LIFE INSURANCE
Life insurance is the most cost effective way to manage the inevitable and unpredictable risk of dying prematurely and thus leaving behind unpaid debts and dependants without financial support.
Click on this link to check your risk before applying for Life Insurance and to calculate your insurance needs.
Although you might have heard hundreds of fancy names of Life Insurances offered by the 48 life insurance companies currently members of CLHIA (Canada Life and Health Insurance Association) you must know that basically there are only two types of Life Insurance - Term and Permanent (Whole Life). The third type, called Universal Life Insurance, is a combination of Term Insurance and Investment and must be used primarily for tax reduction and tax deferral strategies.
As the name suggests, Term Life Insurance provides protection for a limited period of time, usually 5, 10, 20, 30 years. As the premium payable by the insured for this protection simply covers the cost of the insurance (the risk of dying, or the so called mortality risk, plus the administrative expenses and the profit of the insurer), there is no accumulation of funds. When the insurance expires, at the end of the covered period, the insured loses his protection and no money is paid back to him. If the Term Insurance is renewable for another period (5, 10 or 20 years) the premium is increased based on a predetermined schedule included in the insurance policy. In any case, at the age of 75, 80 or 85, depending on the plan, the insurance expires. It is obvious that, although we all are going to die one day, there is a significant risk of the insured dying after the Term Insurance expires or gets cancelled due to the excessive increase of the premium. The predetermined expiry date and the contractual future increases of the premium make this type of insurance inadequate for permanent life protection. At the same time, these are the reasons why this insurance is very affordable at the time of purchase. Term Insurance must be used to cover temporary insurance needs - debt with determined repayment schedule (business debt, mortgage, lease), or as a temporary solution for young couples with limited budget.
The second type of Life Insurance is the Whole Life Insurance. It provides protection for as long as the life insured lives. All the parameters of the insurance - the benefit amount, the premium, the premium payment period, the accumulated funds in the policy (or part of them) are fixed in the insurance contract, guaranteed never to change. This is the best type of insurance protection and the most expensive as it comes to the size of the premium compared to other types of insurance at the time of purchase. Although, if you compare the total amount of premiums that you will pay during your lifetime, this is the least expensive insurance!
There are a lot of people who shop around for insurance. That is why there are so many companies providing tools for online insurance quotes. I would strongly recommend against the use of such an approach when it comes to choosing the right insurance protection.
Your chances to pick the right amount of coverage, the best insurance for your circumstances, from the right insurance company are better than winning the lottery, but not by far. You would never buy a home or a car, without even seeing them, and by only comparing their prices, would you? Why people are using this kind of irresponsible approach when it comes to their financial security and the financial security of their family is beyond me.
Always use the services of a licensed and knowledgeable specialist (life insurance agent, financial advisor or financial planner). Please bear in mind:
- Their services consisting of determining your insurance needs, preparing quotes from many insurance companies, assisting you in choosing the right type of protection, applying for the insurance, cooperating with you and the underwriter to satisfy all the requirements of the insurance company, delivering the policy to you and explaining again all the features of the policy and after that supporting you during the life-time of the policy (20, 30, 50 years) is completely free of charge to you!
- They receive their commissions from the insurance companies, only after your insurance is approved, issued, delivered and accepted by you.
- Their commissions do not affect in any way the amount of premium you pay! If you think that the insurance companies have two prices for every insurance they sell - one for direct online sale and one for selling through agents - you are heading for a big disappointment. Do you know how much work is done by the actuaries who calculate the premiums (prices) for every possible combination of ages from 0 to 100, for male and female, smoker and non-smoker for every type of insurance? The premiums are always the same, no matter how, when and where you buy the respective type of insurance.
- When you buy your insurance directly, online or through your bank, you divest yourself of the right to receive a free of charge professional advice from a licensed agent/broker and the only thing you achieve is to increase the profits of the insurance companies.
- The choice is yours.
Ask for appointment with me to help you calculate your insurance needs and to advise you about the best protection for you and your family.
