To be blunt, death catches up to all of us. the problem won’t go away. Insurance doesn’t have to be all that hard, but It’s boring! It’s morbid! and it can get expensive unless you know how to mitigate it!

So why do it?

Wouldn’t it be better if you invested, paid your debts, or enjoyed that money? The short answer is: You do it for the loved ones you leave behind. I wouldn’t want my family to lose our family home and figuring out how to adapt and running the house all by themselves. Lunches, drop offs, pick ups, extra curriculars, working, and life. All this while still grieving. No amount of money will replace you, but it will help ease the transition and insure the disruption to your family goes a little bit easier.

Then how does it work? Who should get it? And how do you get it? To answer these questions just keep on reading. I’ll try to not make it too boring for you.

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How do I know if I need life insurance?

If you have kids, a spouse, or anyone who depends on you financially, then life insurance is for you. If you have any debts, including a mortgage or loan, and want to pay for your kids’ education or other things in the future, then insurance is for you. Especially, like most of us, if your bank statements don’t show a sum so large that it will cover the living expenses of those people who depend on you. So, protect your family now for future expenses they may have after you've gone (i.e. university tuition) in case you die before you've had time to save enough money.

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But there are all kinds of life insurance. I don’t even know where to start? And what kind should I get?

For most people, the answer is called term life insurance. This type of insurance means you pay the same premium every month, or year, for the term of the policy, typically 10, 20 or 30 years. If you die during that term the insurance company pays a predetermined amount of money to the beneficiary (i.e., the person you told them to pay when you got the policy). If you don’t die, which is also nice, the insurance company keeps the the premiums you paid and you never see it again. Simple enough right?

Term life insurance serves the most basic purpose of life insurance: It gives you peace of mind that your loved ones won’t go broke if you die. It does this at the lowest price and when you need it most; at a time when you’re the busiest, most indebted, with the highest earning potential, during your prime working years and your family is growing. It’s so common, it’s what people generally mean when they say “life insurance.”

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Are there other options?

Yes! It’s called permanent insurance. This one gets a bit complicated. Permanent insurance, or whole life insurance (the terms get used pretty interchangeably, though there are some differences) provides lifelong protection, even if you live to be 130 years old. It can accumulate cash value on a tax-deferred basis. It can be used as an investment vehicle with an option of choosing your investments or letting the insurance company do it for you. These options also have a plethora of add on features that would be too lengthy to go into right now. Sufficed to say, if you can afford this option, make sure you get an experienced advisor to help you with it. Lastly, there are two subsets – participating and non-participating permanent life insurance

Think of participating whole life a little bit like co-ops. If there’s extra money in the funds, for instance if the investments within your policy do better than expected, the money is refunded to the policy holder through dividends. Over time the compounding effect can be a huge benefit to a policy holder.

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So why not get permanent life insurance?

Whole life premiums are quite expensive, usually somewhere between 7 to 12 times the rate of comparable term life insurance. Some of these policies may come with high fees that erode the rate of return. Where term insurance is mostly used to satisfy the temporary need of insuring your working years, whole life insurance is mostly used for a more permanent need. For example tax planning during your retirement years, for your estate or for burial expenses when you die.

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OK, so how many brokers do I call to get the best deal?

Fortunately for you, whether you shop at an Internet-based brokerage or have one of us help you, for term life policies, you’ll most likely end up with the same set of offers, from the same group of big insurers, for the same prices. Term policies are quite competitive and highly regulated. It ‘s more important to ask about the options and guarantees than the +/- $2 you’ll save a month. The more flexible the policy the better options it will provide when your circumstances change.

As mentioned above, the insurance industry is heavily regulated, giving you the peace of mind to buy from whomever you like. One thing to look out for is to be sure your broker represents five or six different companies and know the market.

Best thing to do is to find someone like us, with knowledge and experience in the insurance market, that can get your insurance in place with the least amount of hassle.

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Do I really need to do a medical?

Not always. If you are young and looking for less than $1 million ($2 million with some insurers), probably not, though you still have to answer medical questions. These may cost extra and may not be renewable or convertible so be careful if you opt for these. Otherwise, we go with the traditional process and you may still not need a medical. We just answer a few health questions designed to figure out how big a “risk” you are. Height and weight? Do you smoke anything? Any immediate family members die of diabetes or cancer before age 65? Then we’ll send a nurse to you to do a medical exam (hopefully not needed). Insurers use all that info an put you into the “box” you fit best in and give you a price. Here is where our experience comes in. Every insurance company has different “boxes”. Having been around for a while we know where to send someone who may be a bit overweight, or has had diabetes for years but has always been stable or even someone who has survived cancer.

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What if I tell them I’m healthy when I’m really not?

In the best case, they’ll find out through the medical exams and offer you a policy knowing full well how healthy/unhealthy you are. In the worst case, they’ll issue the policy and find out you lied (this is insurance fraud, by the way) when you die. In this case your family will get nothing. Your estate may get the premiums back if the insurance company is feeling generous. Either way, better to be honest up front and let our experience guide you through.

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How big should my policy be?

Insurance companies will never issue a policy where you’re worth more dead than alive. To determine a good approximation, try and think of all the things your family will need money for when you’re gone. Expenses such as mortgages, groceries, college tuition, your income, etc. Many websites offer handy calculators to help with this. Make sure to take into account all the non-monetary contributions to the household. For instance, if you have young children that would need child care before or after school. This may not be an expense now but may become one if the surviving spouse needs to work longer hours to make ends meet.

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What if I can’t afford the premiums for what I need?

It’s better to have some money than no money. Get what you can afford now. You, having read this far, obviously realize you need to get some coverage. Talk to one of us and we can figure out the best strategy for you to get as close to what you need. Buying a policy you can’t afford and canceling it later is wasted money. It’s more important that your family gets some help, rather than no help.

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How do I know how long my policy should be for?

That really is up to you. This is where a good, experienced broker can help guide you to something you’re comfortable with and can afford. It is usually a good idea to have coverage at least until your mortgage is paid off and your kids have moved out. But again, a good broker would really help here.

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How long does it take?

Good question. Unfortunately there is no good answer for this one. If your broker has access to an online application system it may literally take minutes. If you answer a question that throws up a red flag, depending on the red flag, it can take months. Again, this is the time to have a good, experienced broker as they will most likely know what company to go to depending on the flag that gets raised.

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