Mackay Insurance Blog
Do You Have Insurance for Emergencies and Natural Disasters in Canada
No matter where you look in the world today, it seems emergencies of all types are on the rise.
Changing weather and climate conditions, overloaded power grids in densely populated urban areas and an aging population are not a recipe for peace and ease, especially when the unexpected happens.
Add in a side order of COVID-19 and suddenly you may be wondering if you need additional insurance to protect your family or business from all the unknowns!
If this has been on your mind of late, your friendly Mackay Insurance brokers in Belleville crafted this post especially for you!
Insurance for Natural Disasters in Canada
Snow and ice. Wind and rain. Heat and humidity. Wildfires.
Canada may be best known for our winter sports and ski slopes, but the truth is, we get all kinds of weather events here in the far north.
And each type of natural disaster has its own perils, which is what the Canadian insurance industry calls an event that may be covered under an insurance policy or optional rider.
So, let's take a closer look at how natural disaster insurance works.
The Four Key Elements of Natural Disaster Insurance in Canada
There are four key elements that influence whether, how and how much insurance coverage may be available for different types of natural disasters, including weather events.
These are the four major factors you can discuss with your Mackay Insurance broker in Belleville.
1. The specific category of natural disaster.
While there is no single universal insurance policy that will simply cover you for everything, everywhere, all the time (wouldn't that be wonderful!), there actually is quite a for more coverage options than most people realize.
Let's take a look at the major weather events that are typically covered if you have the right type of insurance policy or rider:
- Fire (insurance coverages for home fires or wildfires).
- Ice and snow (including insurance coverage for frozen/burst pipes).
- Hail (damage coverages to vehicle roof damage).
- High winds (insurance coverage for damages caused by high winds)
- Rain (including insurance coverage for water damage caused by structural and roof leaks).
- Weather events (including insurance coverages for hurricanes, tornadoes etc.).
There are some types of weather related natural disasters that are typically excluded from insurance coverage protection, including these categories:
- Flooding (from natural overland flood events).
More on this in the very next section here.
2. The area where you live and/or work.
It probably won't surprise you to learn that different geographic areas may have different insurance coverage options for natural disasters.
For example, if you live in a flood plain, your options for flood insurance will typically decrease because this is a known peril associated with choosing to live in that specific area or region.
This is not to say you have zero insurance coverage options, although sometimes this is the case. The best way to find out is to contact your Mackay Insurance broker in Belleville to talk through your concerns and coverage options.
3. The coverage options based on your property type and personal circumstances.
In a similar way, the type of structure you own and the property it sits on can influence what insurance coverage may be available for certain categories of weather events and natural disasters.
Also, the age of your building or home and its value (based on the estimate) will have an impact on coverage options and their costs.
4. The insurance provider you select.
Last and certainly not least, different insurance providers may offer a different menu of coverage options for your specific concerns, or perils.
While many aspects of the entire insurance industry here in Canada will be regulated at the provincial level, insurance providers do have some flexibility to bundle or package their coverage products differently.
Some insurance providers may opt not to offer certain types of coverage while others may choose to specialize in certain categories of insurance coverage.
This is where it really pays to talk with your Mackay broker and shop around until you find the insurance provider with the right suite of insurance policies and riders that meets your specific needs!
Don't settle for the first or even the second natural disaster insurance quote you receive.
It is very smart to ask your Mackay Insurance broker to gather several quotes and estimates. This way, you get a good sense for what the current insurance marketplace is offering and which provider gives you the best coverage for the right price.
Don't Forget About Disaster Coverage For Your Home Insurance, Car Insurance and Life Insurance
There are three other places you don't want to forget about when searching out the most comprehensive coverage for emergencies and disasters.
All three types of policies typically offer a certain level of coverage, plus optional riders to address the unexpected.
For home insurance, an example might be a sudden and accidental burst pipe that causes water damage.
For vehicle insurance, an example might be coverage for an unexpected hail storm that cracks your windshield.
For life insurance, an example might be accidental injury from being caught out in severe weather.
NOTE: This does not usually include work-related incidents, for which you will need to look at specific business insurance riders that are relevant to your industry and type of business.
2 Steps to Get the Right Type of Canada Emergency and Natural Disaster Insurance
Here is the best way to find the right insurance coverage.
