Buying Life Insurance for the First Time

As we get older, we start to hit milestones in life that we had only ever dreamed of when we were younger. Getting married, buying a home for the first time, having children, getting your very first “adult job.” While these points in life may all seem very far away, they actually happen very quickly, and it can always seem like life is moving a bit too fast.

Purchasing life insurance is one of those “steps” in life that too many of us fail to consider the importance of, but it’s essential at any stage of life. It can be a big decision. You’ve got the task of having to find the coverage that’s right for you and can secure the safety and wellbeing of your loved ones, even if you’re no longer there.

In this article, we’ll go over some important tips for you as a first-time purchaser of life insurance, as well as some things to note about the decision you’re about to make.

Ask Yourself: Why Do You Need Life Insurance?

At some point in life, we all may need life insurance for one reason nor another. It can help to cover our daily living expenses so that our dependents may live on with the same standard of living as they had before. It can also help us to settle our debts, keep our family living at home, and fund our children’s education. But, even if you don’t have dependents, it can help to cover the cost of an ongoing mortgage, pay off debt so your family members aren’t saddled with the burden, and give a lump-sum payout to your parents, siblings, or whoever you want as named beneficiaries.

Having some kind of financial plan in general is always a good thing. According to RBC’s annual Financial Independence in Retirement poll, only about 48% of Canadians have some kind of financial plan.

Asking yourself why you want life insurance is a good place to start. When you work with a broker, this is easily among the first questions that they will ask you as well.

Know the Difference: Term vs Permanent

Note that when you’re purchasing life insurance, there are actually two forms of life insurance that exist: term, and permanent. Without getting into all the subdivisions of permanent life insurance that exist, we’ll solely go over the difference between the two options.

Term life insurance is temporary, lasting for only 10, 20, or 30 years, and comes at a far lower cost than its alternative. It’s cheaper the earlier you buy it in life. Once the policy is up, most insurers offer you the opportunity to convert into permanent, lifelong coverage. Term is a great option if you want coverage for the time when your children are growing up or until you’ve paid off your mortgage.

You may only need term if:

• You only need coverage for a set period of time.
• You want a tax-free death benefit for your loved ones.
• You want the flexibility of being able to convert your policy.
• You want the cheaper life insurance option.
• You want flexible payment/policy options.

Permanent life insurance may cost you more than term, but it is designed to last the duration of the insured’s lifetime. Depending on the type of permanent, it may also include an aspect known as a “cash value” which builds as time passes. Again, depending on your policy, you may be able to withdraw from this amount of money while you’re alive/or leave money to those you care about.

You may want permanent life insurance if:

• You want lifelong coverage for your dependents.
• You want your policy to accumulate a cash value over time.
• Your premiums, whether annual or monthly, won’t rise with time (although some variations of permanent life insurance offer a flexible premium.)
• You’ll receive a tax-free death benefit your loved ones can use however they want.

A financial advisor or Excalibur Defender can help you break down your options between permanent/whole life policies and term life policies, and narrow down the decision-making process for you.

Ask Yourself: How Much Coverage Do You Need?

After you’ve determined the type of life insurance you want, you’ll need to determine “how much.” This can be a tricky question to answer unless you’ve already enlisted the aid of a broker, who can walk you through what your coverage options are and what “level” of coverage might be best.

Otherwise, you can look to add up all your existing expenses to determine your coverage needs. Consider the following expenses in your total calculations to determine how much life insurance you need:

• Any anticipated one-time costs, such as funeral expenses. The cost of a funeral in Canada can range between $2,000 to upwards of $20,000, including memorial services, cremation, and more.
• The expenses you have monthly, such as bills, rent or mortgage, loan payments, groceries, etc.
• Planned costs, including contributions to savings accounts and children’s education.

Once you have a fair idea of what your expenses would look like for the “average” year, multiply that amount in the years where your loved ones would still be dependent on your money.

Having the right amount of coverage is, again, a careful science, but the job can be made all the easier with the help of an advisor. Once you’ve obtained the right amount of coverage, you can rest easy knowing that you have enough coverage that would help protect your loved ones – even in the event of your untimely, premature death.

Work with an Excalibur Defender for the Best Rates

Last, but certainly not least, work with a broker! A broker can help find you quotes from multiple life carriers, giving you access to some of the best providers around. They can advise you personally based on what they know about you and lend you some of their expertise from working in the industry.

Excalibur’s team of life, critical illness, health insurance, and disability insurance specialists are prepared and waiting to begin helping you protect your standard of life, as well as to prepare you for the worst. Should you ever worry about the continued wellbeing of your loved ones in the event of your premature death, we will help alleviate your concerns by ensuring your debts, mortgage responsibilities, income, and other expenses will be covered. Give us a call or get a quote today.