This document provides tips for purchasing life insurance for the first time, including deciding how long coverage is needed, determining the amount of coverage based on expenses, considering other objectives like cash value, naming a beneficiary, and assessing needs for critical illness and disability insurance. It recommends consulting a financial advisor who can help build a comprehensive financial security plan to meet current and future needs at no additional cost.
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6 Things to Consider When Buying Life Insurance for the First Time
1. What to look for when
buying Life Insurance
for the first time
Buying life insurance for the first time can be
a daunting process. But it doesn’t have to be.
TrustLifeInsurance&Investments
2. Introduction Purchasing life insurance is one of the most
important financial decisions you’ll make. Not
only does it protect the loved ones you’ll leave
behind, it can be a useful tool well before then.
While there are many things to take into account
when purchasing life insurance, check out our list
of some of the first six things to consider when
buying Life Insurance for the first time in Canada.
3. Decide how long
you need coverage
Life insurance is designed to either last a
certain period of time (called term life) or a
lifetime (including whole life and universal
life). If you only need insurance for a specific
period of time (say, when your kids are growing
up or for the length of your mortgage),
consider term life insurance. If you need life
insurance for as long as you live (for things like
burial expenses or income replacement for a
spouse), consider permanent insurance plans.
4. Determine the
amount of your
coverage
Calculate the expenses your family will
incur after your death, including one-time
expenses like funeral costs, as well as
ongoing costs, such as groceries, tuition
and mortgage and car payments. You
should also consider future expenses,
such as paying for a child’s post-secondary
education.
5. One way to determine the costs you’ll leave
behind is through the “DIME” method.
D - Debt (mortgage, private student loans, car loans, credit cards, etc.)
I - Income replacement (Consider the life expectancy of your spouse,
dependents or anyone who depends on your income. Do you want to
replace your income for the rest of their lives?)
M - Mortality (burial wishes and costs)
E - Education (Do you want to fund education expenses for your
dependents? What about childcare? If you have children in daycare, do
you want your policy to pay for their remaining years in daycare?)
6. Think about other
objectives
Some permanent life insurance policies can be
used as savings. Permanent life insurance
policies are lifelong and have cash value that’s
meant to increase over time. These permanent
policies contain a death benefit (or face amount),
which is the amount paid at the time of death,
and a cash value that grows over time on a tax-
deferred basis, similar to retirement or tuition
savings plans.
7. Name a beneficiary
Your life insurance beneficiary is the person
or entity who will receive the proceeds of
your life insurance policy. When choosing a
beneficiary, avoid naming a minor child
(children may not be able to receive funds)
or your estate (it could have tax
implications).
If the policy is to benefit your business, you
may want to have a formal plan in place for
how the proceeds should be used.
8. Don’t overlook
Critical Illness and
Disability Insurance
Keep in mind that, as your career progresses,
you may experience a serious illness or injury.
That’s why it’s a good idea to consider buying
critical illness and disability insurance with life
insurance. Ask yourself: Would you be able to
support yourself if you couldn’t work for a
month? How about 6 months to a year, or even
longer? To help keep your financial plans on
track, consider making critical illness or disability
insurance a part of your financial security plan.
9. Consult an
experienced
financial advisor
A financial advisor can help you build a
comprehensive financial security plan that
will help meet your needs as well as those
of your family at NO ADDITIONAL FEES.
An advisor can help you understand the
insurance that best fit your needs and
budget today. And, as time goes on, you
and your advisor can work together
to update your financial security plan to
reflect your changing needs and lifestyle.
10. Conclusion
So that is basically it. We hope you found the tips
handy for your purpose. We wish you the best of
luck with your first life insurance purchase.