Life Insurance FAQs
Beaver Street Life Insurance is a great choice to protect your family.
1. What is Term insurance?
Term insurance policies cover the insured for a stated term. The most common type of term policies is Term 10 and Term 20 policies. For example, on these plans, the premiums are fixed for 10 years or 20 years and they rise as you age.
2. Why should I buy Life insurance?
Life insurance can be used for a number of reasons. Below are a few of these, but there are many more:
- Income Replacement.
- Paying off a mortgage or a line of credit.
- Final Expenses.
- Emergency Fund.
- Money used to fund your child’s education.
- Estate preservation and creation.
3. What does life insurance cover?
Life insurance is a way of helping your family cope financially when you die. It is intended to provide help to your loved ones when they can’t rely on your salary or income any longer.
The payout can be used to clear debts, pay off the mortgage or just cover everyday expenses. It could even pay for your funeral if you haven’t set anything aside for that.
4. Is there a time limit for claiming an amount after the insured dies?
So long as the information on the initial application is correct there should be no time limit on collecting the claim. The insurance company will need a death certificate and your beneficiary(s) will need to sign a claimant’s statement.
5. How much Life insurance do I need?
It all depends on your personal circumstances as the amount to cover. A common rule of thumb is 10 times your annual salary or income. But obviously, you should make more detailed calculations to make sure you are fully covered.
Let’s say you are married, have a large mortgage and four children, you are going to need more cover than a single parent with a two bedroom flat with one child.
6. How are insurance brokers paid?
Life insurance brokers are generally paid a commission by the insurance company for each policy sold. This cost is built into the premium, so the consumer does not pay any type of surcharge.
7. Can I get Life insurance if I’m sick?
Yes, life insurance is available to people who are sick. Depending on the type of illness, the insured may still qualify for traditional life insurance plans that require medical tests and health questions. In truth, it can be difficult to find affordable life insurance if you have a serious pre-existing medical condition. A common cold or illness will not have an adverse effect.
8. How do I know my Life insurance policy will pay out?
Life insurance policies generally have a two-year contestability period, which means the insurance company can contest the claim for the first two policy years if there is misrepresentation on the application. The insurance company can also contest claims for the life of the policy in the event of fraud.
Regulatory bodies also protection Canadian policyholders. For example, Assuris is the not for profit organization that protects Canadian policyholders if their life insurance company should fail.
9. Is Mortgage insurance through the bank appropriate?
In most instances, individual life insurance offers a much better value than mortgage insurance through a lender. Individual life insurance policies provide level coverage, the plan is portable, if you decide to switch homes or move to another bank, and the insurance company allows you to choose your own beneficiary. There are also substantial discounts for non-smokers and people who have a healthy lifestyle. Mortgage insurance through the bank offers declining coverage, the bank is the beneficiary and there are generally no discounts given to non-smokers or people with a healthy lifestyle.
10. How is Term insurance different from Whole Life insurance?
Term insurance premiums start off low, but increase as the insured ages. Term insurance policies do not have a cash value. Whole Life insurance policies have a higher initial premium, but the coverage is level throughout the insured’s lifetime. Whole Life plans can often be paid-up in a limited number of years and have a built-in cash value.
11. What is Universal Life insurance?
Universal Life insurance is an unbundled form of Permanent Life insurance, which means the life insurance and the investment component are separate. Most insurance companies allow the insured to choose from a wide variety of investment options and the investments can grow on a tax-sheltered basis.
12. Is Life insurance tax-free?
Life insurance death-benefits are tax-free to the beneficiary. If you name your estate as the beneficiary, there is a potential for probate tax.
13. Can you borrow money on a term life insurance?
Most Term life insurance policies do not have a cash value. You can only borrow against the cash value of a policy you can not borrow against the death benefit.
The one exception is most life insurance companies will allow the insured to borrow against a death benefit if the insured is diagnosed with a terminal illness i.e. less than 1 year to live.
14. How do I change or update my personal information on my insurance policy?
You would have to contact your insurance company. The address and phone number they can likely change over the phone after they verify your details. The change of name would likely require some type of document to be signed – they would supply you with the form.
15. How can I change my beneficiary?
Contact us and we will send the necessary form.
16. Will insurance company pay if the insured died outside Canada?
Yes – the policy should pay out if you die outside Canada – assuming all questions were answered accurately and suicide was not committed in the first 2 policy years.
17. I have a term policy, does it just expire if i do not renew or do I have to cancel it? Can it be renewed without me signing any documents?
