Life insurance is an important component of financial planning, offering peace of mind and financial security to your loved ones in the event of your untimely death. In Canada, a variety of life insurance plans cater to different needs and preferences.
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Let us understand the meaning, benefits, and types of life insurance available in Canada and the factors to consider when choosing a life insurance plan.
Life insurance, in simple words, is a financial agreement in which the insurer agrees to provide life cover to the policyholder’s family in case of the policyholder’s untimely death in exchange for regularly paid premiums. The death benefit offered in the event of the life-assured death can be used by the family to fulfil their financial needs. Alongside life protection, these plans also provide wealth creation benefits.
Your family may use the benefit amount for any of the following reasons:
The payout can act as income replacement in your absence
Use the payout to pay for the child’s higher education
Family can use the amount to pay for the funeral services
Payoff any remaining loans and debts that you may leave behind
Make charitable donations to trusts and or leave the money to estate
Term Plans
Financial Security: Ensures your loved ones are financially secure in your absence.
Debt Protection: Helps cover outstanding debts like mortgages, car loans, and credit card balances.
Income Replacement: Replaces lost income, maintaining your family’s standard of living.
Estate Planning: Provides liquidity to pay estate taxes and other expenses, ensuring a smooth transfer of assets.
Peace of Mind: Offers peace of mind knowing your family will be taken care of financially.
Sarah, a 40-year-old, buys a 20-year term life insurance policy with a coverage amount of CAD 500,000. She pays a monthly premium of CAD 50. If Sarah passes away within the 20-year term, her family will receive the CAD 500,000 payout. They can use this money to cover expenses like the mortgage, children's education, and daily living costs. If Sarah survives the policy term, it simply expires without a payout. This provides Sarah peace of mind, knowing her family will be financially secure if something happens to her.
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Here is a list of different types of life insurance plans available in Canada:
Term life insurance provides coverage for a specified period, typically ranging from 10 to 30 years. If the policyholder dies within this term, the beneficiaries receive the death benefit.
Benefits:
Affordable premiums.
Flexibility to convert to permanent insurance.
Ideal for temporary needs such as mortgage protection or covering children's education expenses.
Whole life insurance offers lifelong coverage with a guaranteed death benefit. Premiums are generally higher than term insurance but remain level throughout the policyholder's life. Includes a cash value component that grows over time.
Benefits:
Lifelong protection.
Cash value accumulation can be borrowed against or withdrawn.
Fixed premiums.
Universal life insurance is a type of permanent life insurance that combines a death benefit with a savings component. Offers flexibility in premium payments and death benefit amounts.
Benefits:
Flexible premiums and coverage.
Cash value grows based on investment performance.
Potential for higher returns on the savings component.
Before buying the life insurance plan, you should consider the following factors:
Coverage Amount:
Assess your financial needs, including debts, living expenses, education costs for children, and future income replacement, to determine the appropriate coverage amount.
Policy Term:
For term insurance, choose a term length that matches your financial obligations. For permanent insurance, consider your long-term financial goals.
Premiums:
Ensure the premiums fit within your budget. Term insurance offers lower initial premiums, while permanent insurance provides fixed premiums for life.
Health and Age:
Your health and age significantly impact premium rates. It's often beneficial to purchase life insurance when you are younger and healthier.
Riders and Add-ons:
Consider additional riders, such as critical illness coverage, disability insurance, or accidental death benefit, to enhance your policy's protection.
Insurance Provider:
Choose a reputable insurance provider with a strong financial stability rating and a good customer service record.
To get life insurance quotes in Canada, start by assessing your coverage needs based on your financial obligations, such as debts, living expenses, and future income replacement. Choose the type of life insurance you want, whether term, whole, or universal. Gather personal information, including age, gender, smoking status, and health history. Utilize online life insurance quote tools from insurance companies and comparison websites like PolicyAdvisor and InsuranceHotline to get multiple quotes.
You can also consult insurance brokers for personalized assistance. Compare the life insurance quotes based on coverage amounts, premiums, and policy terms. If required, complete a medical exam. Finally, apply for the selected life insurance plan and review the policy documents to ensure they meet your expectations.
If you are an NRI living in Canada and are looking to financially secure your family, you can easily buy term life insurance plans from India in the following way:
Step 1: Visit the term insurance for NRI page from Policybazaar
Step 2: Fill in the required details like name, age, gender, and contact information
Step 3: Select the right option for occupation type, annual income, smoking habits, and educational qualifications
Step 4: Choose the term insurance for NRI and proceed to pay
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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