How to Buy Life Insurance in Canada with 7 Easy Steps : The Complete Guide

Purchasing life insurance is a pivotal yet complex decision for Canadians seeking to protect their families’ financial futures. This extensive guide : ” How to buy life insurance in canada ” will walk you through the essential steps, considerations and strategies for buying the right life insurance policy in Canada tailored to your unique needs and budget.

This comprehensive 7-step guide will walk you through everything you need to know to buy the right life insurance policy in Canada with Life Buzz – The Biggest Life Insurance Newspaper in Canada

7 easy step to answer the question : How to buy life insurance in Canada

Step 1: Determine How Much Coverage You Need

The first step is calculating how much life insurance you should buy. This involves estimating your family’s financial needs and expenses in case of your unexpected death.

Here are some key factors for topic : ” How to Buy Life Insurance in Canada ” to consider when determining your ideal coverage amount:

Income Replacement

A primary purpose of life insurance is to replace your income in case of death. Consider how much of your income protect insurance is contributed to monthly household expenses and other financial goals.

You’ll want enough coverage to continue funding these priorities for your dependents for 5-10 years or until major milestones like paying off a mortgage or funding education are met.

Debt Payoff

List any outstanding debts like mortgages, car loans, credit cards, personal loans, etc. Your life insurance benefit should be enough to pay off all these debts, so your family isn’t burdened.

Final Expenses

Factor in funeral and burial costs for you and your spouse, which can be $10,000 and up in Canada.

Read more: Average Funeral Cost in Canada

Family Living Costs

Consider regular living costs like groceries, utilities, transportation, childcare, etc. Your family may need coverage to maintain their lifestyle for several years.

Education Funding

If you have kids, ensure enough coverage to fund their future college/university education fully. These costs can quickly add up.

A simple formula you can use is the DIME method:

Debt Payoff + Income Replacement x Years Needed + Mortgage Balance + Education Funding

This gives you a rough estimate. An online life insurance calculator can also help determine the right amount.

Aim for a coverage amount that meets your dependents’ above needs.

Step 2: Choose Between Term Life Insurance vs. Permanent Life Insurance

Once you’ve determined the amount of coverage required, choosing between term life insurance and permanent life insurance is the next big decision.

Term Life Insurance in Canada

• Provides pure death benefit protection for a set period or “term.”
• Typically available for terms of 10 to 30 years
• Premiums start low when you’re young but increase as you age
• No cash value accumulation
• Appropriate if you need temporary coverage

Permanent Life Insurance in Canada

• Provides lifelong protection as long as premiums are paid
• Builds cash value that you can borrow against or withdraw
• Premiums are fixed and don’t increase
• Types include whole life and universal life
• Suitable if you want lifelong coverage

Term life insurance is more affordable when you’re young and healthy. Permanent life insurance becomes cost-effective as you get older.

Choose term life insurance if you need temporary coverage for final expenses or debt payoff. Get permanent life insurance if you want lifelong protection into retirement and value the cash accumulation.

See this article on the same topic to help your decision : What happens when your term life insurance policy expires in Canada ?

Step 3: Research and Compare Life Insurance Companies in Canada

Once you decide between term vs. permanent coverage, it’s time to start researching insurers. Look for companies known for strong financial ratings and customer satisfaction.

Some top life insurance companies in Canada include:

• Sun Life
• Manulife
• Canada Life
• RBC Insurance
• BMO Insurance
• Industrial Alliance

As you research, compare factors like:

• Financial strength – Check ratings by A.M. Best, Moody’s, and S&P. Stronger ratings mean a lower risk of the insurer going bankrupt.
• Policy options – Consider flexible options that meet your needs, like term lengths, coverage terms, and conversion options.
• Riders offered – Riders enhance your base policy, like disability waivers, return of premium, and critical illness riders.
• Customer service – Review reviews and complaints data to gauge customer service experience.

Create a shortlist of 2-3 reputable insurance providers offering the features you want.

Step 4: Get Life Insurance Quotes in Canada

After researching providers, the next step is to get rate quotes.

Life insurance quotes are personalized based on factors like:

• Age : You can reference some documents : Life insurance for kids in Canada , life insurance for Canadian parents ,…
• Gender
• Nicotine use : details at the article : Life insurance for Smokers in Canada
• Medical history
• Family medical history
• Lifestyle and hobbies
• Occupation

To get quotes:

• Online: Visit insurer websites and use quote calculators. You’ll have to enter basic personal details – You can get a quotes of life insurance at Insurance Direct Canada Company.
• Agent: An independent life insurance agent can provide quotes from multiple companies.
• Direct: Contact insurers directly by phone or online chat to get quotes.
• Broker: An life insurance broker can also source quotes from various providers. You must read this article if you want to find a best life insurance broker in canada.