1. Make a list of your specific concerns and needs.
2. Make an appointment to review this list with your Mackay broker.
Get in Touch With Your Belleville Ontario Mackay Insurance Broker
Get in touch with us by phone or email us to schedule a virtual appointment. Ask us about our safe contactless insurance estimates, invoicing and payment options.
Returning to the New Normal: What That Means For Your Insurance Coverage
Slowly yet surely, we are starting to emerge out of the firestorm of the global pandemic.
Many of our customers are returning to working outside the home, with their kids similarly preparing for a return to school.
The roads are more crowded now. Some of that traffic even represents seasonal cottage-holders finally able to make the trek to check on their properties and perhaps enjoy a long weekend away.
We may still feel a bit shaky, a touch uncertain about personal safety and next steps, but there is life to be lived and we want to live it.
And while insurance matters may not feel pressing in light of the other major issues we have faced as individuals, communities and a nation this year, this shift towards post-pandemic life also means it is time to revisit your insurance coverage yet again.
In this timely post, we highlight important insurance coverage tasks you may need to consider as we move into the fall and winter season here in Ontario.
Commuting Again? Make Sure Your Auto Insurance Has You Covered
Earlier this year, it came as a welcome relief for many of our customers when auto insurers dropped rates and offered rebates to reflect province-wide pandemic shelter-in-place orders.
You may have also had a conversation with your Mackay broker about reducing coverages based on reduced driving activity.
As the world opens back up again and you find yourself logging more commute time once more, be sure your auto insurance coverage reflects your actual use patterns.
Time to Make the Switch to Off-Season Cottage & Vehicle Insurance?
This hasn't been an easy summer season thus far for seasonal cottage owners and recreational vehicle owners.
In fact, with the majority of the brief warm season now behind us, our goals for getting the RV out of storage or taking a spin with our motorboat or jet skis may rapidly be fading as we move into fall.
However, with fall nearly upon us, our customers who own snowmobiles or ATVs may be eyeing those with unseasonal eagerness, imagining a winter with the pandemic firmly behind us at last.
In either case, make sure you update your seasonal cottage insurance and recreational boat insurance coverage accordingly. It is not too early to retire a recreational vehicle you don't anticipate using for the remainder of the summer season and reap the savings from that.
Similarly, if your cottage is typically inaccessible in winter, talk with your Mackay Insurance broker about transitioning to off-season coverage there as well.
Evaluate Business Insurance Coverage for a Remote Workforce
Whether your business is an entrepreneurship or a large company, the transition to a largely remote workforce can have a ripple effect on the types of business insurance coverage you need.
In many cases, business liability insurance is set up to reflect a group of workers operating out of a single location. The risk profile changes across the board when that same group of workers is now working from multiple locations.
Part of the increased risk comes into play due to the need to provide remote online access to secure company networks and databases that may contain sensitive or proprietary information.
Part of the increased risk arises from the use of a remote location as a "work site" and what might happen if the remote worker is injured on the job or causes harm or injury to another during scheduled work hours.
Another aspect to the increased risk comes from the need or choice to store company property, supplies, materials, devices or data in an off-site, remote location.
Yet, another issue that arises is when a remote worker needs to use their personal vehicle for non-commute-related company business or to transfer company property or data from one location to another, such as between a home office and the regular work site.
Each of these issues needs to be addressed in a thorough review of the current business insurance coverage - even more urgently if there is an ongoing semi-permanent or permanent transition to a remote workforce. Your Mackay broker in Belleville can help you review and adjust your business coverage policy to reflect these types of post-pandemic shifts.
Homeowners Insurance Policies May Not Cover a Home Office
Similarly, for remote workers who are using a portion of the home as a temporary (or transitioning to permanent) remote work site, it is vital to be aware of any coverage limitations under your existing homeowner insurance policy.
Your current homeowners insurance policy may contain a clause that expressly prohibits operation of a home-based business. Should a claim arise out of the choice or necessity of working remotely from home, it will be up to your insurer to decide whether that constitutes a violation of the policy exclusion or not.
And while it is true that many insurers have adopted a policy of leniency during these unprecedented crisis months, this should be viewed as a temporary laxity and never something you should count on.
It is worth a phone call or email to your Mackay Insurance broker to talk through any changes to your work site and possible risks that may open up when filing a homeowners insurance policy claim.
If necessary, your coverage can be adjusted to reflect your new use of a portion of your home space as a work site. Something as simple as an "incidental office use" rider may be all that is needed.
