Does the very thought of life insurance leave you scratching your head? If so, you’re not alone. While life insurance can be a tough subject, it doesn’t have to be a mystery. This article will help break down the jargon so that you can feel more comfortable as you explore your options.
Answers to Common Questions About Life Insurance
Simply put, life insurance is a legal agreement—also known as a policy—between you (the insured) and an insurance company (the insurer). You purchase a certain amount of life insurance from the insurer (let’s say it’s a $200,000 policy) and the insurer promises to pay that $200,000 to your beneficiaries—these are the people you choose to receive this money (the death benefit) if you pass away.
It’s also important to note that life insurance can be very affordable—no matter how much money you make. That $200,000 policy we mention above? A 30-year-old woman who doesn’t smoke could expect to pay as low as $20 a month for $200,000 in coverage that covers her for 20 years.
In general, most life insurance policies work the same way: in exchange for a fee that you typically pay monthly or annually (your insurance premium), an insurance company provides a certain amount of coverage on your life and will provide a tax-free benefit to your beneficiaries if you pass away while you have coverage.
Learn more about how life insurance works.
While there are many reasons to get life insurance (more on that below), the #1 reason people buy it is to make sure that their family won’t struggle financially if they die. That means if you have someone who counts on you for financial support, life insurance is a must-have.
I’m young, single and don’t have kids. I don’t need life insurance, right?
That depends. There can be benefits to getting coverage now while you’re young and unattached. Check out Six Reasons Why Now May be the Best Time to Get Life Insurance.
Life insurance protects your family financially if you pass away, but it can offer other benefits, too. Certain types of insurance can help you save up for whatever the future holds, whether it’s paying for your child’s education, protecting your assets or another goal.
Check out 4 Reasons to Get Life Insurance at Any Age.
While life insurance comes in many forms, all coverage essentially falls under two main buckets: term life insurance and permanent life insurance. Within those buckets are even more choices to help you get the specific coverage you need.
Term life insurance is the most affordable and provides coverage for a limited time—from 10 to 40 years, and anything in between.
Many people like to buy term life insurance when their kids are young and they’re carrying debt, such as a mortgage. It costs less than permanent insurance and is usually easy to buy. For example, you may not have to take a medical exam if you’re young and healthy and could even be eligible for an instant decision!
Permanent life insurance is typically more expensive but provides coverage for life and, in some cases, an opportunity to build savings.
Term 100, universal life and whole life insurance all fall under the umbrella of permanent coverage. Whole life and universal life combine lifelong insurance coverage with the opportunity to build up savings within your policy (called cash value or accumulation value). One of the perks to a cash value policy is that you may be able to one day access the cash value to supplement your retirement income, help your kids pay for post-secondary education and more.
To learn more about term and permanent life insurance, as well as specialty products, check out The Types of Life Insurance Explained.
The answer to this question is unique for everyone, however, you probably need more life insurance than you think. How much you earn, your debt obligations, how many dependents you have and other factors should all be considered.
Well, that depends! If you’re considering term life insurance, you can have a cost estimate in hand pretty quickly by getting a life insurance quote. The premiums you’ll pay can be very different from what someone else might pay. That’s because premiums are based on a number of things, including risk factors that are unique to each person. In general, here’s what will figure into your cost:
The type of insurance you choose
Term life insurance is more affordable than a permanent life insurance policy such as universal or whole life insurance. Permanent policies offer lifetime coverage and, in some cases, an investment component and other bells and whistles. See Types of Life Insurance Explained.
How much coverage you buy
A million-dollar policy is going to cost you more than a $250,000 policy (for the same Term length).
Your age, health and gender
The younger and healthier you are when you buy life insurance, the less it will cost. Also, men typically pay more than women do. Sorry guys!
Here’s an example:
A 35-year-old female non-smoker can expect to pay around $30 per month for a 20-year term life insurance policy worth $350,000, while a 35-year old male non-smoker can expect to pay around $40 per month for the same policy.Disclaimer4
If you drink alcohol frequently or enjoy certain activities like scuba diving or rock climbing, you may pay higher premiums. And, if you smoke or use tobacco products, you will almost certainly pay more for your policy.
Family medical history
If cancer, diabetes or other medical conditions run in your family, this could increase your rates.
Get a quick life insurance quote now to see what a term life policy might cost you.
The first thing you should know is that some types of life insurance are simpler to buy than others. Depending on the type of coverage you want and how much you’re applying for, your application may need to go through underwriting; this is the process an insurer goes through to evaluate the risk associated with insuring you.
Before we get into underwriting though, here are the routes you can take once you’re ready to buy:
Buying coverage through an advisor
Many Canadians buy life insurance with the help of an insurance advisor. At RBC Insurance, our licensed advisors can provide advice to help you make the best decision for you and your family and help you complete your application.
Buying coverage online
If your needs are fairly straightforward, there’s a chance you could get a quote and buy your coverage entirely online! At RBC Insurance, we offer a few options online:
Term life insurance: Depending on your age, health, the amount of coverage you are applying for and if you’re a Canadian citizen or permanent resident/landed immigrant, you may be able to request a quote and get an instant decision onlineDisclaimer6.
If you don’t receive an instant decision, you may need to complete a phone interview. It’s also possible that a paramedical nurse will need to visit you to take your vitals.
Personal accident insurance: If you’re an RBC® client, age 18 to 69, and a Canadian resident, you can buy personal accident insurance online. In fact, your acceptance is guaranteed. Learn more or enrol nowDisclaimer7.
RBC Guaranteed Acceptance Life Insurance: If you’re a Canadian citizen or permanent resident/landed immigrant and age 40 to 75, you can buy up to $40,000 of life insurance. There’s no medical exam or health questions to answer. Learn more or get a quoteDisclaimer8.
Getting coverage through work
If your employer offers a group life insurance policy, you’ll want to follow up with your HR department or plan administrator.
What information will I have to give when I apply for life insurance?
In most cases, you will need to give information about your lifestyle, health, age, personal and family medical history.
It is extremely important that you answer all questions in your application truthfully and accurately. If you give incorrect or incomplete information, the insurance company can deny, adjust your benefits or void your coverage.
What happens after I apply for life insurance?
Once you send in your application, it may go through some form of underwriting, although sometimes this isn’t required.
As mentioned above, underwriting is a formal process an insurer goes through to evaluate the level of risk they are taking on by insuring you. It can be very involved—or it can be minimal, depending on your situation. For example, you may need to complete a phone interview and/or a medical exam:
Phone interview: If the insurer needs more information, you may need to complete a telephone interview. The interviewer may ask personal, financial and medical questions.
Medical exam: If a medical exam is ordered, a paramedical nurse may come to your house to check your vitals. This could include collecting a urine and blood sample, weighing and measuring you, and taking your blood pressure and pulse.
How long will it take to hear whether I’m approved?
The time it takes to hear back varies. In some cases, you may hear back instantly. For example, if you’re under 56, have a good medical history and want less than $1 million in term insurance, you may get an instant response.
In other cases, it could take weeks or even months to find out if you’re approved. If your application requires a phone interview or medical exam, you’ll have to wait a little longer.
Once you have your life insurance policy in hand, don’t be afraid to ask questions! If something is unclear, it’s in your best interest to understand your coverage.