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You just got married and are planning a family; life insurance may come to mind.
You bought your first home and the word ‘mortgage life insurance’ came up.
There are many reasons to buy life insurance, and when you find that reason it is now time to decide where and how much to purchase.
An insurance checklist may help.
- What do you need to achieve with your policy?
Ask yourself what you want your life insurance to do:
- Pay bills
- Mortgage or other debts
- Replace income
- Contribute to children’s’ education
- Set up a charitable donation
- Pay taxes on investments
- Or all or some of the above
Knowing what you would like to accomplish with your life insurance policy and approximately how much you need to achieve these goals will help you determine how much life insurance you should consider purchasing.
- Who will be the beneficiary?
A life insurance policy on your life can also be on your partner’s life. Do you want a single life, multi-life (2 policies) or joint first to die or joint last to die?
There are calculations in determining how long you need your life insurance, but usually you can quickly do your own math.
- When will your mortgage be paid off?
- When will the children finish school?
- When are you retiring?
- For estate planning purposes or charitable gifts, your life insurance may require a more permanent solution.
So now you have those answers it’s time to look at premiums. An insurance broker can shop all of the companies to find the best rate, but make sure you know what has been quoted – standard or preferred.
There are two basic life insurance rate groups you should know about when shopping for life insurance coverage: standard rates and preferred. Standard life insurance rates are the rates the majority of Canadians quality for, while about one third of the population is eligible for preferred rates.
Preferred life insurance rates are typically offered to very healthy people and means you may pay a smaller premium than most. Usually preferred rates are offered only once the results of the medical information and tests are known. It will depend on your blood pressure, cholesterol levels, height, weight, and family health history. But preferred rates are worth it. They could save you up to 30-35% off your quoted premium.
When comparing prices, make sure you’re comparing ‘standard to standard’ or ‘preferred to preferred’ life insurance rates. If you’re not sure, ask the broker. It would be disappointing to find out you were quoted preferred rates at the beginning, only to find out you don’t quality for them later.
- Now ask the broker what medical questions are being asked and don’t be afraid to disclose any medical information up front. A standard rate can quickly go to a rated policy if you have a medical condition.
- Ask about renewal options
A 10 year term is guaranteed for 10 years, a 20 for 20 and so on. But what happens on renewal, is the policy guaranteed to renew; at what price and for how long?
- Consider the conversion options and restrictions for the policy:
As your life changes so do your life insurance needs and you may want the option to convert your coverage someday.
To convert a term life insurance policy means to transfer all, or part of, the death benefit of the policy into a permanent life policy without a medical. For example, say you originally brought a term policy to protect a mortgage and children. Once the mortgage is paid and the children have grown, you might find it desirable to convert the policy into one that will give you a new level premium for the rest of your life, and a death benefit that is guaranteed not to expire as you age.
When you purchase your life insurance policy, find out if there are any limitations on your age at the time of conversion. In most cases, you have the option of converting up until you are 70 or 75. As well, ensure you are given several options of the type of policies you can move into, the more the better.
- Choose a life insurance broker you can trust. All of these questions should be answered by your life insurance broker before you ask, and a full needs analysis be done beforehand to determine your exact amount.
SPEAK WITH YOUR ADVISOR
For a thorough evaluation of your insurance needs, please speak with our advisor.