You may also need to adjust your personal riders to reflect use/storage of high-value business property like computers. If there is theft or loss, you want to be sure those items can be replaced without causing you to use your personal savings to do so.
Get in Touch With Your Mackay Insurance Broker Today
Mackay Insurance in Belleville, Ontario continues to work remotely and our qualified Mackay Insurance brokers are available to serve you by appointment, in person, as well as by phone, email, fax, social media and courier.
COVID-19 Insurance Relief for Individuals & Businesses
If there is one COVID-19 fact everyone around the world easily agrees on, it is this: the new novel coronavirus is wreaking havoc with budgets and bottom lines worldwide!
This includes individuals, small businesses, big businesses and not-for-profit organizations of all sizes. It seems no individual or business is immune to the effects. The economic ripple effect from the unexpected pandemic is only now starting to make its impact felt.
In fact, 95% of the calls we are receiving right now are calls to inquire about insurance for income loss and/or business interruption, auto insurance discounts and personal insurance benefits.
Callers want to know if the insurance they have been faithfully paying for all these months, or years, can help them in this time of near-universal struggle.
In this post, CEO Bruce Mackay of Mackay Insurance will answer your most frequently asked questions about insurance policy benefits as they may relate to COVID-19 relief.
NOTE: Do you have a question that we didn't answer in this post? Use the contact information at the end of this post to send us your question!
Question #1: Auto Insurance Discounts - Are You Going to Get One?
The short answer to this question is "it depends on the insurer.
Ontario province has adjusted regulations to permit auto insurers to offer discounts and/or rebates to customers who are driving less, due to COVID-19. This option will continue to extend for a full 12 months after the pandemic is officially over.
But officials have left it up to each individual insurer to decide if and/or how to administer financial relief to policyholders.
Some insurers are choosing to be proactive and simply issue blanket financial relief to all policyholders. Some insurers are choosing not to offer relief at all. Some insurers are only administering rebates or discounts on a case-by-case basis - and often only if you, the policyholder, call them first to ask for these benefits.
The best way to find out if your auto insurer is providing rebates and/or discounts due to reduced mileage or changes in vehicle use is to contact your Mackay Insurance broker right away.
NOTE: You can find additional information about coronavirus-related changes to auto insurance in this blog post.
Question #2: What Happens If You Can't Pay Your Policy Premiums Due to COVID-19?
An enormous number of people in Ontarian are struggling to pay for essentials due to the pandemic shutdown. So it is easy to see how paying for insurance premiums might become a serious economic hardship.
Currently, it is up to each individual consumer or business insurance provider to decide how to handle requests for payment deferments and/or premium discounts due to COVID-19 related economic hardship; however, from what we have seen thus far, the majority of insurers are doing their best to provide special concessions to policyholders who are severely impacted by COVID-19. Many insurers are providing policyholders with generous deferments (where you can simply resume paying for your premiums at a later date) upon request.
The best way to find out what, if any, type of economic relief may be available if you can't afford to pay your insurance premiums on time is to contact your Mackay Insurance broker.
Question #3: Will Business Interruption Insurance Cover You for COVID-19?
Recent events have conspired to make this the most controversial and hotly contested question in the insurance industry right now.
Traditionally speaking, the business interruption clause in most commercial insurance policies has not been designed to cover pandemic disruptions, at least according to the Insurance Bureau of Canada (IBC).
As Insurance Business Magazine points out, a recent Supreme Court ruling has rekindled hope that commercial insurers might provide benefits for coronavirus-related business interruption. However, since this ruling was not related to COVID-19, it may be a long road to try to apply this case as precedent to seek coronavirus business interruption benefits.
Because so many businesses are being economically impacted by pandemic-related shutdowns, we expect much more dialogue and debate on this question in the coming weeks and months.
For now, the individual wording of each commercial insurance policy is still the ultimate determinant of whether a pandemic-related shutdown constitutes business interruption for the purposes of triggering insurance benefits.
Some companies and business owners are choosing to take the matter to court, and at least one class action is in process due to denial of business interruption benefits coverage.
The best way to find out if your particular commercial insurance policy may provide benefits for a pandemic-induced business interruption is to contact your Mackay Insurance broker to review your policy.
Question #4: Should You Get Travel Insurance If You Need to Travel During the Pandemic?
