60 seconds and go with The Term Guy! This is our video series explaining everything you need to know about life insurance in 60 seconds.
In this video, I’m going to step you through how to purchase life insurance online. In my experience, the biggest problem that most consumers have with purchasing life insurance online, is very simply a nagging feeling that they didn’t get everything right. They heard a bunch of conflicting information online, and they’re almost sure but not quite 100% sure that they’re doing the right thing. So here’s how to reassure yourself that you are doing the right thing.
Number 1, figure out how much life insurance you need first before you look at the types or anything else, determine how much you need. There’s a calculator on our homepage at thetermguy.ca that will step you through situations common for most Canadian families and the end result should be 10-15x your gross income, somewhere in that range is very typical, it’s where most of our clients end up.
Once you’ve determined that the second step is to determine the term; 10, 20, or 30 years. The correct choice is, how long do you need insurance for. For most people, that’s generally until the kids are out of the house until retirement, what’s the closest time frame for that to happen; 10, 20 or 30 years, that’s going to be the correct choice for most Canadian consumers. And most Canadian consumers looking in that will likely end up with a 20 year term. Nothing wrong with 10 or 30 year term, it’s just that 20 year term is far and away the most commonly purchased type of term life insurance.
Lastly, the application process. We actually 3 ways you can do that. If you don’t want to speak with an insurance agent, you can go to our website, hit the ‘Apply Online Now’ button and answer a few quick questions, it will take you less than 5 minutes – Boom, your application has started. But if you’re still not 100% sure, we do offer 2 additional choices, where you can speak with an experience advisor and get all your questions asked before you apply, or actually apply through these methods. You can either go to our website and book a Zoom appointment so we can talk face-to-face. Or alternatively, you can just give us a call at the toll-free number on our website. We’re happy, no-obligation, we’ll answer all the questions you have and reassure you that in-fact you are making the right decision.
Life insurance has two attributes that we care about.
The first is the insurance. That’s the death claim cheque you get when you pass away. And the second is the premiums or the cost of the life insurance.
Let’s look at the insurance portion first. Let’s say you pass away and I show up with two cheques from two different types of life insurance both for $500,000. What was the better type?
And the answer is: You can’t tell what type of life insurance you have from the death claim cheque. And secondly – nobody cares!
So from an insurance perspective, there’s no difference among all the different types of life insurance.
That tells us that all the different types of life insurance are based around the premiums or the cost structure, and specifically how you pay the cost of life insurance over long periods of time. All we’re going to do to get the different types of life insurance is monkey around with different cost structures over periods of time.
And in the second video in this series I’m going to step you through what those various cost structures are and how to choose the best one.
We saw in part one of this video series that from an insurance perspective, all life insurance policies are the same. A death claim cheque from one type of life insurance is exactly the same as a death claim cheque from another type of insurance. And therefore, the way we get different types of life insurance is to focus on the cost structure or the premiums over long periods of time.
There’re two basic or fundamental types of life insurance in Canada, term life insurance and permanent life insurance.
Term life insurance has premiums that are based on your age so it’s very cheap when you’re young but becomes prohibitively expensive or unaffordable when you’re older.
Permanent insurance however has premiums that are level for your entire life. That means that permanent insurance when you first purchase it, will have a much higher premium than term insurance, but because the premiums never go up as you get older eventually, permanent life insurance will actually become cheaper.
So what’s the best type of life insurance? And the answer is if you need life insurance when you’re younger, but don’t need it when you’re older, then term insurance will be cheaper – presuming you’re going to cancel it eventually. If you need life insurance forever, no matter when you pass away, then over your entire lifetime permanent life insurance will be cheaper.
Today we’re going to look at different types of term life insurance. The most fundamental type of term life insurance would be a one year term life insurance policy where the premiums go up ever single year based on your age that year. So it’s this much today, next year when you’re a year older it’s a little bit higher and so on, again until eventually the premiums become unaffordable.
That type of life insurance isn’t readily available in Canada. It’s not a cost structure that’s palatable to most Canadians. They don’t want life insurance prices that go up every year.
