Life Insurance

If someone you care about depends on your salary, then life insurance is not an option: it’s essential. If you die prematurely without the proper coverage, your spouse and kids may be left without any means to pay the mortgage or buy groceries.

Life insurance has two primary attributes – the premium and the death benefit. If we strip away the marketing aspects from life insurance those are the two base attributes we should be concerned about. If we die, how much do our beneficiaries receive? And how much does it cost to receive those benefits?

Below are some monthly rates sample from one of Canada’s largest insurer as of 01/19. These rates are subject to change and full underwriting. Lower rates may be available depending on your age, gender, amount of coverage and underwriting results. 

$1,000,000 – 10 Year Term for a healthy non-smoker individual:

20 years old$39.95$25,91
25 years old$40.31$26.91
30 years old$40.66$30.91
35 years old$41.02$32.45
40 years old$54.32$45.28
45 years old$84.27$62.85
50 years old$138.92$92.32
55 years old$243.55$165.35
60 years old$424.09$296.51
65 years old$751.96$497.18
70 years old$1302.90$908.84

Features of term life insurance

  • Provides death benefits only
  • Pays benefits only if you die while the term of the policy is in effect
  • Easiest and most affordable life insurance to buy
  • Purchased for a specific time period, such as 10, 15, 20 or 30 years, known as a “term”
  • Becomes more expensive as you age, especially after age 50
  • The term must be renewed if you want coverage to be extended beyond the term length
  • Can be used as temporary additional coverage with a permanent life insurance policy
  • Can be converted to whole life insurance

Features of whole life insurance:

  • Covers you for life
  • Provides death benefits as well as a cash value accumulation that builds during the life of the policy
  • You typically must qualify with a health examination
  • Can be purchased without a medical exam, but at a higher cost
  • Takes 12 to 15 years to build up a decent cash value
  • Can be a good choice for tax and estate planning
  • Cash value is based on how much the return on investment is worth
  • A portion of the cash value can be withdrawn or borrowed during the life of the policy
  • Initially has more expensive premiums than term life insurance, but can potentially save you money over the life of the policy if in force for a considerable number of years
  • Ideal for business owners and other higher net worth individuals looking for tax shelter and enhanced corporate CDA usage

Whole Life or Term Life Insurance Variables and Considerations

When choosing between whole life or term life insurance, there are a number of variables to take into account. A knowledgeable life insurance agent can help you evaluate each of the following aspects of your circumstances and determine whether term life or whole life is a better option for you. The factors to consider include:

  • Your current age
  • Current state of your health
  • Financial needs of your family
  • Plans for funeral and death expenses
  • The age of your children
  • Long term health expenses in the event of a serious illness
  • Your mortgage and current debts
  • When you plan to retire and the retirement plan you have in place
  • Future needs of your family, such as your children’s college tuition
  • Your need for an additional retirement savings plan
  • Your plans and concerns regarding setting up an estate and ramifications for capital gains taxes
  • Your intention to set up a trust as part of your will
  • Whether you want to donate life insurance proceeds to a charity
  • Your feelings on potentially paying into a term policy and never receiving any of that value back

Hypothetically, if you are 35 years old, have young children, and are the primary income earner in your household, you might want to consider buying a term life policy that would fully cover your family’s financial obligations.

Adding up your living expenses, your home mortgage, pay-off of all debts, and your children’s education can help you understand the face value of a policy your family will need if you die prematurely. The length of the term would likely depend on the age of your children and when you foresee them completing college.

Alternatively, you could purchase a whole life policy that will not only pay that policy face value if you should die before your children are through college, but would accrue a cash value that would provide additional benefits to your family or a growing fund of emergency money. You could also consider converting portions of your term life policy over to whole life insurance over time to build a cash portfolio for your retirement as you age.

How Are Life Insurance Premiums Determined

When applying for a term life insurance policy, there are several factors that the insurance underwriters must take into consideration before determining the rates. Including the following criteria:

▪ Age – The applicant’s age has the most significant impact on the premium amount. As you age the price of term life insurance increases exponentially due to higher mortality risk. For younger individuals, term life insurance can prove to be a more affordable way to purchase larger block of life insurance.  

▪ Gender – Statistic shows that women have longer life expectancy than men, are less prone to risky behaviour and therefore benefit from lower insurance premium than men.  

▪ Height and Weight – a person’s build is also an important factor when determining insurance rates – especially weight relative to height. Obesity is a considerable risk factor when it comes to mortality. For those considered to be overweight, a rating (which increases the premium) may be applicable to make up for this higher mortality risk.  