Here in Ontario, the travel insurance industry is closely linked to official travel advisories and border closures.
Starting on March 13, 2020, when Canada officially posted the non-essential travel advisory, the majority of insurance providers stopped issuing travel insurance policies regardless of the reason for the trip.
While some boutique insurers may still provide travel insurance policies for international travel outside of Canada, it is important to verify with the insurer that coronavirus-related travel delays and cancellations as well as medical benefits are included within the policy.
If travel is a requirement for your job, your employer may provide travel insurance benefits to you as a part of your employment package.
If your travel is of a personal nature, the best way to find out the most up-to-date information about available travel insurance benefits is to contact your Mackay Insurance broker.
Get in Touch
Do you have other questions about how the insurance industry is changing in response to the global pandemic crisis?
Do you need help applying for insurance premium payment deferment or filing a claim related to the current economic shutdown here in Canada?
Questions and Answers About Life Insurance and COVID-19
It is the topic we all put off talking about until a pandemic suddenly unfolds. All at once, you may find yourself asking the question: is it too late to enrol in life insurance now? The answer, thankfully, is no; however, continuing to delay your enrolment to see how things play out may put you and your family at risk of coverage exclusions related to the new novel coronavirus.
Right now, health insurance providers are scrambling to calculate risk and overhaul policy terms accordingly. These new terms are likely to impact future policyholders of all ages, since COVID-19 and its secondary complications do not discriminate based on age.
How Will Coverage Be Handled For My Existing Life Insurance Policy?
If you have an existing, active life insurance policy right now, you are unlikely to experience any difficulties with coverage for COVID-19 related claims, provided you meet all other policy requirements. If you have questions about this, please contact us at Mackay Insurance and we can assist you in understanding your life insurance policy.
My Life Insurance Coverage Is Deferred - What If I Need to Make a Claim?
If your life insurance policy is deferred, your coverage will not activate until that period has concluded. It is, however, unlikely that COVID-19 related claims will be handled differently than other "death by natural causes" claims that relate to disease or illness.
I Want to Enrol in Life Insurance, But Will Coronavirus Claims Still Be Covered?
At this point in time, there is no vaccine for the new novel coronavirus. The pandemic is creating an unusually high demand for life insurance products - and for good reason.
As of time of publication, Canadian insurance companies (including Mackay Insurance in Belleville, Ontario) that offer life insurance products have not yet changed terms to exclude COVID-19 related claims.
There is no guarantee, however, that they will not choose to do so in the future, especially if available data indicates the outbreak is worsening.
What you need to know right now is that if you choose to enrol in a life insurance policy today, you will likely receive the same coverage terms that current policyholders have - all other aspects remaining equal.
I Have Tested Positive for COVID-19 - Can I Still Enrol in Life Insurance?
This is a slightly more complicated question, since different insurance providers may choose to handle this sensitive issue differently.
Speaking in the most general terms based on what is known right now, the most likely outcome is that you will be able to enrol in life insurance, even if you have tested positive for COVID-19 and are showing symptoms.
It is equally likely that the policy issuer will place your policy into a deferral period, pending the outcome of your diagnosis. If this is the case, it is not different from how insurance providers have handled policy issuance in the past when a serious illness or disease has been involved.
I Returned From China Recently - Can I Still Enrol in Life Insurance Now?
To date, it has become standard practice in the insurance industry to ask applicants to share details about recent or upcoming travels. Generally, these inquiries are limited to the past quarter or near future.
If you have recently returned from any region reporting a high incidence of COVID-19 cases, or if your near-future travel plans are taking you into such a region, the insurance provider may elect to place your policy into a deferral period.
I Have a Disability Insurance Policy - Can I Make a COVID-19 Claim Under That Policy?
This is a good question. Here, the claim would relate to loss of income due to COVID-19 diagnosis.
The type of policy you have (short-term, long-term) and the waiting period (typically anywhere from one week to two years) will dictate what coverage you receive.
The best-case scenario is this: if you have lost income due to COVID-19, and your waiting period has expired, and your disability insurance policy is still in force, it is likely your claim will be honoured.
It may also be worth asking your insurance company to waive the waiting period.
I Have a Critical Illness Insurance Policy - Can I Make a COVID-19 Claim?
If you have a current active critical illness insurance policy, your policy likely outlines the specific health conditions that qualify you to make a claim against your policy.