So what the companies do is, they take those one year term premiums or one year term costs and they take a period of time lets say 10 years -it’s called a term. And they take the average cost of those premiums over that period of time which levels the premiums out over that term.
If we do that over 10 years so your premiums are level for 10 years, and then they go up, that’s a 10 year term. If we do the same thing over a period of time, lets say 20 years, so the premiums are level for 20 years and then they go up, that’s a 20 year term.
And there’s all different types of term, 5, 10, 15, 20, 25, 30 year term.
The best type of term insurance is a policy that has premiums that are level for the period of time that you need the life insurance for, after which point you don’t need the life insurance.
In this video we’re going to look at a type of life insurance called permanent life insurance.
If you recall from our previous videos, permanent life insurance is defined by a policy that has premiums that are level for life. In contrast with term insurance which is very inexpensive now but becomes more unaffordable as we get older. Permanent insurance will be much more expensive than term insurance when you initially purchase it but because the premiums never go up they stay level and term insurance premiums do go up, over the long term permanent life insurance will actually be cheaper. Therefore permanent life insurance is appropriate for people who need life insurance whenever they pass away whether it be tomorrow or when they’re 95 years old. It’s going to be the cheapest cost over your entire lifetime.
Now there’s two different types of permanent life insurance; one is called whole life insurance the other is called universal life and in future videos we’ll delve into some idiosyncrasies of those two policies. But the thing to keep in mind is; the primary attribute you care about with permanent life insurance is that the premiums are level over your entire lifetime. That’s where permanent life insurance really shines.
In this video we’re going to look at the best type of life insurance. Now if you recall from our earlier videos, the different types of life insurance are built on different costs structures over different periods of time. And therefore, the best type of life insurance generally speaking is that which is cheapest over the period of time that you need it for.
So we want to define the period of time that you need it for, and what’s the cheapest for that time period.
If you want life insurance for income replacement or family needs and are assuming that you don’t need life insurance when you get older then the cheapest type of life insurance will be term life insurance. It’s the cheapest now and gets more expensive when you get older, but you’re going to cancel it.
Alternatively if you need life insurance no matter how old you are when you die, then the cheapest life insurance policy will be permanent life insurance.
Now, it doesn’t have to be either or. You can actually build what I call a layer cake policy which has a layer of permanent and a layer of term. So you’re going to lock in your premiums for the rest of your life for a certain amount of coverage and build it up with a much cheaper block of term life insurance which you’re going to cancel when you get older. That’s the best of both worlds if you say “I need a lot of insurance now and a little bit when I’m older.”
Most Canadian families are looking to purchase life insurance to maintain their family’s standard of living when they pass away. What does that mean? What’s the standard of living? For most of us, our standard of living is based on our income. We go out to work, we earn a paycheque, we bring it home and spend it, and spending it is in fact our standard of living.
Basic, fundamental life insurance principles make it clear that for life insurance to make sense, we need to have a catastrophic financial loss. And in that situation, where’s the catastrophic financial loss? Is it our mortgage? Is it our savings? It’s none of those. Those aren’t losses.
The financial loss upon our death for most of us is the loss of our income and therefore our lifestyle over a long period of time. So your income over a long period of time is in fact a catastrophic financial loss and that tells us that you should be insuring loss, not debt.
So what you want to do is look at your income, determine how much of that income is needed to be replaced to maintain your family’s standard of living, determine how long they need that for, and then run a calculation that says for me to produce this level of income for this number of years, how much life insurance do I need? And there’s a calculator that does exactly that on the homepage of thetermguy.ca. What it will do is, given those parameters, it will show you that if you purchase a million dollars of life insurance, your family can draw that down every year over the time period that you specified. And at the end of the time period, there’s no money left.
Let’s look at the best term life insurance policies available in Canada.
Now from a death claim perspective, one term policy is the same as another. A cheque for a million dollars from one policy is the same as a cheque for a million dollars from another policy. They’re both the same.
But there are a number of additional attributes on the policies that we offer at thetermguy.ca that in my opinion make them the best term life insurance policies in Canada.