Get quotes for term and permanent policies from 2-3 shortlisted providers. Compare them in terms of premiums, coverage amount, exclusions, etc.

Step 5: Complete the Life Insurance Application in Canada

Once you decide on an insurer and policy, it’s time to complete a full application.

Here’s what the application process typically involves:

• Fill out a detailed application with personal/financial information.
• Provide your medical history, including doctor’s details, prescriptions, and medical test results.
• Share lifestyle facts like alcohol use, smoking, hobbies, driving record, etc.
• Authorization to access your medical records.
• Review and sign the completed application.

The application may be completed online or over the phone for no medical exam policies.

Otherwise, an in-person application with a paramedical exam will be required.

Step 6: Schedule a Paramedical Exam

Many life insurance policies require a paramedical exam before approval. This checks your current health status.

What to expect during the exam:

• Basic vitals like blood pressure, pulse, and height/weight measurements.
• Blood and urine samples testing cholesterol, kidney/liver function, etc.
• Medical history questions.
• ECG/treadmill tests if you have any medical conditions.

The exam is conducted by a nurse/technician hired by the insurance company. It takes about 30-45 minutes, and the insurer covers the cost.

Not all insurers require an exam. No medical exam policies have higher premiums but faster approval.

Step 7: Await Application Review and Approval

The final step to answer the question : ” How to buy life insurance in Canada ” is to await your application review and underwriting decision.

The underwriter will:

• Review your application details, medical exam results, if applicable, and any medical records.
• Assess your life expectancy and risk factors based on the data.
• Determine policy eligibility and finalize premiums.

The underwriting process can take 4-6 weeks. You’ll then receive either:

Approval – An approval package with your policy documents. Sign and return documents and pay your first premium.

Decline – A letter stating you’ve been declined coverage and reasons why. Consider re-applying after 6-12 months if the reasons were temporary.

Rated Policy – Approval but with higher premiums due to higher risk factors. Typical for medical conditions like diabetes.

That covers the complete step-by-step process for purchasing life insurance coverage in Canada. Here are some additional tips for saving on your policy:

• But when you’re young and healthiest, lock in low rates.
• Choose a longer-term policy to secure lower premiums for longer.
• Improve health and lifestyle habits to qualify for discounts.
• Bundle your policy with other insurance products from the same provider.
• Pay premiums annually rather than monthly to reduce costs.

And remember to review and update your coverage every few years as your needs and finances change!

Frequently Asked Questions

How many steps to buy life insurance in Canada ?

7 steps include : Determine How Much Coverage You Need – Choose Between Term vs. Permanent – Research and Compare Life Insurance Companies in Canada – Get Life Insurance Quotes in Canada – Complete the Life Insurance Application – Schedule a Paramedical Exam and Await Application Review and Approval.

What medical tests are required when applying for life insurance?

Standard medical tests insurers may require include:

• Blood and urine tests to assess cholesterol, kidney/liver function, nicotine use, etc.
• Blood pressure, heart rate, height and weight measurements.
• An electrocardiogram (ECG) is used to check heart health.
• Treadmill stress test if you have cardiovascular conditions.
• Cognitive/memory tests if applied at older ages (60+).

What is the living benefit of a life insurance policy?

Some life insurance policies include an optional living benefit rider that allows you to access part of the death benefit early if diagnosed with a critical illness like cancer, stroke, or heart attack. This helps cover medical bills and expenses.

What steps can I take to get lower life insurance premiums?

Tips to reduce your life insurance costs include:

• Maintaining a healthy weight and managing any medical conditions.
• Exercising regularly and eliminating tobacco use.
• Choosing longer policy terms (e.g. 20 or 30 years).
• Getting coverage before age 50 when rates increase.
• Purchasing a bundled home/auto/life insurance package from the same insurer.

Read more saving money to buy life insurance in canada at : Discover How A Life Insurance Savings Plan Works for Canadians

How long does life insurance coverage last?

Term life insurance covers a set term length, such as 10, 15, 20 or 30 years. Permanent life insurance policies provide lifelong protection if you continue to pay premiums.

Can I buy life Insurance without a medical exam?

Many insurers offer simplified issue or guaranteed issue life insurance that doesn’t require a medical exam. Approval is faster, but premiums are about 50% higher on average.

When should I buy life insurance?

The best time is when you’re young and healthy, as premiums will start low and increase as you age. Life events like marriage ( life insurance for couples ), a new home, and having kids are good times to buy coverage.