Online Term Life Insurance Rates – Mistakes You Can Avoid
Shopping online for a life insurance plan that fits your particular situation can be a daunting task. There are many companies that offer life insurance and each company has pros and cons. There are also different types of life plans with many different options.
In addition mistakes can be made when enrolling for a life insurance plan.
Please use the following to avoid the most common pitfalls when shopping for life insurance.
Note that we highly recommend talking to a Canadian life insurance broker. It is a broker’s responsibility to know the different life insurance plans available to Canadians, and to fit an appropriate plan to a client’s particular situation.
Mistake #1: Getting the Wrong Amount of Coverage
The purpose of a life insurance plan is to protect loved ones in case the insured passes away. In order to accomplish this, however, it is critical to know how much coverage is required to protect those loved ones.
A good estimate takes into account things such as:
•How many children you have.
•Is there money set aside for your children’s education?
•How many years of replacement income would you like your family to get?
•When is your spouse retiring (if applicable)?
•Value of all investments (e.g. bank accounts, RRSPs, TFSA savings, bonds, stocks, etc.).
•Amount still owing on mortgage(s).
•Amount of all other debt such as loans, leases, credit cards, etc.
•Monthly expenses such as clothing, utilities, fuel, food, etc.
•Funeral costs.
•Etc.
The best way to find out how much coverage you need is by speaking with an insurance broker and going through a needs analysis.
Mistake #2: Not Being Forthright When Applying
There are numerous stories where people have had a life insurance claim denied because of errors and/or omissions in their application.
Whether it is deliberate or unintentional, it is VERY IMPORTANT to be honest and forthright when applying for a life insurance policy! Most life insurance plans are medically underwritten (except for guaranteed issue plans), which means there will be an interview with a medical practitioner who may take some blood and urine for chemical analysis, depending on the amount of coverage you want. In addition the life insurance underwriters have access to your medical records. If something is in your medical records (e.g. things discussed with your doctor, any medical procedures you’ve had, etc.) then make sure you divulge these things when applying.
Some common things that people may be hesitant to be honest about are:
•Smoking and cigarette consumption.
•Alcohol consumption.
•Use of illicit drugs. Note that cannabis (e.g. marijuana) use does not preclude you from getting life insurance coverage. Occasional cannabis users get the standard smoking rates. All harder drugs will result in an application being denied, unless you have been clean for fiver (5) years.
•Depression: while everyone gets depressed at times, if you are taking anti-depressant medication, or if you have discussed depression treatment with your doctor, then it is advisable to disclose these things in your application.
Mistake #3: Not Getting Coverage While Healthy
It could be argued that this is actually the #1 mistake people make when it comes to life insurance!
Trying to get life insurance when you are getting older and/or when you have serious medical problems is difficult. Oftentimes the only option available in these circumstances is a guaranteed issue life plan, which offers much less coverage compared to plans that are medically underwritten.
Term life is particularly cheap right now, and getting a term life plan that has a long enough term for your situation while you are healthy is the recommended way to go.
Mistake #4: Getting the Wrong Type of Coverage
There are two main types of life insurance: term life and permanent life plans. Permanent life plans build up a cash value, and are often used for wealth and estate management.
Term life is simpler, cheaper and does not build up a cash value. It is only used for protection against unexpected loss, and is not designed for wealth management.
Oftentimes people are better off getting a cheap term life insurance plan, and then investing the difference in premiums (compared to permanent life) into other investment vehicles such as TFSAs (Tax Free Savings Accounts), RRSPs, etc.
Mistake #5: Illegible Application
Finally, be sure to fill out an application form carefully and legibly. Writing that is difficult to decipher can lead to delays in the processing of an application. It can also lead to misunderstandings if a claim is being made later on.