First of all, they’re renewable for life. You can actually keep these term policies for your entire life if you so choose. At the end of the term, the policies renew at higher premiums in 10-year increments up to age 85.
At age 85 the policy then becomes a term to 100 policy which means that premiums are now level to age 100. And at age 100, the policy becomes fully paid up for the rest of your life.
Secondly is conversion. Conversion is available until age 71. This attribute lets you exchange your term policy, with no medical questions asked, for a permanent life insurance policy. This feature is vital if we become uninsurable and decide you want to keep your insurance for life, the conversion lets you do that by switching to a permanent policy.
Next up, accelerated death benefits. If you have a limited life expectancy, in other words, if you’re at death’s doorstep, accelerated death benefits allow you to access a portion of your death benefit before you pass away.
Next up is the exchange option. The exchange option lets you exchange your term policy for a longer-term policy, in the first five years of the original policy. It’s a great way if you’re under a tight budget to get some life insurance in place with something like a term 10 and when your budget frees up, switch it out or exchange it for something like a term 20 or term 30.
Now you’d think this actually costs you more money but it turns out it actually doesn’t. If you run quotes on our website for these policies you’re likely to find that these are among the cheapest if not the cheapest policies available in Canada.
In this video, we’re going to look at renewable term life insurance in Canada. Now, this is becoming more important because some insurance providers are starting to release term life insurance policies that are not renewable.
The question is, do you care if you have the renewable provision or not? And the answer should be, you should care a lot. More specifically, it’s something you may not care about, but if you do care, you’re going to care a lot.
So, what’s renewable mean?
What renewable means is, that when you purchase a term policy, the premiums are level for a period of time such as 10, 20 or 30 years. What happens at the end of that term? If your policy is not renewable, your coverage is over abruptly with no options.
If the policy is renewable, your policy actually stays in force but the premiums go up. So you do have the option with a renewable term policy to keep your insurance past the initial term. Why is this important? If you hit the end of your 20-year term policy, so now you’re 20 years older, and you’ve become unhealthy or you need time to make a decision on a new life insurance policy and your policy is not renewable, you’re done. If it is renewable you have time to make some decisions. That’s why it’s important, it gives you options with your life insurance at the end of your term.
In today’s video, we’re going to look at convertible term life insurance.
Now, this is becoming increasingly important as providers are starting to roll out term life insurance policies that are not convertible. So the question of course is, do you care?
And the answer is, you may not care but if you DO care then it’s going to mean everything. And you’re not going to know if you care until towards the end of your term policy.
So what conversion says is, up to a specific age, it’s often ages 70 to 71, you can opt, at your choice to exchange a term policy for a permanent life insurance policy without any medical questions.
Now, where does that become useful? Well, if you purchase a term policy and at the end of your term, let’s say 20 years from now you become uninsurable if you have conversion you can simply hand back your term policy and say “reissue it, no questions asked” as permanent lifetime insurance and it’s guaranteed that you can do that.
If you don’t have a conversion that option’s not available to you and now you’re uninsurable and you’re simply done with life insurance and no further opportunity to ever get any again.
In this video, we’re going to look at the exchange option found in many term life insurance policies in Canada.
In the first five years of a term life insurance policy with the exchange option, you can do a direct swap for a longer-term without any medical evidence.
So if you’ve purchased a term 10 policy with the exchange option, in the first five years you can swap it out for a brand new term 20 or term 30 for example.
Now importantly, the new policies’ premiums will be whatever the company is charging for your age at that time.
There’re two common reasons you might look at the exchange option. The first is budget. If you’re looking at a longer-term but it’s not in the budget, you might consider purchasing a term 10 policy with the exchange option. Then, when your budget frees up in the first five years, swap it out for the appropriate term 20 or term 30.
The second reason for the exchange option is for people who are smokers and have the associated higher premiums but are planning on quitting in the next few years. In that case, the exchange option can save you substantially in the earlier years of your policy. That’s going to require a little bit more of a longer conversation so we’re going to cover that in our video on life insurance for smokers.
