Have questions about life insurance? Maybe you'll find the answers here!
Below are the some of the questions (classified according to subject) submitted by visitors to our site, as well as our experts' replies.
Cost of Life Insurance
What is the cheapest life-insurance product?
The cheapest option is usually term insurance, because there is no savings component. Products such as Term 10 come up for renewal every ten years, and premiums are very reasonably priced (with time, however, they become more expensive).
Universal life products can also be affordable, and enable you to save whenever possible.
I'm a 35-year old male smoker. I'd like to know the costs of a $250,000 life-insurance policy, payable over ten or 20 years, that would cover me for life.
For whole-life coverage payable in 10 or 20 years, you should consider a Universal life policy, which lets you pay premiums over whatever period you choose (subject to certain limitations). This monthly instalment is invested in accordance with your specifications, with investments earning tax-free income. The premiums and investment income are then used to pay the costs of coverage.
The product selected and return obtained have a significant influence on premium duration and amount. For example, at a 3% rate of return (ROR), a monthly payment of about $305.00 will produce a minimum face amount of $250,000. It's always better to use a low ROR when forecasting outcome; should you obtain a higher yield, you'll be making payments over a shorter period of time, paying less, or increasing your face amount (which will always fluctuate). Depending on the parameters used here, and all else being equal, that face value could be as high as $294,000.
Desjardins Financial Security offers a number of life insurance products able to meet your needs, each with its own specific features. To find the one best suited to your profile, get a price quote, or obtain answers to any other questions you may have, contact a financial security advisor assigned to a Desjardins caisse or a Desjardins Financial Security Independent Network associate.
I'd like to know how much life insurance would cost. I'm 43, and my wife is 48. We both smoke, but are in good health. We'd like $50,000 worth of insurance for each of us, for the next 15 or 20 years.
You can purchase a 20-year, $50,000 policy for just under $100.00 a month. If you need permanent coverage, however, premiums could vary from $140.00 to $175.00 a month for both.
To properly assess your needs and choose the product that's best for you, contact a financial security advisor assigned to a Desjardins caisse or a Desjardins Financial Security Independent Network associate.
Exclusions and Eligibility
I'm a nurse employed at a research centre. Our trial participants want to know if their life-insurance policy proceeds would be paid out if they were to die when taking an experimental drug.
If these individuals already have life insurance, get them to review the exclusions stipulated in their contract. If experimental drugs aren't mentioned, the face amount of their policy should be paid out to any beneficiary.
As life insurance standards differ from one insurer to the next, however, advise them to contact their representative if they need more information in this regard. If they enrol in life insurance while taking an experimental drug, tell them to inform their insurer to that effect, so as to avoid any problems.
I've been divorced for eight years, and got remarried three years ago. During my first marriage, I took out a life insurance policy on the lives of my wife and two children. When we got divorced, I kept the life insurance policy. Since then, my ex-wife has also remarried. If she died, would my insurer pay the policy proceeds to which I'd be entitled if we were still married, or would it consider I no longer had an insurable interest in the life of my wife and refuse to pay, given that she's remarried? My children are now aged 25 and 27, and are on their own. The life insurance was taken out to provide for them should some misfortune occur.
The life insurance policy you took out on your ex-wife's life is still in force, provided all applicable premiums have been paid. A divorce doesn't invalidate your rights with regard to this coverage, given that, when you took out the insurance, you had an insurable interest in her life.
Also, upon the death of your ex-wife, policy proceeds will be paid to the designated beneficiary.
Please note that, in Quebec, if you'd designated an ex-spouse as your beneficiary, the divorce would render that designation (as beneficiary, not as the insured party) of your life insurance null and void.
I recently heard about a 45-year-old man who couldn't get life insurance because he had a kidney removed when he was a child. I'm concerned because my four-year-old son was born with three kidneys, two of which were not functioning and had to be removed last March. Although he only has one good kidney, he's now very healthy. However, does this surgery mean that he'll have problems getting life insurance when he's older?
Based on this information, it's difficult to determine whether your child will have problems getting life insurance. Selection criteria vary depending on the insurer. Below are some possible outcomes and suggestions.
Before issuing a policy, the insurer will analyze the medical report to assess risk. This may result in an extra premium. Since your son underwent surgery only last spring, there hasn't been much time in which to evaluate the effects. If the insurer did issue a policy with an extra premium, that premium might be reduced in a few years' time, provided your son's health didn't deteriorate as a result of the operation.
You may want to take out basic coverage on your son's life, either immediately or in a few years, with a guarantee of insurability. The latter allows the amount of coverage to be increased without the need for medical evidence of insurability. Given his age, the premiums won't be very high and your son will be insured for his entire lifetime.
You can get more information from a Desjardins Financial Security Independent Network associate.
I'm planning to start my own company, which should be employing seven or eight people by the end of its first year of operation. As capital outlay, I plan to waive my own salary for the first three months. Will I still be insurable under a group insurance plan? In other words, will I be considered an employee even if I don't receive a salary?
