THE 6 KEYS TO AFFORDING “UNAFFORDABLE” LIFE INSURANCEUpdated on Jul 02, 2015
What identifies Canada’s “best life insurance?” Oh, you’ll find that defining earmark within your policy. It just won’t quite be written in explicit, black-and-white terms by an underwriter, no matter the company.
That’s because the terms are only half the equation, with the personal circumstances right under your nose balancing out the rest. The best life insurance policy is the one that most thoroughly compensates your loved ones proportionate to your earnings and your annual premiums. Hence, if you spoke with 10 randomly selected working adults of varying ages and professions, you might hear of 10 unique circumstances each meriting different types of policies purchased in different amounts.
Now, here’s the good news. Ready? Firing away: everybody can afford life insurance. It’s another necessity that merits the priority of setting money aside to keep it in good standing. Carrying anywhere from 10 to 12 times your present annual income in coverage makes a good initial guideline. After all, that’s locking in 10 to 12 years of your equivalent yearly earnings to continue supporting your loved ones during an immediate transitional phase after your death and beyond. Luckily, coming through with the annual premiums to afford that safety net could come shockingly easily…
· PROVIDE A (REALISTIC) COVERAGE ESTIMATE
Unless there’s some unusually substantial reason to believe your income will dramatically rise within the immediate future, use only your present earnings as your baseline. You may need coverage to see your family through a mortgage term. They may only eventually need coverage enough for financial security while regrouping after your loss. Regardless, plan only for necessary coverage while taking into account any additional income sources currently supporting your family. If you aren’t your household’s sole bread-winner, then don’t overpay for lavish over-coverage and stick with a minimal plan that only offsets the loss of your own earnings.
· A VOTE FOR TERM LIFE
Term life insurance protects your family against the loss of your earnings over a limited period, priced out with fixed-rate payments. If you don’t need longer-term whole life insurance – i.e., if you don’t have a dependent family – then don’t splurge on it. It can cost up to 10-15 times a solid term policy’s price tag. You can always purchase more coverage later, as your circumstances and/or budget change.
· DECIDE YOUR TERM POLICY’S DURATION
On a related note, take your term life policy’s duration into account and perform a little extrapolation.
Make sure that your family can access their funds as they’re needed. Their needs will change with age – mortgage terms come and go, a time comes to fund a college education and retirement needs arise. Your coverage has to be ready and waiting as the needs it’s meant to meet come onto the horizon.
· GET CREATIVE WITH PAYMENT TERMS
Some schedules for keeping your premiums up to date and your policy in good standing may prove more fiscally responsible than others. Examine each option carefully. Paying smaller, monthly fees may seem initially like a more sound strategy. Take at least a cursory look at paying on an annual or semi-annual schedule, though. There’s sometimes a long-term savings to be had in exchange for larger sums paid up at once. Also, if you’re a younger individual that can reasonably expect increased earnings over the long term, renewable policies can sometimes provide a set coverage period with annually increasing premiums. You’ll initially pay less than level-premium policies and more as you continue your coverage, but if you’re planning realistically, then your income should have room to grow in proportion to your premiums.
· DEVELOP HEALTHY HABITS EARLY
Plainly and simply, the healthier a policyholder you are, the less a risk insurance companies will consider you for an imminent payout. Rates rise with your age, so buy your policy early and take the best care of yourself possible. Many policies offer discounts for certain positive wellness factors, such as abstaining from tobacco and keeping cholesterol levels down.
· COMPARE AND CONTRAST
Really, the “best life insurance” is one that you’ve chosen with a responsible, realistic budget in mind after surveying a wide net of options. Research as broadly as possible and talk to a wide array of providers before choosing a policy. Remember, competition among companies for your dollar does a consumer good!