There is a lot of information floating around about life insurance, and even some misconceptions. The truth of the matter is that life insurance can be an important step for most people when it comes to planning ahead and securing the right financial protection for loved ones.
When considering your life insurance options becoming educated about the variety of plans can make a world of a difference in finding the most suitable coverage for your unique needs. There may be some aspects of life insurance that you will be surprised to learn.
You can get covered even if you have an illness/disease
Life insurance isn’t just for healthy people. Even if you are denied coverage by one life insurance provider because of an illness or disease, it does not mean you cannot be covered by another provider.
If you have been diagnosed with or in the past have had cancer, heart disease or diabetes, you can be covered by no medical life insurance. Below are the statistics on these conditions in Canada:
- There will be an estimated 225,800 new cancer cases and 83,300 cancer deaths in Canada in 2020.1
- About 1 in 12 (or 2.4 million) Canadian adults age 20 and over live with diagnosed heart disease.2
- One in three Canadians is living with diabetes or prediabetes.3
Prevalence rates of these diseases/illnesses in Canada means there is the possibility that you can be diagnosed in your lifetime. No medical life insurance plans ensure that even those that are considered hard to insure, can be relieved to know that there is an option for getting protected with life insurance coverage.
Will you have all the coverage you need?
Often, traditional life insurance providers will offer people with health conditions policies with exclusions or limitations. These limitations and exclusions are especially in areas where the client is at highest risk and most in need of coverage. Coverage for those with a pre-existing condition can mean either being declined and/or, paying higher rates. Ensure you have a plan with adequate protection and aren’t underinsured for your health-specific needs.
No medical plans, in contrast, can provide comprehensive coverage even if you have an existing disease or illness. The no medical application process is easy and convenient. There are no doctors’ visits or medical tests, and you won’t be required to have fluids drawn using needles. The process simply requires you to answer some health-related questions. You could be covered in days versus a traditional life insurance plan which can take anywhere from one to three months to be issued.
Will premiums be higher?
Having an illness/disease does not necessarily mean that your premiums will be expensive or prohibitive. No Medical and Simplified Issue Life Insurance providers are specialized in this risk and offer a variety of affordable plans.
Even Young People Can Benefit from Life Insurance
Life insurance isn’t exclusively for the older generation. Younger people can also benefit from life insurance as an important component of their financial planning.
Many people may not know that your family’s health history can also affect your own chance of qualifying for the best possible rate for life insurance. If a close family member was diagnosed with a medical condition, it may increase the likelihood of you suffering from that disease in the future. That’s why it’s best to get coverage while you’re young, before your family health history changes, as many insurance applications ask about this in the qualification process.
Another good reason to apply for life insurance when you’re younger is because you can benefit from lower rates due to being in better health.
Some life insurance policies also have additional benefits such as scholarships, online access for creating wills, power of attorney and more.
Safeguard Loved Ones from Your Debt
Millennials in particular, carry heavy amounts of debt such as post-secondary education costs or outstanding mortgage debt. Without life insurance coverage, family members would be unfairly burdened with these outstanding expenses.
The cost of post-secondary education in Canada continues to surge. Tuition costs for undergraduate degrees have increased 28 years in a row, and on average, students pay $6,500 per year.4 This does not include costs beyond tuition that students must pay during schooling such as meal plans, residence, and transit.
The Top Reason Canadians Own Life Insurance is to Cover Final Expenses
More than two thirds of households have either group or individual life insurance.5 According to Life Insurance and Market Research Association (LIMRA), the top three reasons stated by Canadian consumers for owning life insurance are to cover final expenses (40%); because it’s a good/wise/necessary thing to do (32%); and to facilitate a transfer of wealth (30%).6
Considering the cost of final expenses in Canada, it makes sense that this is a driving factor for many to invest in a life insurance policy. In Canada the cost of a funeral can range from $5,000 to over $15,000. This range depends on if you’re having a burial or cremation, along with a list of other options.
Many Canadians believe that owning a life insurance policy is simply a good and practical thing to do. Across the country we all want to be sure our loved ones have financial protection and to be prepared should the unexpected happen.
Transferring wealth to a family member, friend or cherished organization is another leading reason for owning life insurance. The benefit paid to loved ones or an organization is tax-free.
Employee Benefits may not Provide you with Full Coverage
Do you know if your employee benefits include life insurance? Many people don’t have a strong idea of what their employee benefits cover.
Take the time to look through the benefits your employer provides and seek the advice of a life insurance advisor to help you understand if and where you are underinsured. An advisor can explain the consequences of not having adequate coverage from benefits such as life insurance, critical illness insurance, or long-term disability insurance.
For example, depending on the size of the death benefit under your employee benefit plan, you’ll need to consider if it meets your needs:
- Is this enough coverage?
- Will the amount cover your mortgage?
- Does it allow your spouse or partner to take time off work?
- Does it leave money aside for your children’s education?
Often the best approach is to “top-up” group coverage. Through a mix of the group plan and individual coverage, this should ensure that you have enough coverage to meet your needs and the needs of your family.
Differences Between Individual Life Insurance and Employee Benefits
Individual life insurance is portable unlike employee benefits. This means it won’t go away if you move jobs or are laid off. With employee benefits, since you don’t own the policy, you can’t take the coverage with you if you cut ties with your employer.
Many group plans only cover working years, or up to age 65, whereas individual plans can cover longer periods, especially for those working past the age of 65.
Part Time Employees
Individual life insurance can provide coverage for many part time employees who would not be covered by employee benefits, especially those in the gig economy (a free-market system, in which independent contractors/workers are hired for short-term commitments).
Life Insurance Costs Less Than You Think
The cost of life insurance is a lot less than most people think. In fact, a 2015 study revealed that an overwhelming majority of consumers misjudge the cost of life insurance plans: Millennials overestimated the cost by 213%, and Gen Xers by 119%.7 The truth is, depending on gender and amount of coverage needed, premiums can cost less than three lattes a month.
Mortality data and advancements in medical technology translates to better health related outcomes, with people living longer. As a result, life insurance is costing people less. Seeking life insurance while you are still healthy can help you secure these lower rates.
It’s important to know that even if you have medical issues, an extreme sports lifestyle, or if you work within a hazardous workplace, you can still qualify for affordable, reliable coverage, depending on the life insurance provider.
Is life insurance right for you?
Life insurance isn’t as complicated as you may think, and you may have been surprised to learn some of these facts. Start by educating yourself on the types and plans offered by various life insurance providers. Knowing your options will help you feel confident in selecting the right life insurance plan to protect your loved ones.
- 1 https://www.cancer.ca/en/cancer-information/cancer-101/cancer-statistics-at-a-glance/?region=on
- 2 https://www.canada.ca/en/public-health/services/publications/diseases-conditions/heart-disease-canada.html
- 3 https://www.diabetes.ca/media-room/press-releases/one-in-three-canadians-is-living-with-diabetes-or-prediabetes,-yet-knowledge-of-risk-and-complicatio#:~:text=Currently%2C%20one%20in%20three%20Canadians,developing%20diabetes%20in%20their%20lifetime.
- 4 https://globalnews.ca/news/4414387/canada-tuition-college-resp-2018/
- 5 https://www.lifehealthpro.ca/news/more-canadian-households-own-life-insurance-finds-limra-322135.aspx
- 6 https://www.lifehealthpro.ca/news/around-one-third-of-canadian-households-do-not-have-life-insurance-says-limra-303930.aspx
- 7 https://www.marketwatch.com/story/you-need-more-life-insurance-and-it-is-probably-much-cheaper-than-you-think-2017-03-13