Our company's group insurance plans have various eligibility criteria. To find out if you are insurable under such a plan, you need to answer the following question: Are you planning to offer group insurance coverage to all your employees? If so, to be eligible yourself, you need to be considered an employee, which by definition means receiving a salary and working a certain number of hours a week. If you don't meet these criteria, we can provide a group insurance plan for your employees with a rider covering your particular situation. If you'd like more information on this subject, we suggest you visit our "Groups and Businesses" section.
Moreover, if you're interested only in coverage for yourself, you can always get individual insurance that will meet your needs. Desjardins Financial Security offers many different options, including the SOLO Health insurance plan.
For further information on our products, or help in evaluating your insurance needs and selecting the product that suits you best, I suggest you contact a Desjardins Financial Security Independent Network associate.
Insuring a Child
Should I take out separate insurance for my child, or is a policy rider enough?
It all depends on your requirements. If you want coverage for funeral expenses, a rider might be just what you need. However, taking out life insurance in your child's name guarantees future insurability even if he or she develops a health condition. Otherwise, an additional premium might have to be paid, or insurance coverage might even be refused altogether.
Furthermore, if your child were to die prematurely, the proceeds from his or her insurance could help offset the loss of income caused by your or your spouse's prolonged absence from work.
I suggest you visit the "I'd Like Product Information.", "My Life is Changing.", and "I Need Advice Tailored to My Situation." sections, where you'll find a vast array of practical information.
Should I Keep My Old Insurance in Force?
I have an old insurance policy and was wondering whether I should keep it.
The first question you should ask yourself is whether you still need insurance coverage.
Then you should try to find out if a taxable gain will result if you terminate the policy-a likely scenario if your policy has a cash value and you've held it for years.
You should also determine the cost of your policy, taking into account the premiums you pay, any dividends you may receive, and the increase in your cash value over the years.
If you want to buy a new policy, you'll have to prove you're insurable, which may not be the case.
Smoking Status
I recently started smoking, at a rate of about one cigarette or cigar a day. Can this have an impact on my life insurance?
Generally speaking, if you've already taken out life insurance as a non-smoker, you retain that status even if you start smoking.
However, some insurance companies require evidence of insurability upon the renewal of products such as term insurance. We strongly suggest you check your policy provisions.
If you take out a new life insurance policy, you must declare that you're a smoker even if you smoke only one or two cigarettes (or any other form of tobacco) a day.
Term Life Insurance
What is term insurance?
Term life insurance is the most widely held type of life insurance. It provides coverage for a fixed period of time-one, 10, 20 or 100 years-and is designed to meet specific or short-term needs. It is therefore essential that you choose the product best suited to your requirements.
I'd like to know if renewing a term insurance contract involves any changes to the contract premiums.
When a term life insurance policy is renewed, the premiums will be increased according to the age of the insured. It's important to note that, as its name suggests, such a policy meets temporary coverage needs. For example, it could be used in case of death to care for a child until he or she reaches legal age, or repay a personal loan or mortgage.
When should one take out term insurance?
Term insurance is ideal for covering debts or other short-term insurance needs in the event of death. For example, it means you can:
- help fund your children's education and ensure their financial security until they're of legal age;
- pay off the mortgage on the home or cottage that's given your children so many fond memories;
- repay your student loan;
- settle other debts, such as a car loan, line of credit or credit cards;
- buy out the shares of a deceased partner without putting a financial burden on your company;
- enjoy short-term coverage if you can't afford long-term protection.
I'd like information on Enhanced Term 10.
Do you mean the Enhanced T10 with Critical Illness Advance? If so, here are some of the features of this plan.
ENHANCED TERM 10 with Critical Illness Advance is a Preferred Term 10 plan bundled with Critical Illness insurance. Whether death or illness occurs, a benefit is paid.
Premiums are fully guaranteed and increase every 10 years.
Issue Age: 18 to 65
Coverage to: Age 75
Life insurance
Min. Face Amount: $100,000
Max. Face Amount: $2,000,000
Critical Illness benefit:
Minimum 'advance benefit' - 25% of the face amount of the policy
Maximum 'advance benefit' - 100% of the face amount, up to $1,000,000
Convertible to age 70 to any permanent life insurance plan designated by the Company. The amount available for conversion is reduced by any "accelerated benefit" paid.
Benefit Payments
On Death:
100% of the death benefit is paid out if no "accelerated benefit" claim has been paid.
On Diagnosis of a Critical Illness:
The "accelerated benefit" amount selected at the time of application is paid upon diagnosis of one of the covered conditions.
If 100% is paid in the event of a critical illness, the policy terminates. If less than 100% is paid, the policy continues at the reduced face amount and premiums are adjusted accordingly.
You have a choice of options such as the:
- Angioplasty Rider (optional)
Pays 10% of the "accelerated benefit" when the insured undergoes his/her first angioplasty (limited to one event). After a claim is paid, coverage is reduced by the amount of the claim, and the premium is adjusted accordingly.
For more details, or if you'd like an insurance quotation, I suggest you contact a Desjardins Financial Security Independent Network associate.