▪ Amount of Coverage – The amount of life insurance you apply for will affect the rates due to something called “price band” which means the higher the coverage, the lower the cost per thousand should be. Price band usually kick in at around the $250,000 mark, increases at the $500,000 mark and 1M mark. Band discount will vary based on each providers. As a result, you may find that a $480,000 policy cost more than $500,000 due to this price band. 

▪ Smoking Status – Another one of biggest factors in the premium rates for both term and permanent life insurance coverage is your smoking status. Smokers can pay up to 3 times more for insurance. Smoking does not just include cigarettes – but also small cigars, nicotine, gum, patches and other forms of tobacco usage. This high additional premium charged to smokers can be a blaring sign of just how dangerous smoking is to a person’s life expectancy.  

▪ Health Status – Most life insurance applications will require that the insured undergo a medical exam to determine his or her overall health status. This will usually entail the taking of a blood pressure and a heart rate reading, as well as a blood and a urine sample. These will be tested to ensure that the proposed insured is in overall good health and does not pose any risk factors to the insurance company. There are “no medical exam policies” but are usually more expensive with limited death benefit amount due to the added risk. 

▪ Driving Record – Insurance companies will inquire about your driving record such as speeding tickets and other past dangerous driving pattern. Although one or two speeding tickets going 15-20km/hr over the speed limit may not be an issue at all, someone with a reckless driving record or suspended license may be considered a higher risk individual and charged additional premium.  

▪ Lifestyle – The applicant’s lifestyle will be taken into consideration. Potentially hazardous activities you may be participating in will be contemplated as part of your application such as skydiving, hang gliding, scuba diving, motorcycle racing, race car driving etc. Participation in these type of activities doesn’t mean the insurance company will decline your application or charge additional premium.  

Note: If you have an existing life insurance policy and later in life decided to take up one of those hazardous activities, it will NOT impact your existing coverage. Contestability period last for two years from the day the policy is issued. Insurance providers only take a snapshot of your circumstances at the time of the application. What you decide to do with your life afterwards is up to you and will not impact your policy. This is why it is always better to apply for insurance when you dont need it. 

▪ Length of Coverage – As a rule of thumb the shorter the term, the lower the premium. In the early years, a 10 Year Term policy will always be cheaper than a 15, 20 or 30 year term. However, after 10 years the rates will often go up 5 to 8 times unless you are still in good health and able to qualify for a new policy. If you know that you’ll need insurance for longer than 10 years and are looking for stable long term premium, 15-20 year terms may be more suitable. Otherwise you run the risk of being stuck with excessive premium after the renewal is up should you be uninsurable. 

▪ Policy Riders – Some term life insurance policies may contain riders that will include or exclude various coverages which could impact the premium. Common riders can include waiver of premium, a children’s term rider, and / or an accidental death and dismemberment rider.  

Which Term is Right For You?

Now that you understand the major differences between term and permanent insurance, it is time to decide what term length may be more suitable for you. For individuals with short term liabilities and older children, a 10-year term might be sufficient. 

For individuals who have just purchased a home or are in the process of having children, you may want to consider a longer term policy, such as 20 or 30 years.

Most of the leading life insurance companies in the industry offer 10, 15, 20, and 30 year terms. Sit down and really consider how long it will take to payoff your debts and how long your financial obligations will prevail This will help you choose the most practical term for your specific situation. Give us a call to discuss your particular situation.  

Why Some Quotes for Life Insurance May Differ From Others

When comparing two separate term life insurance policies, you may notice two quotes with the same death benefit and term length but two different premium. Why is that? Insurance providers use very similar actuarial science to determine their cost of insurance but their pricing mechanism will vary. One provider may aggressively price their rates in the 20-40 age category while not being competitive at all within the 40-55 age bracket. Marketing, market place positioning and underwriting are some of the factors responsible for these discrepancies. 

This is why you should purchase insurance from independent broker who is not tied to a single carrier such as the captive agency model.   

Where to Find Affordable Term Life Insurance Quotes

When you are ready to find the ideal term policy for your needs, we can help. We represent many of the top term life insurance carriers in the marketplace today – and we can assist you with obtaining all of the important information that you will require in making an informed purchase decision.

We can do so for you quickly, easily and conveniently – and all from your home computer – without the need to meet in person with an insurance agent should you prefer not to.

Should you have any additional questions regarding finding affordable term life insurance – or even if you just have a question or concern about life insurance in general – we’d be thrilled to assist you. We can be reached via phone, by dialling 250-580-3359. 

We understand that finding the best, most affordable quotes for term life insurance may seem like a difficult task. There are a lot of variables to factor in – and you want to ensure that you are choosing a company that will be there for you when you need them.

To learn more about Hugo Donais, click here.