In this video, we’re going to look at accelerated death benefits which is a feature found in some term life insurance policies in Canada. The purpose of accelerated death benefits is to allow someone that has a life insurance policy and a limited life expectancy to access a portion of their death benefit before they actually die so they can use it for things such as medical treatment or family time or what have you.
There is a prerequisite that your life expectancy is dramatically reduced, typically expected to be less than two years. And any such proceeds are paid out as a loan against your eventual death benefits so when you do pass away the final amounts that will be paid out will be reduced by the amount of accelerated death benefits previously paid out.
In today’s video, we are going to look at three common riders found in many term life insurance policies in Canada.
Now importantly, we’re not going to look at renewable and convertible term, and we’re not going to look at the exchange option, we’ll cover those in their own video.
First up is the accidental death benefit rider. This rider pays an additional death benefit if you die as a result of an accident and it doesn’t pay if you don’t die as a result of an accident. You either need life insurance if you die or if you don’t, you don’t need life insurance typically that pays on how you died, so my recommendation is: skip that one.
The second one up is the disability waiver premium. A disability waiver premium pays your life insurance costs if you’re disabled for at least six months. Properly, what you should really have is a full-featured, full coverage long-term disability policy that covers all your costs not just your life insurance premiums.
Third up is the children’s protection rider. Children’s protection riders provide a small amount of life insurance coverage for all your children. Unlike the other two riders, if you’re looking for a cheap and inexpensive way to cover all your children for small amounts of life insurance, it’s actually a very cost-effective option.
In this video, we’re going to look at the definition of smoking within the context of a life insurance policy. Importantly, the definition that gets used is the definition used by the insurance company, not consumers. So it’s possible that a consumer might say “well I’m not a smoker” and the insurance company says “in our context you are” and you’re going to qualify at smoking premiums.
Let’s look at cigarettes first. One cigarette a year will qualify you at smoking premiums. Any cigarettes at all and you’ll be looking at smoking premiums.
In terms of marijuana, if you use a low amount of marijuana occasionally or recreationally then many life insurance companies in Canada today will actually qualify you at nonsmoker premiums. But if you cross their limits then they’ll again consider you a smoker.
The last three are kind of in a group. It’s pipe, cigars, and cigarillos. Most companies will consider you a smoker if you smoke even one of those at all. There are occasional exceptions that are very company dependent. If you’re a cigar smoker and very occasionally, so if you smoke one or two cigars a year on the golf course, then some companies will qualify you at nonsmoker premiums but any use above that will qualify you at smoker premiums.
In this video, we’re going to look at a strategy that can help smokers who are planning on quitting save substantially in the earlier years of their policy.
Now typically what you might think of doing is purchasing something like a term 20 policy at smoking premiums and then once you qualify at nonsmoking premiums go through the paperwork, reduce the policy down to nonsmoker premiums. So you pay smoker premiums for a couple of years then you drop it down and now you’re paying nonsmoking premiums for the duration of the policy.
There’s a better way.
Instead of purchasing a term 20 initially, we purchase a term 10 policy which will have much cheaper premiums in the early years of the policy but for the same life insurance coverage. Once you qualify at nonsmoking premiums we do two things.
Number 1, we re-qualify you down to nonsmoker rates. So now you’ve got a nonsmoking term 10 policy which isn’t what we want – we want a term 20 policy. But then we use the exchange option at the same time to bump you out to a term 20. Net result, instead of paying term 20 smoking premiums in the early years of the policy, you’re paying term 10 and saving substantially. So it’s a much cheaper strategy for the same end result.
I’m going to run over my 60 seconds in this video, it’s a little too much to cover in just 60-seconds. I’m going to talk about the various definitions of no medical exam life insurance policies. Now, consumers will traditionally categorize life insurance policies either into medical exam policies or no medical exam policies. But in practice, it’s much more nuanced than that. You really got to watch when someone says it’s a no-medical exam policy because that’s a little bit iffy these days.
So on one end, is a true no-medical exam life insurance policy. In the industry it’s called a guaranteed issue, there’re no medical questions and everybody qualifies. Unfortunately, these policies have limited coverages, generally, it’s $50,000, they’re very high premiums and they’re limited to accidental death only in the first 2 years of the policy, so it’s barely even life insurance in the first 2 years.