Universal Life Policy
I have a universal policy. I was wondering whether I should invest my money in the policy's accumulation fund or in an RRSP.
You should invest in your RRSP first. Both will accumulate tax-free, but only an RRSP gives you a tax deduction when you contribute. On the other hand, RRSP withdrawals will be fully taxable, while only interest will be taxed at time of withdrawals from your universal policy.
What are the main features of a universal policy?
With a universal policy, in addition to insurance coverage, there's an accumulation fund in which your money accumulates tax-free. Premium flexibility is also greater. Not only can you choose premium frequency and amount, but you can also increase or decrease coverage as required without terminating your policy.
I'd like to know more about the savings component of universal life insurance.
Although this question is very broad, here's some information on the subject:
This component offers various investment possibilities, including guaranteed deposits and index funds. The sums invested accumulate in a special account, where they grow tax-free. They can be used as a contingency fund, to pay all your insurance premiums, or as additional retirement savings. This type of savings plan is suitable for people who have no personal debts, contribute the maximum allowable amounts to their RRSPs, and have finished paying off the mortgage on their principal residence.
Can you tell me the difference between whole life insurance and universal life insurance? I'd like to pay off my premiums in 20 years or so, and be guaranteed there will be no more to pay afterwards. Would whole life or universal life be best for me?
One primary difference is that universal life includes a separate fund where your investments accumulate at the going interest rate. You also have investment options that offer yields in line with stock market returns. However, the investment risk is yours to assume. With universal life, you can pay your premiums whenever you want. With whole life, your premiums are usually locked in. In general, only non-participating whole life is fully guaranteed. If guarantees are important to you, this type of insurance may be your best bet, but it's usually more expensive. You can also buy a universal policy and ask for an illustration using a conservative interest rate (3% or 4%), and then invest the premiums in options such as five-year GICs.
We suggest you consult the Insurance Shopping Guide which contains a wealth of relevant information
Does a universal life policy with increasing death benefits equal to the cash value become an endowment policy payable for a certain period of time, or is the premium payable for the life of the insured?
With universal life, the number of years you have to pay premiums depends on the accumulation fund's return on investment and the size of premium you're willing to pay. Generally speaking, there's no set number of years involved. Usually, your representative will provide an illustration that shows how long you'll have to pay based on the premium level you've chosen and a given long-tem interest rate. It's a good idea to ask for forecasts with differing interest-rate scenarios, because interest-rate changes have a direct impact on how long premiums will have to be paid.
For more information, we suggest you consult the Insurance Shopping Guide
Which Type of Insurance Should I Choose?
I'd like to know if renewing a term insurance contract involves any changes to premiums. Could you also tell me which type of life insurance is best for someone 18 to 21, and why?
When renewing a term life insurance policy, premiums will increase in keeping with the age of the insured. It's important to note that, as its name suggests, such a policy meets temporary coverage needs. For example, it could be used in case of death to care for a child until he or she reaches legal age, or repay a personal loan or mortgage.
If I understand your second question, you're looking for the ideal coverage for some 18 to 21 years of age. However, each case is unique. You should really have your needs analyzed by a financial security advisor in order to establish if you actually require coverage at all, and, if so, which is most suitable for you.
The purpose of an insurance policy is to offset a loss of income or protect assets-circumstances that are rather rare in the case of a young person. However, an insurance policy taken out early in life can be less expensive than if taken out at a more advanced age. It can also be used to guarantee your coverage is maintained, since, as a result of events occurring later in life, you may have to pay additional premiums (if you're still insurable at all).
I suggest you visit the "I'd Like Information on Insurance Products", "My Life is Changing", and "I Need Advice Tailored to My Situation" sections, where you'll find a vast array of practical information.
I have a T10 life insurance policy that will be expiring shortly. I'm a 51-year-old business owner looking for a new life-insurance contract. What can you recommend?
In order to propose a new life-insurance contract best suited to your situation, we would have to assess your coverage needs. How will the life insurance proceeds be used-to buy out your shares in the company, pay for expenses related to your death (including taxes), or protect the estate you're leaving your heirs?
To provide sound advice, we need more information about such factors as your goals and needs, family situation, company position, other coverage, and health. For example, if you're in poor health, you could use the conversion privilege under your current term insurance to take out a whole life policy without providing evidence of insurability.
For help in assessing your needs and choosing the most suitable product, we suggest you contact a Desjardins Financial Security Independent Network associate.
Why Take Out Life Insurance?
Why should I take out insurance to protect my family against financial loss?
When someone dies, it's always very difficult on those left behind. However, with proper insurance coverage, survivors are at least protected from financial worry, and the deceased's estate is sheltered from the burden of debt. Insurance is obviously not the only option.
You can always save your money to prepare for a contingency, but there's no way of knowing when it will occur. Will you have set enough money aside by the time you die? Life insurance is a way to protect your loved ones when they need it most-after you're gone. Like it or not, death is something we all have to face one day.
Please feel free to read the article «How to Transfer Wealth While Minimizing Tax»