The brokers here at Baker & Baker Benefits have been helping Canadians get life insurance for several years now, and we enjoy passing on our knowledge and experience to the Canadian public.
In keeping with this spirit, here are some insightful tips on how to save money when buying a Canadian life insurance plan.
Tip #1: Consider Annual Premiums vs Monthly Premiums
When buying a life insurance policy there are two payment options available: annual and monthly premiums.
Annual premiums are paid once a year. This payment option does not appeal to everyone and depends on the financial situation of the applicant. However, paying an annual premium can save you a substantial amount of money, and in fact can save you almost one month’s premium. Of course, the lower the premiums the less money will be saved using an annual payment method.
Tip #2: Get a Term Life Plan with the Right Term Length
The most popular type of life insurance is term life since it is much cheaper than permanent life insurance plans such as whole life or universal life. Unlike permanent insurance, term life does not have a cash value.
While permanent life insurance can be used as an investment vehicle (e.g. estate planning and wealth management), many people prefer to get a simple term life plan and then invest their hard-earned money using other mechanisms such as:
• TFSAs (tax-free savings accounts).
• RRSPs (Registered Retirement Savings Plans).
• RESPs (Registered Education Savings Plans if you have children).
• Miscellaneous investments.
The length of the term you choose is critical. The important thing to remember is that once a term is up you have to renew the plan at a higher premium if you want continued coverage (assuming the plan is renewable, which is most often but not always the case).
Choose a term for which you absolutely must have coverage. A popular term plan is term-to-65, which offers protection up to the age of 65. This often appeals to people that are getting a life insurance plan primarily for their children. An alternative is a term-to-100 plan, which pays out at the age of 100 if the insured does not pass away before then.
The trade-off is this: the smaller the term length, the lower the premiums will be. Consider wisely before selecting a term length!
Tip #3: Quit Smoking and Lose Weight
There are two health-related factors that have a major impact on rates: smoking and obesity.
If you are overweight make a really serious effort at losing that excess. Not only will this save you money on your premiums, but you will probably live longer and have a healthier, happier life.
If you quit smoking know that for most insurance companies a person must have quit smoking for at least one (1) full year for it to have an effect on rates.
If you want to quit smoking but are having a hard time doing so please check out this listing of quitting smoking resources (Canada-wide).
Tip #4: Consider Buying When Young and Healthy
Life insurance can be very difficult if not outright impossible to get if you have serious health problems. The time to buy is when you are healthy, and the cheapest premiums can be had for relatively young people.
A whole (e.g. permanent) life insurance plan makes better sense for young people. There are numerous ways to get lifetime coverage and also use the policy to build up and manage wealth.
Tip #5: Shop Around
Finally, make sure you shop around and get many quotes from multiple insurance companies.
If you are considering a term life insurance plan try getting quotes for different term lengths to see how the premiums differ.
We also recommend consulting with a life insurance broker and getting their input.
Oftentimes a broker will know about the company and plan specific positives and negatives, which could be relevant to your particular situation.