Most Term policies renew automatically. The insurance company would require you to sign a letter to cancel the policy.
18. Will I be notified when my policy is going to expire and my rates change?
Yes, the insurance company will send you a letter notifying you of an increase in rates. Insurance companies also generally notify the broker of record of any major policy changes and he/she should also notify the insured.
19. Can I pay my life insurance premium by instalments? If so, how many instalments can be allowed?
We allow for monthly or annual payments.
20. Where can I get a copy of my policy if it becomes lost or misplaced?
You can get a copy from us directly by contacting.
21. Am I covered if I commit suicide after having the policy for more than 2 years?
Life insurance policies have a 2-year suicide provision so the policy would pay out after 2 years assuming there was no misstatements of fact on any of the application questions.
22. How long does it usually take for a beneficiary to get the death claim even after the contestability period is over and the requirements were already submitted?
The amount of time can range from a couple of days to several months. If the insurance company suspects foul play or fraud they will likely write the insured’s doctor(s) for clarification.
23. If a person has quit smoking for a year, does it make a difference in the annual premium.
Yes, non-smoker rates are significantly less than smoker rates.
24. My husband quit smoking "cigarettes" 7 years ago. He occasionally chews nicotine gum. When applying for insurance would he only be considered at "smokers rates" ? Thank you
This depends on the company. Most life insurance companies would qualify him as a smoker but some companies may not mention Nicorette or nicotine substitutes in terms of their non-smoking declaration. It’s important to check the application wording very carefully.
25. Can a former spouse buy and pay for an insurance on the life of her former husband, on whom she does not depend financially? (This is in Ontario, Canada)
There has to be an insurable interest and the insured always has to sign the application and answer any necessary health and lifestyle questions.
26. Is there a certain amount of time a policy needs to be in effect before full death benefits are paid?
Most life insurance policies in Canada pay out from day one – except in instances of suicide or if there is meaningful non-disclosure on the application.
27. What are the common illness or medical condition a person can be declined with such regular life insurance application?
Some of the illnesses include a recent diagnosis of cancer, stroke, heart attack, uncontrolled diabetes, high blood pressure or cholesterol. Insurance companies like to see illnesses are stable.
28. What is the maximum age of an application?
Insuring Canadians age 69 and under is possible.
29. Can an applicant get declined insurance coverage even when they are healthy?
Sometimes insurance companies view risk differently than applicants. Someone could have had a heart attack a year ago and could feel perfectly healthy but the insurance company may view this health issue differently.
Your health, lifestyle and family history will be among the factors that decide your insurability.
30. Is there a way to notify Canadian Insurance companies if you think someone has fraudulently submitted an application for Life Insurance coverage without the insured's consent?
Yes, you can notify the compliance department of the insurance company. You can also notify the appropriate provincial insurance regulator.
31. Can I make changes to my policy?
While you can usually make amendments to your policy, it might result in additional underwriting and/or higher premiums.
32. Can I get life insurance through my employer?
It depends, your employer might offer death-in-service benefit – this pays out a lump sum, usually based on your annual salary if you die while in employment.
While it can be a valuable benefit, you might need to take out additional coverage depending on certain factors, such as how much debt obligations you have, as well as any financial provisions for your dependants’ future.
33. How do I decide the length of the term?
You’ll need to consider exactly what you want it for. Maybe you want to make sure the policy lasts as long as your mortgage repayments.
Or perhaps linked to your children’s age, so that it won’t expire until they have finished school, turned 18 years old, or finished university.
Of course, your own age will have an impact on your decision.
34. Can I buy life insurance that will payout whenever I die?
Yes, it is called T100 insurance. Your family can claim for your policy no matter when you die, unrestricted by a policy term.
35. Are life insurance premiums fixed?
Usually, have guaranteed fixed premiums throughout the policy term.
36. How much does life insurance cost?
Your premium will vary depending on your health and lifestyle, the type of policy, the size of the sum insured and also the risk of a claim.
Also, age is a factor, so life insurance will be more expensive for an older person. Similarly, if a customer is in poor health, they can expect to pay a higher premium.
The insurer will take into account occupation, hobbies, lifestyle – such as weight and fitness to help determine their premiums.
37. Can I insure my partner?
It is wise to purchase insurance on everyone in your family as the financial impact will be felt if they died.
38. How do I cut the cost of life insurance?
It makes sense to buy life insurance as young as possible as older people pay more for their premiums. So in your 20s & 30s rather than your 50s. Improving your health, such as losing weight and giving up smoking, can also reduce your premiums.