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Life Insurance Guide

 
Why do I need life insurance?
 

The main reason to consider life insurance is to ensure your loved ones are financially secure in case of a premature death. Other reasons include covering final expenses, debts and outstanding taxes as well as protecting your business.

What type of polices are there?
 

There are 2 main types of insurance "TERM" and "PERMANENT". Under these main categories there are many various types and variations such as "Whole Life" "Universal Life" "Quick Pay" "Cash Value" "Pay to 65" "Term To 100"

What is the difference between a "TERM" and "PERMANENT" insurance policy?
 

The primary difference between "Term Insurance" and "Permanent Insurance" is the fact that term polices have no cash value and provide temporary protection which in most cases will expire before the age of 85. Permanent policies can accumulate cash value and will provide coverage for life. There are many different ways you can structure your policy, a "Whole Life" policy gives you limited investment options and dividends that are based on the performance of the insurance company. "Universal Life"offers a wide range of investment choices such as "GIC'S" "Bond Funds" and "Mutual Funds". Both types provide for customised premium payment options.

What happens if I want to cancel the policy?
 

You can cancel a life insurance policy at any time, if there are cash values associated with the policy there may be tax consequences at cancellation.

What happens in case of a missed payment?
 

Term life insurance policies allow a 30 day grace period if a payment is missed after which time a medical reassessment may be required to reinstate the policy. Permanent life insurance plans that offer cash value can cover the cost of the premiums from the accumulated funds.

How do I get coverage?
 

The first step is to speak with an independent insurance broker like us at Insurance Supermarket. Once you and your broker decide on the right insurance policy, you then proceed to the application stage. Your broker will complete your application and then submit it to the insurance company. In conjunction with the application submission there may be a requirement to order a third party medical as well as a copy of a doctor's report as part of the underwriting process. This is done through various medical companies and is paid for by the insurance company. The whole underwriting process usually takes 6-10 weeks depending on the requirements.

How much does it cost?
 

Life insurance premiums are based on the applicants age and health status. The older you are, the higher the cost. Health is the biggest factor regarding the potential cost of a policy, if you are in exceptional health and have a good family history you may qualify for preferred rates. If you have ill health, your policy may be rated (cost more) or in extreme cases declined.

How do I pay?
 

You can pay monthly, semi-annually or annually. Monthly payments can be set-up on an automatic withdrawal.

Can I buy a policy on someone else's life?
 

You can take out an insurance policy on somebody's else's life provided you have their consent. You must also have an insurable interest, meaning if the insured dies there is direct financial liability.

Under what circumstances would a life insurance policy not payout?
 

The only reasons a policy may not pay out is if there was a fraudulent misrepresentation on the original application, by suicide within the first 2 years of the policy or if someone dies in the act of a criminal offense or war.

What is Critical Illness?
 

Critical Illness is a type of coverage that provides a one-time lump sum payment to the insured if they suffer a critical illness and survives it for 30 days after diagnosis(90 days for cancer). Most policies cover up to 25 illnesses with the majority of claims being for Cancer, Heart attack and Stroke. Like life insurance, you can buy "Term" or" Permanent" policies depending on your need.

What is disability coverage?
 

Disability coverage provides the insured with monthly income in the event that they are unable to perform the regular duties of their job. The coverage amount is based on your pre-disabilty income and will not exceed that amount. Benefits can be paid (depending on your policy) for a disability resulting from accident only or you can purchase a policy that covers both accident and illness claims. Most policies will only pay the benefit until age 65.

What is an Annuity?
 

An annuity is a guaranteed income product that is only available through an insurance company. The investor provides a lump sum payment to the insurance company and in return the insurance company guarantees to pay out a set amount for a specific period of time. The longer the guaranteed period the lower the payment. In some cases if the purchaser (the annuitant) dies a beneficiary can be selected to continue to receive the payments. The biggest benefit to an annuity is the tax preferred treatment on the income received by the annuitant.

Can Term Life Insurance be converted to Permanent Life Insurance?
 

The most widely asked question when someone is considering purchasing life insurance is should I buy "TERM" or should I buy "PERMANENT". The good news is you can do both! Most term policies are issued as R&C or renewable and convertible. The convertible option allows the insured to convert their term coverage to any permanent coverage offered by the insurer without any additional medical requirements. The conversion privileges will vary from company to company. For example company "A" may allow conversions up to age 60 where company "B" may allow to age 65. Most insurers will allow the insured to convert the full amount of the term coverage (known as face amount) to one of their permanent coverages. One thing to consider is that when you choose to convert your coverage, it will be based on your age at that time and the premium will be higher than if you bought a permanent policy in the first place.

What are the advantages and disadvantages of No Medical Exam Life Insurance?
 

NO Medical Insurance is becoming more popular with consumers these days. The term No Medical can be misleading to some consumers as medical questions are generally still required, all health questions must be answered "NO" before a policy will be issued. The advantage to these policies is that very little effort is required by the consumer to have the policies issued as no medicals or additional information is requested. The disadvantage to these policies is that because there is very little information required by the insurer, the premiums tend to be higher compared to a fully underwritten plan.