Since COVID-19 is a newly identified illness, it will not be listed. This means insurers will likely elect to exclude COVID-19 related policy claims.
You may have some wiggle room here if you contract a serious secondary complication due to being diagnosed with COVID-19.
In this case, as long as the secondary complication itself is on the approved list of covered critical illnesses, it probably will not matter that COVID-19 came first - your claim will most likely be approved.
Is Now the Right Time to Purchase Life Insurance in Ontario, Canada?
Here in the province of Ontario, the coronavirus pandemic is still a rapidly evolving situation. It is very hard to make any predictions about the progress of the virus even for the near future.
This means that the basic reasons to apply for life insurance remain the same, but may perhaps be more urgent now.
If you are newly married, caring for dependents (whether young or elderly), have children or are concerned about loved ones bearing the cost burden of your burial and funeral, this is an excellent time to consider enrolling in life insurance.
Perhaps the greatest value of a new life insurance policy is simply knowing your loved ones are protected.
Get in Touch
Do you have more questions about applying for life insurance and how that process might be affected during COVID-19? Our team at Mackay Insurance continues to work remotely, but we are here for you. You can read more here about how to reach out to your broker via phone.
Buying life insurance is never fun. But it doesn't have to be difficult or even stressful.
In fact, life insurance as a product is actually designed to help ease stress, worry and anxiety in your life.
With the right life insurance policy by your side, you can wake up each day knowing your loved ones will be taken care of financially should you suddenly be unable to provide for their needs.
But getting there can feel daunting, especially when you are trying to figure out which type of life insurance product offers what and how much of it all you actually need.
In this post, we aim to demystify and simplify life insurance step by step so you can select the right policy with ease and confidence.
Step 1: Choose Between Term and Permanent Life Insurance
There are two basic umbrella categories of life insurance: term and permanent.
Term life insurance
Term life insurance is the simpler of the two types of life insurance you can buy here in Canada.
Term life insurance gets its name from how it works: the policy is active for a set term and activates only if the policyholder dies. Once the policy term expires, it is necessary to buy a new term life insurance policy to stay covered, and the premium for the next term will generally be higher.
The one exception is if you purchase a convertible term life insurance policy. In this case, you can convert your policy into a permanent life insurance policy as long as you do so before the term expires.
You should choose term life insurance if:
You have debt and just need to know your family has financial protection in place until the debt is retired.
You have a limited budget for life insurance and need predictable premiums.
You are building an investment portfolio elsewhere.
Permanent life insurance
Permanent life insurance is sometimes also called universal or whole life insurance, although there are some important differences about each.
Essentially, permanent life insurance is a type of policy that is, as its name implies, permanent - it stays with you throughout life and your premium is generally the same for your entire life. It also has a value in addition to the amount it pays out when you die, so it is like a combination life insurance policy and investment.
As such, permanent life insurance is often viewed as both a protective policy and an investment policy.
You should choose permanent life insurance if:
You want to add life insurance to your investment portfolio.
You are able to afford the higher premiums for having a cash value to your policy.
You want to offer your dependents a guaranteed death benefit payout.
You are interested in the tax benefits from holding a life insurance policy.
You want the flexibility to access the equity on your policy in emergencies.
Step 2: Decide How Much Life Insurance You Need to Buy
Because the whole topic of life insurance can feel emotionally charged, it can be good to talk through this step in the decision-making process with your insurance broker.
Having friendly, knowledgeable, objective input can really simplify the planning process.
We like to give our clients this simple 4-step worksheet:
1. How much debt are you carrying?
You may have a car note, a mortgage, student loans, credit card debt or all of the above.
In the event your income suddenly ceases, these creditors will be first in line to gobble up any available resources.
So you definitely want to make sure you purchase sufficient life insurance to cover your debts until they are paid in full.
2. Who is financially dependent on you?
Do you have a spouse? Children? Grandchildren? Elderly parents? Pets?
Consider who among your loved ones may find themselves in sudden financial distress if you were to pass prematurely.
3. What is your monthly net income?
At the very least, you want your life insurance policy to be able to cover your ongoing monthly financial obligations (such as debt) plus replace your monthly net income.
4. What are your dependents' future financial needs?
If you are saving for a child's higher education or have an aging loved one who may need future care, these are examples of financial needs to factor in when choosing your policy amount.
