F.A.Q About Life Insurance in Canada
1. What is life insurance?
Life insurance is a contract between you and an insurance company. If you pass away, the insurer pays a sum of money (the death benefit) to your chosen beneficiaries in exchange for the premiums you’ve paid.
2. Why is life insurance important?
Life insurance provides essential financial protection for your loved ones, covering expenses like funeral costs, debts, and lost income, ensuring your family’s financial stability.
3. What types of life insurance are available in Canada?
- Term Life Insurance: Affordable, temporary coverage for 10, 20, or 30 years.
- Permanent Life Insurance: Lifelong coverage, including Whole Life, Universal Life, and Variable Life, which can build cash value over time.
4. How much life insurance do I need?
Typically, aim for coverage 7-10 times your annual income. Your specific needs depend on your financial obligations, income, and family situation.
5. How are premiums calculated?
Premiums are based on your age, gender, health, lifestyle, coverage amount, and term length.
6. Can I get life insurance with pre-existing conditions?
Yes, but your premiums might be higher, and some insurers may impose exclusions or limitations.
7. Who is a beneficiary?
A beneficiary is the person or entity you designate to receive the death benefit from your life insurance policy.
8. Can I change my beneficiaries?
Yes, you can update your beneficiaries at any time by contacting your insurance company.
9. What happens if I miss a premium payment?
You’ll usually have a 30-day grace period to make your payment without losing coverage. If you miss this period, your policy might lapse.
10. Is the death benefit taxable?
In Canada, life insurance death benefits are generally tax-free.
11. Can I borrow against my life insurance policy?
Yes, with certain permanent policies like Whole Life or Universal Life, you can borrow against the cash value.
12. What is a medical exam, and is it always required?
A medical exam assesses your health for underwriting purposes. Some policies offer no-medical-exam options but usually come with lower coverage limits and higher premiums.
13. What is term conversion?
Term conversion allows you to convert a term policy to a permanent one without a new medical exam, providing flexible, long-term coverage.
14. What is a policy rider?
A rider is an add-on to your policy for additional coverage or benefits, such as critical illness or accidental death coverage.
15. How do I file a life insurance claim?
Your beneficiary should contact the insurance company and provide necessary documents, like the death certificate, to process the claim.
16. What does life insurance cover?
- Natural Deaths: Heart attacks, diseases, old age.
- Accidental Deaths: Car accidents, drowning, falls.
- Suicide: Covered after a waiting period (usually two years).
- Homicide: Covered, unless the beneficiary is involved in the crime.
- Illness/Injuries: Some policies include critical or chronic illness riders.
- War/Terrorism: Some policies exclude these events.
17. What does life insurance not cover?
- Criminal Activities: Deaths during illegal activities like drunk driving.
- High-risk Hobbies: Some policies exclude activities like skydiving.
- Misrepresentation: Lying on your application can void your policy.
18. How does life insurance work?
You pay premiums, and the insurer pays a death benefit to your beneficiaries if you pass away.
Term Life Insurance: Covers you for a specific period (10, 20, 30 years). If you die within this period, your beneficiaries receive the payout.
Permanent Life Insurance: Covers you for life, builds cash value, and includes options like Whole Life and Universal Life.
Whole Life Insurance: Provides guaranteed payouts, potential cash value, and fixed premiums, but at a higher cost compared to term life.
19. What is the difference between life insurance and mortgage insurance?
- Life Insurance: Pays a lump sum to your beneficiaries, who can use it for any purpose.
- Mortgage Insurance: Pays off your remaining mortgage balance, with the payout going directly to the lender.
Conclusion
Life insurance is vital for financial planning and protecting your loved ones’ future. For personalized advice or to get instant quotes, visit United Life Financial or call 905-906-7000.
