Helpful tips for first-time life insurance buyers

Buying life insurance doesn’t have to be difficult

Buying life insurance for the first time can seem daunting. It’s a big decision, there are many options to consider and it can be stressful to think about what might happen if you’re no longer there to support your loved ones.

Getting insurance coverage that’s right for you is one of the most important ways you can financially protect those you care for from the unexpected. Buying life insurance is essential at any age and there are key advantages to starting early.

Here are some helpful tips to make the whole process easier for you.

Remember why you need insurance

Insurance can help financially protect those you care about when you’re no longer there to support them. It means there could be money available when it’s needed the most, so your loved ones can spend more time helping each other through a difficult time, and less time focused on how to pay the bills.

Life insurance can help:

  • Cover everyday living expenses
  • Settle debts
  • Keep the family home
  • Continue plans you’ve made for your loved ones, like an education fund

Once you know what type of life insurance you want, you’ll then want to determine how much your family will need to continue their lifestyle after you’re gone.

Life insurance that’s right for your needs and budget

There are two kinds of life insurance:

Term life insurance – temporary, lower-cost insurance coverage (at least initially) which you buy for a set period of Life Insurancetime. When that time’s up, your coverage can be renewed or you can convert to permanent, lifelong, coverage without having to answer further health questions.

Permanent life insurance – typically costs more, but lasts a lifetime and includes features that can grow money inside your policy over time (called cash value). You can access this money while you’re still alive or leave a larger legacy for those you care about.

Once you know what type of life insurance you want, you’ll then want to determine how much your family will need to continue their lifestyle after you’re gone.

To start, calculate:

  • Monthly household expenses – groceries, bills, mortgage, loan payments, etc
  • Planned expenses – RRSP or contributions to your children’s education, for example
  • Expected one-time costs – for instance, funeral expenses

You should figure out how much these expenses will cost for a full year, then how many years your loved ones would need to rely on this income. It’s a good starting point, so you have an idea of your insurance needs, which you can finalize with the help from me.

Don’t forget to insure your health

Did you know you’re much more likely to experience a serious illness or injury before you retire than you are to die? Ask yourself: if you were too sick or injured and couldn’t work for a month, six months or even a year, would you need an income source (that’s not your own) to support yourself and your family? If your answer is yes, critical illness and disability insurance may be valuable additions to your financial security plan that can protect what you’ve planned for and help ensure your loved ones are taken care of.

Consult a financial professional

I can help you create a plan – including life, critical illness and disability insurance – to help protect yourself and your family from any financial or non-financial issues that might come up.

What’s the Best Life Insurance for You?

To build the right financial plan for you, it’s important to know:

What are your life insurance options?

When it comes to life insurance, you have two choices: term life insurance and permanent life insurance. Both are great choices that protect you and your family, but each has different features. Deciding what’s Life Insurance for Familyright for you depends on what you need.

Term life insurance is temporary, lower-cost insurance coverage initially, where your payments stay the same for a set period of time. When that time’s up you can renew your coverage or convert it to permanent life insurance without having to answer further health questions.

Permanent life insurance also helps protect those you care about and provides you with more security because it lasts a lifetime.1 Initially, it costs more than term life insurance but includes features that can grow money inside your policy over time (called cash value). You can access this money while you’re still alive to help you achieve what you’ve always wanted – more retirement income or perhaps to start your own business – or leave a larger legacy for those you care about.

Deciding which option is right for you can be difficult. Here’s some information to help you make a decision.

So which option do you feel best suits your needs: term insurance, permanent insurance or a combination of both?

No one knows your situation better than you do. However, I’m here to help you. I can review your needs, help you choose the right insurance option and work with you to build a financial security plan to protect what matters most.

Mortgage Insurance vs Personal Life Insurance

You’re finalizing your mortgage – a huge commitment that comes with a great deal of responsibility. It’s natural to be concerned that your family might lose their home if the income earner was no longer around to make the payments.

You have a couple of options, both involving affordable monthly payments. Lending institutions offer you mortgage insurance – also called creditor insurance – at the time you sign the mortgage. The other route is personal life insurance that you can buy through me.

  • It’s important to research the differences between mortgage insurance and personal life insurance.

Mortgage insurance is convenient. You can apply for insurance coverage at the same time you’re getting your mortgage. This insurance is used to cover the outstanding mortgage balance if you die. You can also include your spouse in the coverage.

Mortgage Life Insurance

However, it’s important to research the differences between mortgage insurance and personal life insurance to help ensure you’re giving yourself and your family the type of insurance protection that meets your needs.

You do have to qualify for personal life insurance, a process that may include verification that you and your spouse are in good health. Once you start paying the premiums, you’re covered for the term of the policy, with automatic renewals. And as long as premiums are paid as required, only you can cancel the policy.