Buy Earlier And Pay Less in Life Insurance Premiums
Like any insurance product, life insurance premium quotes factor in a variety of risk variables.
The major risk variable when it comes to life insurance, however, is, well, death. So it just makes sense that you may well pay lower insurance premiums when you are young.
This can be helpful for budgeting as well as future financial and investment planning.
Other Ways to Save on Life Insurance Costs
You may also be able to trim your premium costs by taking advantage of these cost-saving tips.
Ask your employer about group life insurance (employer-sponsored life insurance).
Opt for term life insurance if premium costs are a real issue.
Choose a shorter term up front.
Use a life insurance broker like Mackay Insurance that can shop around for the best rates on your behalf.
Pay for your premiums once annually instead of monthly or semi-annually.
Ask about preferred rates (these can include non-smokers, health history, etc.).
Buy a stand-alone life insurance policy instead of mortgage life insurance.
Get in Touch
Do you need expert, objective guidance to help you protect your loved ones through the purchase of a life insurance policy? We can help! Just complete this simple online form to get a no-obligation life insurance quote.
Contact us online or give us a call at 888-853-5552.
Life insurance is not the cheeriest topic in the world. No one loves to spend their weekend poring over pamphlets about death benefits and future payout potential.
But we do it because of them – our partners, our children, our parents, even our pets.
We do it because we don’t want to lie awake at night worrying about what will happen to our loves when we aren’t there to care for them. We do it because the unexpected is a smart thing to expect in today’s day and age.
Learn about your life insurance options as we move into the holiday season – perhaps this is the year you give this gift for the living to those you love!
Two Basic Types of Life Insurance
Despite what you may have heard or read, there are really only two basic categories of life insurance: term and permanent.
Regardless of which type of life insurance you select, you can expect to make a premium payment (typically remitted monthly or annually) to keep your policy active.
In exchange for your premium payments, your loved ones can expect protection in the form of a death benefit payout should the unfortunate occur.
What Is Term Life Insurance?
This is the simpler of the two options. Term life insurance is more affordable, faster and easier to apply for. It is a popular choice for singles, young couples and young families.
Term life insurance is designed to provide protection for a specific date range, or term.
After the selected period of time has expired, the insurance product also expires, whether there has been a death payout or not. If you continue to need protection, it is then necessary to purchase a new term life insurance policy.
What Is Permanent Life Insurance?
The second type is permanent life insurance. Here is where confusion often sets in, because permanent life insurance goes by lots of different names.
Some common names for permanent life insurance include whole life insurance, universal life insurance and even term to 100 life insurance. But basically, these are all just types of permanent life insurance with different benefit structures.
Permanent life insurance is also designed to provide protection in the form of a death benefit payout. But rather than having an expiration date, permanent life insurance endures until the policyholder passes, so there is never a need to purchase a new life insurance policy.
There is also an additional benefit in that the policy itself can function as a type of retirement investment product. It can be used in multiple ways while the policyholder is alive and passes the benefits on to designated beneficiaries when the time comes.
Why Choose Term Life Insurance?
Term life insurance is designed to be simple, although we realize it may not seem that way at first glance!
Term life insurance is a great fit if you are single, coupled or starting your family. This is the most popular type of life insurance with these three categories of shoppers because the basic goal is simply to protect dependents in case a primary income stream suddenly disappears, through death.
There are different protection periods to choose from. Term-10 is a policy that lasts for 10 years from the date of issue. Term-20 lasts for 20 years. Term-30 lasts for 30 years.
The premium you pay is calculated based on an average risk over the term you choose. Say you choose a term-10 life insurance policy. On the date your policy starts, the risk of death is probably low. But it will increase slightly every year for obvious reasons.
The premium you pay each year will be an average of all 10 years’ worth of risk. For this reason, your premium will not increase during the course of your policy term.
This is what makes longer-term periods attractive to term life insurance policyholders – you get a locked-in rate that includes the lower risk cost of your younger years.
However, when your policy expires after 10, 20 or 30 years, there is no cash value to you (no payout—payouts are not made unless in the case of death) and you will then need to purchase a new policy.
Why Choose Permanent Life Insurance?
Permanent life insurance is by necessity a more complicated type of life insurance product. This is because it is designed to do more than simply provide protection in the form of a death benefit payout.
