Before you choose a life insurance policy, there are some things you can do to help your insurance company calculate your premium. This includes living a healthy lifestyle with regular exercise as your company may use the BMI index (your body-mass index that is a ratio of your height and weight). Receiving a mental health evaluation to see if you have a history of depression is also important.
Alcohol drinking habits are considered, as someone who drinks three to four beers a day would be subject to higher premiums. Medical history, driving records, and even gender is calculated into your premium since female policyholders pay nearly less than their male counterparts.
Canadians are able to get either term or permanent life insurance policies. The former pays a death benefit if the person insured dies within a fixed period of time, such as 10 or 20 years, or if they reach a certain age, such as 65 years old.
If you die within the duration of the Term policy, your beneficiaries will be paid out, but once the fixed period of time ends, the coverage stops and they will no longer receive payments.
Your insurance company will calculate your premiums and any fees you’re responsible for the length of the term. If you renew the policy, your premiums could increase but Term life insurance is considered less expensive than Permanent when you first enroll.
Permanent life insurance, like its name, provides coverage to you for your whole lifetime. Your beneficiaries will receive payments if you die at any time while your policy is active. If you cancel the policy at any time, you can receive a cash value back (minus the premium amounts you paid for insurance). You can also use it to take out a policy loan or use it as collateral for a loan. But if you don’t repay the loan, it could have the adverse effect of reducing the amount of money your beneficiary would receive or cash value back if you cancel.
Within permanent life insurance is whole life insurance which doesn’t change your premiums as you age and often has a guaranteed minimum cash value assigned to it.
The other type of permanent life insurance is universal, which provides an investment account with life insurance. The account has a cash value and allows withdrawals and loans.
The investment account allows you to decide how your premiums are invested. You can also raise or lower your premiums based on limits specific to your life insurance policy. You are also able to decide what types of investments you want on the account in addition to the returns you wish to receive.
The last type of permanent insurance is called Term 100. The difference between it and the other types is that no cash value builds up and this means it is eligible for lower premiums than whole or universal life insurance.