Passionate People Episode 1: Life Insurance 101

My name is Taylor Forsyth and I’m an Account Manager in the Financial Services Department at The Standard Insurance. If you’re thinking about purchasing Life Insurance for the first time, you could be having trouble figuring out the differences between the types of coverage available to you and you may be wondering which one works best for your situation.

To make things easier, I’m going to break down the basics you need to know by answering some of the most common questions I get asked about Life Insurance.

Why do I need a Life Insurance Policy?

As an individual, there are a number of reasons you would require Life Insurance. One of the main reasons is peace of mind knowing that your family will be protected if you are suddenly no longer around. The death of an individual can come with some heavy financial burdens for those who they leave behind. Life Insurance can help cover final expenses like funeral costs and lawyer fees upon death. Those costs can run up to somewhere between ten and fifteen thousand or more.

Another major expense is taxes on death. This will depend largely on your assets when you die, but if you have a recreational property like a cottage or a camp, and you want to be able to leave that behind for your family and their children, it could be a substantial tax burden for them. Life Insurance can be used to cover that.

Ultimately, you want a Life Insurance policy to ensure your family’s financial security in the event of your death. This includes covering any debts you are leaving behind like loans, lines of credit, a mortgage, or a credit card. You want to make sure you can leave a legacy behind for your family so that they can continue to live the same lifestyle that they did when you were alive.

 Can Businesses Purchase Life Insurance?

Yes. If you are a business owner, it is definitely a good idea to consider a Life Insurance policy. The biggest reason is ensuring the continuation of your business. Business owners can purchase what’s called Key Person Life Insurance. This can be purchased for themselves and other key employees so in the event of a death, the business can continue to operate by allowing you to cover lost income generated by this key person while you are looking to find a replacement.

If your business is one that has multiple shareholders, the shareholders can purchase Life Insurance on each other so that if one is gone, the other shareholders can use the funds from the insurance policy to buy back shares from the deceased shareholder’s estate.

Term vs Permanent Life Insurance

When looking to buy a life insurance policy as an individual, two terms you may be seeing often are Term Life Insurance and Permanent Life Insurance. It’s important to understand the difference between the two when you are deciding which one is right for you.

Term Life Insurance is life insurance that is for a specified period of time. This is meant to cover your more temporary life insurance needs such as your mortgage, or the education costs of your children. These are expenses that will eventually be reduced or even eliminated over time.

Permanent Life Insurance is just how it sounds. It’s life insurance that lasts forever. This is to cover costs that will be there regardless of when you pass away, like funeral costs and taxes on death.

Term Life Insurance is generally less expensive than Permanent Life Insurance. However, a good think to know if you decide to purchase Term insurance because it costs less, is that your Term policy can eventually be converted into a Permanent one at a later date once you can afford it.

What do insurance companies need to know for my Life Insurance policy?

Once you have determined which type of policy you need and you are ready to make your decision, there will be some information you will need to provide to the insurance company. For individual Life Insurance, they will need to know your date of birth, your gender, and your smoking status. 

Once your broker has submitted your application, the insurance company will conduct a medical interview and the outcome of that interview will be used to determine the final cost of your policy.

Hopefully this brief overview has given you some information to help you with your decisions when it comes to buying Life Insurance. Contact us today or talk to your broker to start the conversation and we will help you find the Life Insurance policy that is right for you.