The first difference is found in the cost of your premiums. This is because permanent life insurance does not have an expiration date. Your premium costs are calculated based on risk of death from now until you actually do pass, whenever that may be.
So the premium payments you make will be higher than they ever will be for term life insurance right from the start. As well, to keep your payments from skyrocketing later in life, premiums start out higher than they would be in a term life insurance policy and stay that rate.
This is important because your policy actually accrues cash value over and above any future death benefit. Each year, your premium payments are held in reserve and appreciate in value.
If you choose to cancel your permanent life insurance policy, you will then receive a refund based on how much you have paid in over and above what your actual risk to date has been.
Get in Touch
Is it time to think about giving your loved ones the gift of protection through taking out your personal life insurance policy? Our friendly, experienced Mackay insurance brokers are happy to help you choose the policy type that meets your needs!
Contact us online or give us a call at 888-853-5552.
Life insurance is that one product no one really wants to buy while they are living, but no one really wants to die without having it, either!
Even bringing up the topic of life insurance—when to buy it, how much of it to buy, how long to buy it for—can be a touchy subject between loved ones.
The truth is, life insurance isn’t easy to talk about! It gets even tougher once it is time to actually pick out a policy and iron out all the details of what, when, and how much.
In this post, we take a close look at the number one question most individuals, couples and families today have when it comes to life insurance: When is the right time to purchase a life insurance policy?
The Most Popular Time to Buy Life Insurance
Certain times in life can bring up the topic of life insurance more naturally.
Getting married is one of those life-changing transitions that can prompt discussions about future financial planning.
For some couples, and especially those who want to start a family together, this can be a key moment to decide to take out a life insurance policy.
The hands-down most popular time people decide to purchase a life insurance policy is with the arrival of their first baby.
For most of us, this is the first time in our lives when we have a dependent who totally relies on us for everything they will need in life.
Taking out a life insurance policy can feel very reassuring in the sense that while you can’t control what may happen to you tomorrow, but you can control whether your baby will be provided for if the unthinkable occurs.
Another popular time to think about taking out a life insurance policy is when you are approaching retirement age.
This is the time in life when most people’s minds turn to thoughts of aging, making a will, repaying any outstanding debts, making end-of-life arrangements and leaving something behind for loved ones.
The Best Time to Take Out a Life Insurance Policy
There is a big difference between the most popular time to purchase life insurance and the best time to purchase life insurance.
Investopedia points out that the best time to take out a life insurance policy is when you are born!
If you think about it, this strategy makes sense. You are as young as you will ever get, and presumably healthier than you will ever be again. You have no medical history to complicate approval or hike premium prices.
You have your whole life ahead of you to let your policy appreciate (which is especially important if you are buying life insurance as an investment).
Of course, you can’t purchase a life insurance policy for yourself when you are born, but it’s a very smart thing for a parent to do for a child.
There are two ways to take out life insurance on your child’s behalf. You can purchase a whole life insurance policy in your child’s name and then transfer policy ownership on their 18th birthday. Or you can pay a little bit more on your own term life insurance policy to add coverage for your child.
The Benefits of Purchasing Life Insurance
As the Government of Canada points out, life insurance is designed to provide some very specific benefits to loved ones in the event of your passing.
The life insurance payout is a tax-free lump sum payment. It can be used to pay for funeral and burial services, pay off debt, take care of dependents and loved ones or be put into an estate or trust. It can also be used to contribute to a charitable cause.
But the number one benefit that many people cite as their main motivation for purchasing a life insurance policy is simply peace of mind.
Types of Life Insurance Policies
As with any major purchase, your main reason for purchasing a life insurance policy will and should inform what type of policy you purchase.
There are two main types of policies: term and permanent. There is one basic difference between these two policy types: term life insurance expires and permanent does not.
Term life insurance is the simplest type of policy. The main reason to purchase term life insurance is to have some type of protection in place for dependents or to repay debt if you pass during the term of the policy.
Permanent life insurance offers two different subtypes: whole and universal.
Whole life insurance provides a guarantee that premium costs will not increase during the life of the policyholder along with a guaranteed death benefit payout.
Universal life insurance is the most flexible type of life insurance coverage. This policy type offers lots of options for how and when you pay your premiums, how you use accumulated earnings and the amount of the death benefit payout.
Making the Choice to Open a Life Insurance Policy
Even from this brief overview, you can see that making the choice to open a life insurance policy can get complicated quickly.
