately $1,200,000 of coverage to meet that objective. The number will be a bit different once you factor inflation and interest.
- Type of Life Insurance.There are two types of policies, Term Life and Permanent Life. Term Insurance is for “IF” you pass away. Permanent Insurance is for “WHEN” you pass away. Typically, most need Term Insurance during their prime income earning years as their main concern is to replace the loss of income. If you are a high-income earner and already maxing out your TFSA/RRSP, then permanent insurance may be worth considering providing you with additional tax-sheltered growth on your investments.
- Length of Term Insurance.You have different options here, Term 10, 20, 25, 30, etc…. This is how long the rate is guaranteed to remain the same. The longer the duration of coverage, the higher the cost. You can choose to select a term to match how long you need an income for. For example, a Term 30 will provide a 30-year-old with coverage until Age 60 and arguably your need for an income will not be as high as it is currently. If you are on a tight budget, you can go with a Term 10 or Term 20 – just make sure that it provides you the contractual right to extend the coverage to a longer duration policy without any medical underwriting (within the first five years).
- Disability Insurance.Your ability to earn an income is what pays for your housing, food, clothing, etc. Like life insurance, disability insurance will replace a portion of your income if you are not able to work due to an injury or illness. The risk of disability is much higher than the risk of premature death. This coverage is also nearly impossible to purchase for a pre-existing condition that you are concerned about – so it’s best to purchase when young and healthy. Depending on your occupation, I would recommend a high-end contract with minimal limitations or exclusions. Not all brokers specialize or even sell this type of coverage, even though it’s one of the most important coverages to have at a young age.
What to watch out for:
- Working with a captive agent (where they work for only one company) as they will not be able to help you know all your options in the market, only the options they can provide.
- Working with an advisor who is pushing insurance as an investment, and not taking the time to understand your needs.
- Avoid any applications that have a “simplified” process. You may pay more for the coverage and depending on the product, it may cause accidental non-disclosure which can become problematic in the event of a claim. Think of mortgage life insurance, when you can purchase coverage from the lender providing you with a mortgage.
- Some policies are non-convertible. This means that you can’t switch from a term policy to a permanent policy in the future. Typically, this will be offered through direct channels where the company is selling their own product.
We know these decisions can be intimidating, however it’s not a reason to avoid.
SecurePlan prides itself on our process, which is there for you every step of the way from planning to execution of your insurance needs.
Our approach is consultative to ensure you understand all your options when it comes to insurance. Our goal is to enable you to make an educated decision on the insurance plan that you feel is most important to you and your family.
Ready to take a leap to get the process started? Please don’t hesitate to get in touch.