Life insurance is a popular insurance product that has been adapted to meet all the needs individuals may have throughput their lifetime. There are, therefore, many types of life insurance, grouped into two main categories: term life insurance and permanent life insurance.
To help you better understand each type and identify which one best suits your situation, we have created an easy-to-understand guide that explores, among other things:
Term life insurance
Term life insurance is designed for people with predetermined financial needs over a specific period. For example, when you take on a mortgage or other large debt, or when you have children who depend on your earnings, term life insurance is what you need, because that financial burden will disappear after a certain period. This death benefit will be used to maintain the lifestyle of your loved ones.
It’s the most affordable type of insurance, allowing you to insure yourself for the length of time and the amount that you choose. You pay only the cost of the insurance. If you die during the term of the insurance policy, your beneficiaries will receive the amount you insured yourself for.
This type of coverage also gives you flexibility: depending on your changing needs, you may decide to renew it when the selected term ends. You may also cancel it, change the coverage amount or convert it to permanent insurance. The new premium for this new policy will be adjusted based on your age and the new terms of the policy.
Features of term life insurance:
- Amount of insurance: at the discretion of the insured and based on your needs.
- What determines the cost of your insurance: your gender, age, tobacco use or lifestyle, health status, family history, amount of insurance and the predetermined period selected.
- Additional Coverage: Child Rider, Accidental Death, Guaranteed Insurability, and others, depending on the insurance company.
- Extend, change and renew your term life insurance: a flexible policy that can be adapted to your needs and changing circumstances.
- The benefits of term life insurance: simple to apply for and obtain, more affordable, easy to change, and cancellation is penalty free.
- Process for obtaining term life insurance: medical questionnaire, possibly medical exams.
Group life insurance
If you are an employee or student, you probably have access to a group insurance plan. Most plans offer life insurance for the duration of your participation in the group plan. This insurance is therefore considered temporary. It ends when you change jobs or retire.
Features of group life insurance:
- Amount of insurance: often by “increments” of your annual salary. For example, if you earn $55,000 a year, your standard coverage amount will be $55,000. You can increase your coverage, but always using the concept of “increments”. So you could increase your coverage to two, three or four times your salary.
Note: the first “increment” is often mandatory; you cannot avoid having life insurance. The other increments are optional; - What determines the cost of your insurance: group characteristics. Unlike other types of insurance, which rely on your health characteristics and age to determine the price of your insurance, group life insurance uses the characteristics of the group plan members to set the premium price. So you will pay the same amount as your colleagues for the same basic protections that the plan provides.
Note: your age and health status do not affect your insurance premium. However, if you choose to add more increments, your personal characteristics will be used to calculate the additional premium; - To extend your insurance: if you leave your job but want to keep your insurance, you can usually do so by using the conversion privilege up to age 65. No health tests are required to qualify for this privilege, but the insurer takes your age into account when setting the insurance premium;
- Process for purchasing group life insurance: no medical, coverage is mandatory.
Simplified or accelerated issue life insurance
Simplified or accelerated issue life insurance allows you to purchase life insurance without going through the traditional insurance underwriting process. In other words, you only have to fill out a short questionnaire to purchase insurance. You don’t need to take a medical exam. This insurance can be issued in one day, whereas traditional life insurance can take several weeks to be issued.
While this type of insurance can be permanent, most simplified issue insurance is temporary.
Features of simplified issue life insurance:
- Amount of insurance: at the discretion of the insured, possibility of a limit on the sum insured;
- What determines the cost of your insurance: the medical questionnaire you will need to complete, as well as your age, eligibility and smoking status;
- Process for purchasing simplified issuance insurance: no medical exam, but a short medical questionnaire to meet contract acceptance criteria;
- Advantages: fast coverage, often within 1 day, which is a good alternative if you are not eligible for traditional life insurance.
Universal life insurance
This type of insurance can cover you for your entire life, as long as insurance premiums are paid automatically by the fund.
Universal life insurance is both an insurance tool and an investment tool. A percentage of the premiums you pay is used to pay for your life insurance, and the excess is deposited into an investment account. These amounts can be used in several types of investments depending on your needs and long-term vision.
Features of universal life insurance :
- Amount of insurance and investment: at the discretion of the insured. You can choose the amount of premiums and when you will pay them;
- What determines the cost of your insurance: your gender, age, tobacco use or lifestyle, health, family history, amount of insurance and duration;
- Why choose this type of permanent life insurance: because of the product flexibility. While it is one of the most complex types of life insurance, its many options for adapting the product make it a smart choice for some individuals;
- Process to obtain universal Insurance: medical questionnaire, possibly health exams, selection of investment funds, selection of contract terms, overview of downward trends in performance projections.
Participating or non-participating whole life insurance
Whole life coverage covers people until death, regardless of age. This type of coverage is a great choice for people who want to pay their funeral expenses and taxes upon death, or who would like to leave an inheritance while maximizing the estate.
Even though term insurance has lower premiums, permanent life insurance is a more economical choice if you want coverage for your entire lifetime.
This type of coverage may also have a cash value, which is an amount equal to a portion of the premiums you have paid and will be returned to you if you no longer need the coverage.
It can also be participating or non-participating. Participating life insurance lets you participate in the insurance company’s profits. The company determines the amounts of your profits and deposits them in an account linked to your insurance, which allows you to accumulate the amount without it being taxable. The amount paid to you as a member is therefore not guaranteed; it depends on the insurer’s performance.
Features of whole life insurance :
- Amount of insurance: at the discretion of the insured. You cannot choose the amount of premiums or when you will pay them, unlike universal life insurance;
- What determines the cost of your insurance: your gender, age, tobacco use or lifestyle, health, family history, amount of insurance and duration of monthly or annual payments; Why choose this type of permanent life insurance: to get life insurance and to save at the same time, more simply than with universal life insurance;
- Process for obtaining whole life insurance: medical questionnaire, possibly health exams, selection of investment funds, selection of contract terms, overview of downward trends in performance projections.
Still have questions about the life insurance offered by Matcha Insurance? Our financial security advisors are available to answer any questions you may have and to reassure you.
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Guaranteed issue life insurance
If you are looking for life insurance that will insure you without asking health questions, you need the guaranteed issue life insurance. The insurer will consider only your age, not your health, before insuring you.
However, in the event of death in the first two years, coverage will reimburse the premiums paid. Even if the death is accidental. It is important to check the clauses and conditions in the contract before signing it.
Features of whole life insurance:
- Amount of insurance: at the discretion of the insured, but usually between $10,000 and $50,000;
- What determines the cost of your insurance: your age;
- Why choose this type of life insurance: to get permanent insurance quickly and simply. Also perfect for people who have difficulty getting insurance because of their medical condition;
- Process for obtaining guaranteed issue insurance: no health questions, payment of first premium upon signing.
Once you have chosen the type of life insurance that suits your needs, feel free to use our monthly price comparison tool to ensure you have the best product for you. You can also talk to our team of experts, who will guide you towards the ideal product for you.