You have all kinds of choices and decisions, from when to open your policy to what type of policy to open to how long that policy will remain active.
Then you have decisions about how much coverage to take out, what to do with that coverage (especially if you have an investment-type policy) and who to name as your beneficiary.
The most important thing to remember here is that there is no one “right” time for everyone to take out a life insurance policy. There is only the time that is right for you.
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Life insurance is not the easiest topic to tackle. However, it is one of those topics your family will be relying on you to address—a true labour of love if ever there was one.
This is because life insurance is a reliable way to provide for your family's financial needs if the unthinkable should happen and you no longer can. Once you can work your way past the discomfort of thinking about this, the rest of the process is reassuringly practical: what type, how much, how long, and so forth.
In this post, learn the basic mechanics of how life insurance works so you can make the right decision for your family.
Types of Life Insurance
With life insurance, you have a variety of policy choices to consider. Each policy type revolves around the same two basic principles:
The policy premium. This is what you will pay to take out the policy, typically per month or annually.
The policy death benefit. This is what your beneficiary will receive should you pass away while holding an active life insurance policy.
There are two basic types of life insurance in Canada:
Type 1: Term life insurance
Term life insurance is simple and basic. It is also the least expensive type of life insurance, which can especially appeal to young families just starting out. This life insurance product gets its name from how it works. You buy term life insurance for a period of time called a "term." A policy term can be 5 years, 20 years, or more.
Here are the three basic things you need to know about term life insurance:
If the policyholder passes away before the term expires, the named beneficiary will receive a payout in the amount of the policy's face value.
If the policyholder does not pass away before term expiration, the policy simply expires.
Typically, the policy contains an option to renew for another term.
Term life insurance, due to its simplicity and practicality, is often the policy of choice for families. But in some situations, buying a more involved life insurance policy such as permanent life insurance can make good sense.
Type 2: Permanent life insurance
Permanent life insurance and its two subtypes—universal and whole life—are viewed as investment vehicles in their own right, similar in some ways to mutual funds or retirement funds.
So with permanent life insurance, your premium is comprised of two parts:
A premium towards pure life insurance.
A premium towards investment.
There are certain situations when a permanent life insurance policy may be the perfect solution to vexing financial issues, such as high current investment-related taxes or high anticipated capital gains tax on an estate released after probate to beneficiaries.
Typically, universal life and whole life insurance will differ in how the investment portion is handled and the degree of flexibility the policy holder has in determining how that portion gets invested.
The most important aspect here is to try each policy type on for size and see which one is a better fit.
How to Save Money on Life Insurance Premiums
Regardless of which life insurance product you select, the amount you pay in premiums will be directly related to the following:
Whether or not you smoke
Whether or not you drink
Your family health history
Your level of fitness
Your driving record
The amount of life insurance you take out
So already you can see some clear ways to control the costs of what you have to pay in insurance premiums. However, even if you have some issues in your medical history that may drive up premium costs, there are other ways to save money as well:
Bundle your life insurance policy with other insurance products. If you purchase life insurance with an insurer you already do business with, you may be eligible for what is called a "multi-policy" discount.
Buy your policy in the first six months after your birthday. This way, your age rounds down for underwriting purposes and you can potentially qualify for a lower premium.
Turn down the "guaranteed life insurance" option. This option lets you skip the medical exam portion of qualifying for life insurance—for an extra fee. So there is no need to choose this type of policy unless you are in poor health.
Pay your premiums annually instead of monthly. Often, an insurer will reward the reduction in their administrative expenses by giving you a discount on your policy costs if you pay annually.
Renegotiate your premiums if your driving record improves. If an offense times out on your record, you can ask your insurer to review your premium costs again and potentially qualify for a lower rate.
Ask about additional discounts. A couple of examples are if your employer has a special deal with an insurer or if you belong to an organization that qualifies you for a discount.
Talk to Mackay Today
Mackay Insurance Brokers has been invested in providing our customers with the lowest rates on the best insurance products since 1977. Today, we proudly serve more than 5,000 clients in the Belleville, Ontario, and surrounding areas. Our staff has a combined 165 years of insurance industry expertise and we love putting that knowledge to work for you!
You can contact us by phone at 888-853-5552 or online. Don't wait: let us help you achieve peace of mind in knowing your family is well taken care of, no matter what the future holds!