5 minutes read

Life Insurance Low Down – 7 Top Tips

Vincent Heys

Do you own or rent your life insurance policy?

If you’re not sure or perhaps you don’t even know that you can rent a life insurance policy, then this life insurance low down is for you! We are breaking down the tips and tidbits about life insurance so that you can ace the game and sleep tight knowing you are well covered.

Start here to get the basics on why you need life insurance, and how much you’ll need. And read on for our top tips to do life insurance the savvy way.

The life insurance low down – our top tips

1. Lock in your Premimums

Did you know that in Canada life insurance is level cost? Which means that the price that you pay when you take out the policy is the price you’ll pay for the duration of the policy. The older you get before taking out life insurance the more expensive it becomes. So, lock it in early and as young as possible. It will save you thousands of dollars over your lifetime, and let you rest easy. This is our number one top tip for life insurance in Canada.

2. Group Benefits

When you’re working for a company, you might be offered Group Benefits Life Cover by your company. If you’ve got the chance, sign up because the fees are low, making it an economical choice. However, it probably won’t be enough to fully cover all your expenses and financial needs should you pass away. Hence, optional life cover will be tabled for you to add onto your basic cover.

While it may be convenient to lump it all together, do your homework first. Generally, this optional life cover will be more expensive, and the premiums are age-related (meaning you pay more the older you are). Rather lock in your premium with private life insurance to cover the difference. Your premium won’t increase, and it will be cheaper. In this case, convenient is not cost-effective!

One more thing about group benefits cover is to remember that you can’t take it with you when you leave the company. This is just another incentive to make sure you’ve got private life insurance in place.

3. Corporately owned life insurance

If you’re a business owner or owner operator, you can purchase a life insurance policy within your company. This let’s you save, reduce taxes and ensure your business is protected should you pass away. Take note of the fact that the beneficiary of the life policy will be the company and not a person. However, the proceeds could still be paid out tax free to your spouse via the CDA account.

4. Renting vs Owning Insurance

There are multiple ways to go about taking out a life insurance policy. “Renting” life insurance means that you pay the premiums for a defined period, and should you pass away in that time, there will be a payout (also known as Term Assurance). You can rent a life insurance policy for 10 or 20 years paying a cheaper premium but if you don’t pass away, there will be no payout. Owning life insurance is when you buy a policy for the whole of life, meaning you’ll pay premiums for the duration of your life. The premiums will be higher, but there is a definite payout.

5. Underwriting Life Insurance

You can save on premiums by going the route of underwritten life insurance. The insurance company asks you qualifying questions and runs certain tests to assess your risk and health problems before setting your premiums and cover. This is cheaper because the insurance company knows exactly what they’re getting into, so to speak. The key here is that they will only underwrite you once, in the beginning, and not again. So, coming back to the life insurance top tip – lock it in early!

Alternatively, you can choose to go the simplified, quicker route where you choose life insurance that is not underwritten. This means that the insurance company doesn’t ask any questions or do any checks, you simply buy your life cover, no questions asked. These premiums will be more expensive. So, while it may simpler, it is more costly.

6. Life Insurance and Buying a House

When you buy a house, you will need to take out a life insurance policy. You can purchase a policy through the bank where you have your mortgage. Just remember that the policy is owned by the bank and not by you. And as the value of your mortgage decreases, so should your premiums, right? Wrong. They stay the same – costing you more in the end. Rather opt for private life insurance that covers the cost of your mortgage and you are the owner of this contract. And don’t forget that top tip – lock it in early!

7. Immigration and Life Insurance

If you’re immigrating to Canada, or anywhere really, don’t cancel your life insurance in your home country too soon. Rather leave the policy in place, and only when you’re fully covered in Canada then you can close that policy.

A bonus tip is to remember that you’ll need a lot more life insurance cover in Canada than you did in the country you immigrated from, e.g. South Africa, because the cost of living and house prices are higher. Don’t be afraid of the amount of insurance you need, rather be safe than sorry and make sure you’re fully insured. Lastly, don’t let the price of the premiums scare you off, in the grander scheme of things, life insurance is not expensive, but entirely necessary.

Still have questions?

While this life insurance low down covers the most important aspects of life insurance, you might still have questions. If so, we’d love to hear from you! To find out if you’re fully covered and on track to reach your financial goals, you can set up your Dashboard here in less than 7 minutes (the time it takes to get a coffee from your favorite cafe). Or you can speak to a Wealthstack expert for life insurance top tips tailored to you.

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