5 tips for choosing your life insurance

Many families have been thrown off by inflation and higher mortgage rates. From a strictly monetary perspective, we have collectively realized that the future is full of surprises, demonstrating the importance of protecting loved ones with adequate life insurance. We've put together some tips to help you choose or review your life insurance to ensure your loved ones are protected.

1. Choose the right type of insurance

Life insurance can play very different roles, and some products are better adapted to them than others.

For families with children who want to maintain their income level and standard of living if a parent dies, term life insurance can be an attractive option.  Term life insurance is available for different predetermined terms ranging from 10 to 30 years, or up to age 65. The premium is fixed for the duration of the term. In the event of death during the term, a lump sum will be paid. At the end of the contract term, your personal life insurance coverage will end.

This type of life insurance would allow your family to meet their short- or medium-term financial commitments. For example, your family could benefit from this financial coverage until your children become adults or complete their education. Term life insurance can help your family maintain their living standard or leave them an inheritance. In other words, it can cover everyday expenses or help pay for your loved ones' needs and further growth, like sports and family activities. 

Another scenario: a business owner is concerned that upon his death, his estate will end up with a large tax bill after selling his company. Permanent life insurance can then offer an advantageous way to guarantee a benefit to pay the tax payable at death, with coverage for the rest of your life. It's an interesting option for individuals as well as business owners since it lets you maintain your coverage even if your health situation changes. Over the long run, it's more cost-effective than term insurance, which covers you only for a set period of time.

Other products, such as participating and universal life insurance, may even include a savings component, which can be used in a number of ways, such as offering your loved ones a financial base, financing your business growth or increasing your retirement income.

2. Determine how much you need

Life insurance offers a range of optional benefits. For example, it can cover certain death-related expenses, such as funeral costs and tax bills, and can help give an inheritance to your loved ones. Life insurance can also be used to pay off the deceased's personal debts, such as credit card bills or loans. 

A financial security advisor will analyze your financial needs and assess the gap between your current situation and your goal. They can also determine if you and your family's current coverage is right for your financial situation at this time. If necessary, they can suggest ways to bridge any gaps. It's important to periodically review the amount of insurance you've selected to ensure your family will be able to maintain their standard of living. 

3. Assess the duration of the desired coverage

How long do we want to protect our loved ones? There are several things to consider before you can answer that question.

First of all, figure out the time you'll need to see through your financial commitments, such as your debts, and the remaining time on your mortgage or on any monthly payment plans, for example. Next, decide how many years you want to bridge any income gaps for your family in the event of your death.

In practice, you'll need to make allowances for certain elements, like the inflation rate and interest income from any invested money, to get a more realistic result. There's no one-size-fits-all formula, as the amount can vary depending on your situation and needs. That's why our financial security advisors can be a very useful resource. They use analysis software to make projections and accurately assess your needs.

4. Take out insurance early!

The cost of an insurance policy is calculated based on the applicant’s age, among other things. In most cases, the older you get, the more it costs. The younger and healthier a person is, the more affordable their insurance coverage will be. In the case of younger persons, it's also less likely that they'll have to undergo extra tests, which makes the application process a lot easier.

5. Contact an advisor for assistance

It’s easy to get lost between various product categories, coverage levels and policy periods. While online tools can provide some guidance, a financial security advisor can help you dig much deeper and more accurately assess the appropriate amount of coverage and product for your needs.