The benefit payout

With mortgage insurance, your creditor is the named beneficiary and the proceeds are paid to the creditor, not your family. If you or your spouse dies, the outstanding amount is paid off. As the mortgage is paid down the benefit coverage decreases.

Personal life insurance allows you to choose your beneficiaries. And the lump-sum benefit payment is paid tax free on the death of the life insured even if the mortgage is paid off. This type of coverage provides added financial security beyond just the mortgage.

Monthly premiums

With mortgage insurance, the coverage decreases each month until the entire principal is paid off and the premiums stay the same. With personal life insurance, your coverage doesn’t decrease as the mortgage is paid down and you can choose a plan that will keep the premium you pay level for 10, 20 years or for your lifetime.

Flexibility

Generally, most lending institutions offer non-convertible term life insurance where the lending institution owns the mortgage insurance policy. If you switch mortgage lenders, your policy is void. Given that you’ll be older than when you originally signed your mortgage or your health may have changed, the premiums with a new lender could be higher or you may not qualify for new coverage.

If you already have a personal life insurance policy in place and you buy a bigger home, you may want to consider increasing the coverage. One option may be to leave the existing policy in place and take out a second one to increase overall coverage for your family.

Take time to compare and carefully weigh both options. I can provide expert guidance.

Protect What Matters Most With Life Insurance

When you think about protecting those you care about – your spouse, children, family members – you’ve probably considered life insurance.

But you might have wondered, “Can I afford it?” After all, life insurance is expensive, right?life-insurance-cup-coffee-day

Surprisingly affordable

If you can buy a cup of coffee each morning, you can probably afford to protect your family with term life insurance.*

If the unexpected does happen, your family can use the proceeds to:

  • Pay off large debts, like a mortgage
  • Cover daily living expenses
  • Continue plans you’ve made for the future, such as an education fund for the kids

Life insurance proceeds help ensure your family members are provided for and can achieve their long-term goals, even if you’re not there to support them.

Talk to me today and start protecting your family for less than the cost of a daily cup of coffee.

The example provided is not complete without the London Life illustration, including the cover page, reduced example and product feature pages all having the same date. Read each page carefully as they contain important information about the policy
*This comparison is based on London Life term 10 life insurance, male and female, up to age 40, non-smoker, standard risk, monthly premium payments. Monthly premium depends on your age, amount of coverage and general health information. Life insurance coverage amount represents the policy’s death benefit. Rates as of November 2014. Term 10 life insurance premiums increase on renewal after 10 years. Cost of coffee is based on $1.60 per cup.

Choice of Participating Life Insurance Dividend Options

Your participating life insurance dividend options give you considerable flexibility now and in the future. You can use your dividends to:

  • Buy additional insurance, on a tax-advantaged basis, without evidence of insurability
  • Lower your out-of-pocket premiums

This means you can choose how to balance affordability today and growth tomorrow. Historically, dividend scales increase and decrease over the life of a policy. Keep this in mind as you consider these dividend options. The reduced example in the life insurance illustration shows you the effect of a decrease in the dividend scale on the non-guaranteed values. Actual proportions for paid-up additions and Econolife vary by such factors as age, risk class, amount of life insurance, out-of-pocket premium payments and declared dividends.

Paid-up additions

With this dividend option, you use your dividends to buy additional, fully paid-up life insurance. Here are some advantages of paid-up additions:

  • Your coverage increases annually, with no need to prove insurability. This gives you a way to offset inflation, so your coverage doesn’t erode over time.
  • You buy the additional coverage on a pre-tax basis. Dividends used immediately to pay premiums in the same policy don’t incur income tax.
  • Paid-up additions generate further dividends, similar to your base policy.
  • The cash value of your paid-up additions, once credited to your policy, is vested and cannot be reduced or used in any way without your authorization, other than to pay premiums. Most contracts allow dividends, including those already applied, to be used to help keep the policy from lapsing if a premium is unpaid, for example by the use of an automatic premium loan.

Econolife

With the Econolife dividend option, you use your dividends to buy a combination of permanent life insurance and term life insurance. This gives you access to the coverage you need today, at a very affordable price. Econolife coverage offers these advantages:

  • You buy the Econolife term life insurance with pre-tax dollars. Dividends used immediately to pay premiums in the same policy don’t incur income tax.
  • In years when your dividend is larger than the cost of the Econolife term life insurance, some of the dividend buys permanent paid-up life insurance. Over time, this permanent life insurance can completely replace the temporary life insurance. After that, your death benefit begins to increase. You can use Econolife to strike a balance between affordability today and growth in cash value and death benefit tomorrow.
  • You can convert the temporary Econolife term life insurance component to a separate permanent policy any time before reaching age 65.

