Life insurance is an essential financial tool for your family as the policy will pay when your family needs it the most. If you are currently considering getting life insurance, however, you are worried that it might be too expensive or difficult to obtain. Let’s discuss the factors affecting the price of life insurance coverage in the year 2022.
Why Life Insurance?
You may think getting a life insurance policy is unnecessary. What if we tell you that you are not alone? There are a lot of other Canadians that think like you. But is this the right thinking? Consider the following: If someone asks you, “Do you really need a winter tire to drive in the snow?” How would you respond? Maybe you drive carefully or only when the snow-plowing trucks have cleaned the highways and streets. The real message of the question is, “How are you managing the risk of a car accident?” Some may choose to get the winter tire, some may use public transit in snow, and others might decide to use a tire that is not suitable for snow. All our options to choose from; however, you cannot deny that the driver with winter tires is better protected against accidents.
It is the same logic when it comes to protecting your family and loved ones with a life insurance policy on yourself. If you have anyone who relies on you for financial support, whether you are a single parent or have aged parents, then you need to think about how they will cover their living expenses when you are gone.
Life insurance is designed to help you ensure that the people who rely on you the most will have financial support when you are gone. According to the Canadian Consumer Agency, when you plan your life insurance policy, you need to make sure that if something happens to you or your spouse, your family will be able to carry on living without any major disruptions.
Factors Affecting the Cost
Life Insurance Coverage Duration
We need to start from the basics. There are two types of life insurance policies: term and permanent.
Term life insurance is more affordable but also more basic in terms of structure. Term life insurance offers temporary coverage for 10, 15, 20, 25, 30, and 40 years. If the insured passes during the term of the policy, the beneficiaries will receive the proceeds of the life insurance policy tax-free.
The decision to choose which duration of life insurance depends on the liabilities and needs the insured is looking to cover. For example, if the insured has a 30-year mortgage on his house, he will be advised to obtain life insurance coverage that will last for 30 years. Discussing the details of your life insurance policy with your insurance advisor is important.
Depending on your policy, you might be able to renew your life insurance when the term ends. This is an advantage because you will not be asked to go through medical underwriting for the renewal.
Permanent life insurance is coverage that lasts for the entire duration of the insured’s life span. There are three main types of permanent life insurance: Term 100, Whole Life, and Universal Life.
The first option provides a tax-free death benefit to the beneficiary, much like the term life insurance products. While the latter two enable the insured to have both death benefit and cash value within the policy. The cash value grows on a tax-deferred basis and can be invested in different options such as bonds and mutual funds. Tax is only paid when the money is withdrawn, and this deferment allows the cash to grow. These policies last indefinitely and are used for estate planning.
Age
The younger you are, the lower the mortality risk. Therefore, younger individuals will pay a lower premium to purchase life insurance. That is why you need to get the coverage sooner than later. As every year passes, your rate is increased. Find your life insurance rate.
As an example, for a $250,000 term-10 policy for a healthy 35-year-old female, the monthly premium will be as low as $11.25, whereas a healthy 45-year-old female will pay almost double that amount at $18 monthly for the same coverage and same insurance provider.
Gender
Men and women have different life expectancies, which changes how life insurance is priced for the two genders.
Data released by Statista for 2020 indicates that females are expected to live for 84 years, whereas males are expected to live up to age 80 in Canada. Therefore, life insurance rates for women typically cost less than for men.
For example, for a $250,000 10-year term policy where all else is equal, a 35-year-old male would have a monthly premium of $14.40, and a female would have a premium of $11.25.
Health Status and Medical History
Your health history will also play a role in your insurance premiums pricing, and insurers run a thorough and comprehensive health assessment on all applicants. If there are health questioners, the applicant/insured must be truthful to avoid voiding or cancelling the policy. This is because various illnesses can affect your life expectancy.
In many cases, the insurance policy will cost much more as the policy will be considered “rated.” In some cases, the insurance company may reject the application due to the high risk of insurability.
Smoker versus non-smoker
Smokers have a higher risk of dying at a younger age, which increases their life insurance premiums considerably. Some companies, like Foresters Financial, do provide incentives for individuals to quit smoking by providing the first year of premium as a non-smoker rate, and if the individual quits at that rate, they can keep their rate.
For example, for a $250,000 10-year term policy where everything else is equal, a 35-year-old female smoker will pay $22.50 monthly compared to only $12.60 for his non-smoking counterpart.
Typical rates of Life Insurance in 2022
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Generally, a couple of factors affect the rate of life insurance.
- Duration (the longer the duration of coverage, the higher the premiums)
- Age (as the proposed insured ages, the cost of life insurance increases)
- Sex (female mortality rate is lower than male, hence lower premiums)
- Smoking Status (if you are categorized as a smoker by the definition of the underwriting, your rate will be higher than nonsmoker)
- Health Conditions (diagnosed health conditions and medications affect the rate of insurance)
These prices are for males and females who are in good health and do not smoke. The prices do change if you are a smoker, have poor health, or take regular medications.
If you have a history of heart disease or cancer or work in one of the hazardous occupations, you will pay far higher premiums, and in some cases, the underwriting might reject your case.
Life insurance policies can make an excellent investment. Even though 1 million dollars might sound expensive, they are affordable when premiums are paid over many years. The money from life insurance will provide an infusion of tax-free money for your spouse and family when you are gone and will pay for their expenses.
Finding the right Life insurance policy with the proper coverage amount at the right price is complicated and overwhelming. Our expert advisers are fully qualified to help you work out the coverage that will meet your family’s needs. By taking your age, health, liabilities, and goals into consideration.
At Apluswealth, you can get a quote, compare quotes, and find the life insurance quote you feel comfortable with. Our life insurance advisors will provide you with quotations and the most suitable policy types.
Contact our expert advisers today to find out the best life insurance for you.
