Even though we don’t want to talk about them, accidents can happen unexpectedly, anytime–that is why we call them accidents. Ontarians recognize this and understand why having life insurance is a must. It will secure the financial future of their children and household in the event of an untimely death. If you choose to buy life insurance in Ontario, it is vital that you understand the different types of life insurance offered.
There are a number of factors that determine the cost of life insurance in Ontario, such as the type of coverage, health status, and the age of the policy holder.
Life insurance in Ontario is categorized into two types:
- Temporary life insurance, also referred to as term life insurance
- Permanent or whole life insurance and universal life insurance
Temporary, Term Life Insurance
This is best suited for clients who need coverage for a period of time, such as young families or individuals with budget concerns. Key Features of a term life insurance policy include the following:
- Guarantees the sum and cost of the policy are insured for the duration of your policy
- Rates are determined based on the overall status of your health.
- Usually lasts for 5, 10 or 20 years
- Allows the coverage of multiple people under the same policy
Whole Life Insurance
Permanent or whole life insurance is best suited for individuals who want to ensure that their families are financially protected in the event of a premature death. A portion of the premium goes into an investment account to create a cash value for the policy. Key features include the following:
- Four policy lengths available (10-year, 20-year, 65-year and 100-year terms)
- The cost and total sum of the policy are guaranteed for the term of your policy
- Guarantees the cash value of a policy
- Premiums determined by the sum insured on your policy and your general health status
- Allows for multiple people to be insured under the same policy
Universal Life Insurance
This type of life insurance allows you to secure financial protection for your loved ones and at the same time accrue tax-exempt cash value. Universal life insurance is ideally suited for families looking for financial security while also procuring additional funds. Young couples with higher income levels seeking a tax-benefit can also take advantage of universal life insurance. Universal life insurance policies in Ontario have the following features:
- Tax-sheltered savings account and life insurance protection
- Flexible, allowing you to alter the insurance amount and payment frequency
- Provides several investment options
- Allows you to take out loans or make withdrawals against your cash value
- Multiple individuals can be insured under the same policy
Why Do Ontarians Need Life Insurance?
An obvious reason people buy life insurance is to protect their children. If the income-earning individual passes away unexpectedly without buying life insurance, the dependents will suffer from the loss of the person’s income. The tax-free lump sum payment from a life insurance policy can sufficiently substitute the deceased person’s income, pay debts and education costs, living expenses as well as other liabilities of the beneficiaries.
Buying life insurance also allows you to pay off tax liabilities, debts and other estate costs so that your estate’s assets will not have to be borrowed against to pay for these expenses. This also takes away the burden from your dependents and loved ones.
Withdrawals and Loans
The permanent life insurance policy comes with a cash value component which is accessible during the term of your life insurance policy. You can either obtain a loan or withdraw money earned from your investment.
Ways to Save on Life Insurance
Apply young: One sure way to enjoy lower premiums is to apply for a life insurance policy at a younger age.
Stay healthy: If you are healthy, insurance companies will reward you with lower premiums. Note that some insurance companies use the BMI (Body Mass Index ratio) to determine your premiums.
Avoid excessive drinking: If you don’t have any drinking related issues you can also benefit from lower premiums. Your premiums can increase by up to 50% if you have had any drinking related issues.
Insurance type: The type of life insurance policy you choose also matters. For instance, term life insurance has a lower rate compared with universal or whole life insurance.
Don’t incur additional costs with a guaranteed issue life policy: If you are healthy, you don’t need a guaranteed issue life insurance policy. Guaranteed issue life insurance policies do not necessitate a medical exam, but they cost a lot more. Do a health check and benefit from lower life insurance rate.
Drive safely: Your driving record may improve over time (it takes about 3 years for small offenses to get off your driving record) so if you have past driving offenses you can review your policy with your insurer to have your premiums reduced.
Avoid insurance agents: An insurance broker is different from an insurance agent. Insurance agents generally work for a particular insurance company and will only offer the company’s services leaving you with fewer options.
Pay for your premiums annually: If you pay your premiums annually, you may enjoy lower rates. This is because annual payments save insurance companies extra administrative costs (e.g. cost of sending bills).
To find affordable life insurance in Ontario, you need to know the exact coverage that will suit your specific needs. You will have to compare quotes from different insurance companies. This may be difficult and time consuming. Save yourself the hassle by having an expert insurance advisor work you through the entire process. You will be able to save time and money, and choose the best policy at the right price.