Are you looking for life insurance to buy but don’t know how and where to start? You’re not alone. With the many options available from the biggest insurance companies in Canada, purchasing a life insurance policy might be challenging and appear complicated.
Millions of Canadians purchase life insurance policies yearly to ensure their families are taken care of financially if something happens to them. Unlike home and auto insurance, life insurance has different types—each with its pros and cons and separate price tags.
However, buying life insurance does not have to be challenging. I have put together a step-by-step guide on how to buy life insurance. This blog post will walk you through the basics of how to buy life insurance in Canada and find the best policy that offers coverage for your needs.
Want to find out more? Then read on.
How To Buy Life Insurance: Six Simple Steps
Life insurance is one of the most important purchases you will ever make. It is a safety net for all who depend on you financially. It gives you and your family peace of mind to know that, no matter what happens, they will be taken care of financially.
But with so many life insurance products on the market, it can be hard to know where to start and how to buy life insurance. Here are six tips to help you choose the right life insurance policy for you and your family:
Step 1: Know How Much Life Insurance You Need
Everyone’s financial needs are unique. There is no one-size-fits-all coverage for everyone. Life insurance coverage should be customized to satisfy your needs and financial goals.
It should be projected towards your income, outstanding debts, expenses, and the needs of your loved ones. You should consider buying enough coverage to support your dependents many years after your death financially. They should be able to maintain their current lifestyle and financial situation when you pass away.
Some insurance experts recommend buying a life insurance policy six to ten times your annual income. This can help your family survive with you for a long while.
However, the DIME formula is the most popular method for determining how much life insurance you need. It considers your outstanding debts and final expenses, the total income that your dependents might need after your death, the balance on your mortgage, and any expected educational expenses.
Learn more about how to determine how much life insurance you need
Step 2: Decide What Type Of Life Insurance Best Meets Your Financial Needs
You must have heard that there are different types of life insurance, but they fall under two major types: term and whole. Each has its fundamental distinction, and you should consider how each would work for you.
After evaluating your financial needs and goals, you can decide which type of life insurance suits you.
Term life insurance will provide coverage for a specified term, usually 10, 20, or 30 years. It is a more affordable way to get coverage till you attain your life’s milestone, like paying off a mortgage or putting your children through college.
Whole life insurance provides lifelong coverage, which makes it more expensive than term life insurance. Also, it builds cash value that can be used to cover emergencies, pay for long-term care, supplement retirement income, or pay for policy premiums.
You may want to do more research and compare the different types of life insurance to find out which will best meet your financial needs and goals.
Learn more about the different types of life insurance
Step 3: Understand What Affects Your Life Insurance Rates
Several factors are considered when determining how much you would pay for coverage. Insurance companies always look at these factors when determining your rates.
- Age: Your age has a significant impact on your premiums. The older you are, the more your chances of dying, so insurers will charge more for this risk. It’s best if you apply for life insurance at an early age. You can lock in low premiums when you apply at a young age.
- Health status: Healthier people often get lower premiums from insurance companies. If you have a pre-existing condition, you will be hard to insure, affecting your insurance rate.
- Smoking status: Smokers typically pay five to twenty times more premiums than non-smokers of the same age and health status. The insurance company will determine your smoking status through a urine test.
- Gender: Women live longer than men, and insurance companies offer them better rates.
- Family medical history: A family history of certain medical conditions, like diabetes, cancer, etc., can increase your insurance rates.
Learn more about how much is life insurance and what affects your rates
Step 4: Shop Around For The Best Rates
Once you have decided on the type of coverage you will need, you need to decide where to buy life insurance.
Most Canadians buy their policy from an insurance broker. Insurance brokers represent you, and most times, they offer impartial advice.
You can buy your life insurance policy through a financial advisor, an organization, or an employer or go directly to an insurance company.
No two insurance companies are the same. They all spend millions trying to convince you that they offer affordable coverage. But you must shop around for yourself.
So, search through their website and look at their policy options when looking for a policy. The best insurance companies for you will offer competitive rates, coverage options that satisfy your needs, and a positive customer experience.
Ask for quotes from different insurers in Canada and determine which company offers the best rates. While price is an essential factor, it’s not the first you should consider. You must consider the insurance company’s financial stability and strengths, its reputation, and your insurance policy’s internal costs.
Step 5: Fill Out The Application Form & Apply
After picking your chosen insurance provider, the next step is to fill out an application. Insurers usually give applicants lengthy forms to complete.
The insurer will enquire about your age, weight, health status, lifestyle, family medical history, and smoking status. Sometimes, your insurer may request a medical examination.
Some insurance companies like Manulife require a phone interview where you will be asked a few questions. Do not withhold any information from your insurer. Lying to your insurer or on your life insurance application can cause your insurance company to refuse coverage or ask for more premiums.
If you misrepresent or lie about any information on your application form, your insurer can reduce your death benefit or deny the claim altogether.
Step 6: Sign The Documents and Pay Your Premiums
When your application process is completed, wait for the approval. The insurance company’s underwriter will take the information gathered from your application, medical exam, and phone interview and determine if you are eligible for life insurance coverage and how much premiums you will pay.
You will receive the policy documents to sign and approve if you get approved. Traditionally, this is done with a physical copy, but you might receive the paperwork online to be completed with a digital signature.
You can now decide how you will pay your premiums, monthly or annually. Annual payments come with a little discount. Contact your insurer to choose your payment method.
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Final Thoughts on How to Buy Life Insurance
If you’re like most people, you may procrastinate when it comes to buying life insurance. You might think you don’t need it or have plenty of time. But if something happens and you don’t have life insurance, your loved ones could be left with a lot of debt and expenses.
That is why it’s essential to know how to buy life insurance. If you need help buying life insurance, don’t hesitate to contact me. I can help you find the perfect life insurance policy for your needs and budget.
Hi, I'm Adeola Adegoke. I am a licensed Insurance Broker in Manitoba, and I hold a master’s degree in Mathematical Sciences (with a major in Financial Modeling) from the African Institute for Mathematical Sciences (AIMS), Tanzania.
Also, I have a second master's degree in Statistics from the University of Regina, and I am currently pursuing my Ph.D. in Statistics at the University of Manitoba.
The primary purpose of Money Reverie is to help everyday Canadians make better financial decisions by providing up-to-date financial news and information, reports, product reviews, and government programs.
