Chances are you’ve heard of life insurance before, but you may be unsure of what exactly it is or why people get it in the first place. While the subject can be intimidating at first, it might be easier to grasp than you think - you just need a little help with making sense of it all. We’re here to give you a hand clearing up any confusion around life insurance.
So, if you’re ready to learn about how the right coverage could help protect the ones you care about most, let’s start with the basics…
What is a life insurance policy?
Think of a life insurance policy as an agreement between you (the policyholder) and an insurance company (that's who we represent) This agreement requires you to pay a monthly premium to the insurance company. Should you pass away while insured under your policy, the company will pay a tax-free lump sum amount to your loved ones (the beneficiaries). The money your beneficiaries receive is known as a ‘death benefit’ or ‘benefit amount’.
The benefit amount is often used to help families replace lost income following the passing of a parent or spouse. It can, however, be used for any number of things.
Who needs life insurance?
If anyone depends on you financially, you could need life insurance. Financial dependents can include a partner or spouse, children, or elderly parents for example. When trying to decide if you need life insurance, ask yourself: if you were to pass away today, how would your family cope financially without you? If you believe they would struggle to keep up with bills, loan repayments or living costs, you could consider life insurance as a means of helping protect them.
While life insurance can give you peace of mind, it isn’t for you, it’s for the people you love. By buying life insurance, you’re taking responsibility for your family’s financial future. You’re providing an income replacement for those who rely on you.
But it’s not just practical things like bills and mortgages that life insurance can help with. The benefit amount could help pay for new clothes, after-school activities, trips to the movies or any of the little things that make family life so special. Life insurance can give you relief knowing that these things can continue, even when you’re no longer around.
What policy types are available to me?
You can take out an age-based or a level premium policy. Your chosen benefit amount remains level throughout the policy, or, with an age-based policy (see below), the Automatic Benefit Amount Increase option means the benefit amount will increase automatically by 3% each year and your premiums will increase as well. You can opt-out of any of these annual increases, but if you opt-out of three increases consecutively, the Automatic Benefit Amount Increase option will be removed. The coverage will then remain level from then on (missed increases are forfeited).
Age-based (whole of life): An age-based policy is whole of life. It doesn’t expire meaning you’re covered for life if you continue to pay your premiums. Your premiums will go up every year as you age, as described in more detail in the policy terms and conditions.
A level premium (term) policy: A level premium policy lasts for a specific pre-determined period between 10 and 30 years. This policy type comes to an end at age 80 or if you reach the end of your chosen term e.g., after twenty years. Should you pass away within the policy term, your loved ones will receive the death benefit in full. If you survive the policy term, your coverage will end.
What is a life insurance premium?
A premium is the amount of money you agree to pay the life insurance company to receive coverage. The premium amount will be agreed upon by you and the insurance company when you’re taking out a policy. With Cover Direct premiums start from as little as $9.66 per month1.
The cost of your monthly premiums will depend on the size of your benefit amount, the policy term, the state of your health and your age at the policy start date. The younger and healthier you are at the time of taking out a policy, the cheaper your premiums will be because statistically, you may be likely to live longer. Your gender and smoker status will also affect the cost of your policy.
Once you have a benefit amount and a term in mind, it’s important to work out what you can comfortably afford to pay for. This figure will correspond with your chosen benefit amount.
How much life insurance can I get?
With Cover Direct, you could provide significant financial support for the people who need you, so that life can continue when you’re gone. You could secure a policy worth up to $1,500,000 depending on your circumstances such as your age, gender or health. Choosing a benefit amount that’s right for you will depend on how much coverage you need, how long you would like to be covered (the policy term) and how much you can comfortably afford to pay each month (your monthly premium).
To figure out how much life insurance you need, you should calculate your family’s financial needs should you pass away. Carefully consider anything your family may need financial support with if you’re no longer around. This might include bills, living costs, mortgage or loan payments, post-secondary tuition or retirement funds for your partner.