Econolife gurantee

  • With the Econolife guarantee (lifetime or 10-year), if your current dividends can’t pay for the Econolife term life insurance, London Life won’t ask for extra out-of-pocket premiums or surrender existing dividends to cover any shortfall while the guarantee is in effect.
  • If the guarantee expires or is forfeited, you may need to make additional premium payments to pay for any shortfall, or reduce your Econolife coverage.
  • Some options will end or forfeit the Econolife guarantee. If you use dividends for a Premium Vacation or withdraw them from the policy, the Econolife guarantee ends. Policy loans don’t affect the Econolife guarantee.
  • If the dividend scale increases, permanent paid-up insurance can replace the Econolife term life insurance even faster.

Accumulation

With this dividend option, your dividends accumulate with interest. The accumulated amount increases the death benefit. The interest rate is adjusted from time to time and interest is credited on each policy anniversary.
Interest on the accumulated dividends is taxable. Some or all of the dividends may be taxable.

Cash payment

With this dividend option, you take your dividends in cash. Some or all of these dividends may be taxable.

Loan reduction

With this option, you apply your dividends to any outstanding policy loan. Other uses for dividends

Premium Vacation

With the Premium Vacation option, you use current and accumulated dividends to pay some or all of your premiums, rather than paying them out of pocket. This flexibility is useful if you have a short-term need for cash, like a career change, tuition or new mortgage, or a long-term need like retirement. It’s a convenient way to balance your cash flow with your need for continuing coverage.

Premium Vacation relies on the dividends earned and retained in your policy. Over the life of the policy, increases and decreases in dividends affect how much is available to pay premiums, how much of each premium you can pay with dividends and how long you can take a Premium Vacation.

Cash payout

With this dividend option, you withdraw dividends to take advantage of an opportunity or meet cash flow needs. This reduces the policy’s death benefit and cash value. Policy illustrations demonstrate how this works.

London-Life

Policy illustrations

I can provide an illustration to show how your policy works. It shows which values and benefits are guaranteed and how dividends affect the growth of non-guaranteed values and benefits, depending on your dividend option. The illustrated growth of non-guaranteed values and benefits assumes the dividend scale continues unchanged over the life of the policy.

While policy illustrations are useful, the illustrated dividends aren’t guaranteed and aren’t an estimate or prediction of future performance. To better understand the sensitivity of the policy values to changes in dividends, compare the illustration’s primary example to its reduced example. For more information on policy illustrations, ask me for a copy of Your guide to life insurance illustrations.

Choice of additional benefits

You can customize your participating life insurance policy by adding a variety of optional benefits. Consult your policy for full details of your benefits. These descriptions cover the main points.

Supplementary term life insurance

You can add term life insurance to the total coverage, without paying the annual policy fee for a separate policy. This is useful if you need additional coverage and affordability is an issue or the need is temporary. This term life insurance is renewable, and the renewal premium rates are guaranteed. You can convert this temporary life insurance to permanent life insurance from London Life.

This conversion option expires on the date shown in your policy.

Total disability waiver of insurance

London Life pays the premium in the event of the insured person’s total disability as defined in your policy.

Premium waiver insurance

In the event of death or disability, as defined in your policy, of the person with premium waiver insurance (usually the premium payor), London Life waives all future premiums, to the end of the specified period. An alternative option simply covers the death, but not disability, of the person with premium waiver insurance.

Accidental death insurance

If the insured person dies as a result of an accident, as defined in your policy, this benefit provides additional insurance. The accident must occur before the policy anniversary when the insured person turns 70.

Guaranteed insurability benefit (GIB)

This benefit gives you the right to buy additional life insurance at certain future dates, without evidence of insurability. You can exercise this option up to two years before or after each option date. The new policy can be for permanent or term life insurance from London Life, subject to administrative rules then in effect.

Where to get more information

  • You can find out more about London Life participating life insurance by calling me (519-860-4223). You can also ask me for an updated policy illustration.
  • Each year on the anniversary of your policy, you receive a statement that updates you on the status
    of your policy.
  • If you have a question about your policy or would like a copy of the most recent London Life
    participating life insurance financial facts (form 41-4031), call the client service centre at 1-877-566-5433.
  • Visit us on the Internet at www.londonlife.com.

Notes:

  • Performance data is provided for illustrative purposes only and represents past performance, which is not necessarily indicative of future performance.
  • The tax information in this guide is based on Canadian legislation at the time of printing and is subject to change. This information is of a general nature only. For further information, discuss the tax implications of your policy with your accountant or tax advisor