Next up, is also called a no medical exam life insurance policy, but there are actually medical questions. The insurance company will ask you 15 or 20 medical questions that you answer either yes or no to, it’s very black and white, and if you answer them all no, then you qualify for the coverage and if you answer one of them yes, then you don’t qualify for the coverage. So, there is really a medical exam because there is a qualification there. These policies are generally more expensive, the benefits and features in the policies are generally severely restricted and the real danger here is that if you answer one of those questions incorrectly, the insurance company can deny your claim after you pass away and these policies do have a reputation for doing just that.
I’m going to jump ahead to the fourth type, this is the type of life insurance a typical consumer will perceive as being a true medical exam policy. These policies come with 2 aspects. One is a full medical questionnaire, generally done with a paramedical visiting your home, plus the addition of a urine and blood test. Now, that was very common practice pre-COVID, but with COVID when nobody wants anybody in their home, the insurance companies had to get rid of these urine and blood tests and they did that.
And we’re left now with the third type of no medical exam policy, again these policies are often categorized as no medical exam insurance. These are the types of policies we offer at thetermguy.ca. We don’t bill them as no medical exam life insurance policies because, in my opinion, they’re really not. These policies consist of strictly a telephone medical history interview with a paramedical. Nobody comes to your home, there is no urine, there’s no blood test. If the insurance companies need more information than they can get through the medical history interview, they’ll reach out to your doctor.
So again, there are 4 types. True no medical exam insurance coverage. The second type is no medical exam, but there’re qualifying questions that are yes or no. The fourth one which isn’t really used these days involves a urine and blood test. And the best type which doesn’t involve a urine and blood test, but has a paramedical interview you over the phone, is the type of policy we offer at The Term Guy. This structure, where you do the telephone interview, and then they reach out to your doctor for any additional information, allows you to get the best premiums, the highest coverage amount, and the best policies in terms of coverage. And again that’s why we offer these policies at thetermguy.ca.
In this video, I’m going to step you through how to take a medical exam. It’s actually very simple. I just want to clarify, when I say medical exam, there is typically no blood or urine test, nobody is coming out to your home, you’re not running on a treadmill or anything like that.
A medical exam these days consists almost entirely of a simple phone interview with a paramedical person, generally takes around 20 minutes and the purpose of the medical interview is simply for you to disclose your medical history to the insurance company. That’s it. There’s no pass or fail, there’s no judgement, you’re just going to do a data dump from your head over to the para-med through these questions. What you need to do is very simple, listen to the questions and answer them as they are asked. Now that’s important because by natural tendency, you won’t do that. You will normally just say “yes everything is fine” because perhaps it is fine, but that’s not the question that was asked.
So here’s an example of the type of questions they might ask you. They might say something like “have you ever had any tests, investigations, injury, treatment, or surgery on your eyes?”. And a typical consumer will say “no”. Now, they’re not lying, but they didn’t actually answer the question because the question was actually 5-in-1. So if they never had any investigations, injury, treatment or surgery on their eyes, that’s fine, but the question also asks if they’ve ever had any tests, and for most of us, in fact almost all of us, the correct answer should be something like “Yes, I get my eyes tested every couple of years, and my eyes are fine. Or I wear glasses and that corrects my vision to 20-20 and my eyes are fine.” That’s the correct way to answer all of these questions, going into a lot of detail.
This is actually beneficial because it makes underwriting a lot quicker, it gives us better answers, cheaper premiums because it lets underwriters properly evaluate your medical history and discard stuff that’s no longer a risk. So, take your time, listen to the questions and answer them as asked and you will get the best policy for the cheapest premiums that you can get.
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Policies are underwritten by Wawanesa Life Insurance, a Canadian life insurance company rated A Excellent.
The Term Guy is a licensed life insurance agency serving residents of Ontario (Lic #37992M), British Columbia (Lic. #LIC-2021-0030559-R02), and Alberta (Lic. #5-11247944-2021).