Finding the perfect life insurance policy for yourself can be a lot of work or even overwhelming at times so it’s best to always start by understanding the available types of life insurance policies being offered as well as understanding what your own needs are. There are different kinds of life insurance plans including: traditional (fully underwritten), simplified, and guaranteed issue. Each person is different, so finding the right life insurance policy for you depends on many aspects in your personal life.
What to consider when applying for a life insurance policy
When applying for life insurance, it helps to think about how the company evaluates whether or not to give you a policy with them. Does the company consider you a risk? Does the company ask you questions that you might not be willing to answer? Being considered high risk will increase your premium or even deny you a life insurance policy, while heavy questioning could also deem you uninsurable. That doesn’t mean you may not be able to get life insurance, it just means the type of policies and coverage available to you varies. Check out what you need to know before applying for life insurance for more information.
As part of the application process for life insurance, you will have to go through an underwriting process that could result in a rating. Underwriting is the process an insurer uses to rate you and determine your individual risk factor. Every major life insurance company in Canada has its own underwriting guide, which essentially outlines the evaluation process for applicants.
Things to consider:
- What information matters when you apply for life insurance
- How much coverage you need
- What types of life insurance policies are available
- What company can provide you the policies and benefits you want
It is very important to think ahead before applying for a life insurance policy, because you need to consider what you need and then figure out what company can provide the best available option for you, which is why a life insurance broker is helpful. If at any point you want support and help in finding a policy from the best life insurance companies, remember that at no cost Protect Your Wealth will help you find the right life insurance policy for you, check out What’s A Life Insurance Broker to further understand how we can help find your perfect life insurance policy.
What information matters when you apply for life insurance
Your application for a life insurance policy goes to the underwriting of the company and through their company guidelines will determine to approve or deny your application. Note, each company has their own guidelines that the underwriting follows – each company is different. There are many factors that the underwriting of a life insurance company will look at when you apply for a life insurance policy. These factors can include:
See the photo below to see the things life insurance companies look at when you apply and how that affects your policy.
Upon applying, the underwriting will evaluate your risk to the company – meaning the company will determine if you are eligible to be insured for the specific plan that you applied for. If approved for a life insurance policy you will be given a premium which is the cost of the policy. Note that a life insurance company is a place of business, if they see you having a higher chance of losing money than gaining money for the company they will consider you high risk and possibly deny you a policy or increase the cost of your policy. So, if the company considers you to be high risk when you are applying for a traditional life insurance policy (like term or permanent life insurance policies) then, it is very possible that you can be denied life insurance, it is the most common type of life insurance to deny you for factors described above. To a life insurance company, being labeled high risk means you are considered to be at a higher risk to die or become ill based on the information you have given about your wellbeing and lifestyle. For example, if you have asthma, you will be considered to be a higher risk client and may even be denied when applying for traditional life insurance policies from multiple companies. Therefore, depending on your situation in life, life insurance policies may vary in both availability and costs to you.
Understanding the Types of Life Insurance Policies
The type of life insurance you need depends on the information the underwriting asks from you. So, if you are asked medical questions then the answers to the questions can determine if you are approved for a life insurance policy or not. Different types of policies allow the ability to build personalized insurance plans for yourself, where you can choose from different amounts and types of coverage plans. Keep in mind that each company makes their own guidelines on who to approve or deny when applying to life insurance companies, this is why it is highly recommended that you work with a life insurance broker when figuring out your options
Overall, there are three main types of life insurance, including: fully underwritten, simplified, and guaranteed issue life insurance. Giving key features and different benefits in each type of life insurance.
Fully Underwritten Life Insurance
Also known as traditional life insurance, fully underwritten life insurance has many types of policies within. Mainly, there are two different types of policies based on their duration, including: term life insurance and permanent life insurance.
Fully underwritten policies will ask medical related questions and require a medical examination or an attending physician’s statement (APS). Traditional life insurance policies tend to cost the least amount giving a fixed rate for the duration of the policy, they also have the most amount of coverage available but the underwriting can easily deny you a policy for lifestyle choices and health related reasons.
Traditional life insurance is the best option for you if you are considered low risk in your wellbeing and lifestyle. The lower your risk the less your premium will be.
1. Term life insurance
Term life insurance is a policy in which the insured is covered within a certain period of time that can last 5, 10, 15, 20, 25 or 30 years. Usually a guaranteed fixed premium, usually cheaper than whole life insurance, for the duration of the term and sometimes options for a policy auto renewal to skip the underwriting process.
2. Permanent or whole life insurance
A policy that lasts for your whole life called whole life insurance or permanent life insurance. Note that most permanent or whole life insurance policies will have a growing cash value and even sometimes are able to be paid for a brief time and then never again.
Further within permanent life insurance, there are subtypes of life insurance, including: participating life and universal life available. To learn more about these two options check out our blog comparing participating life and universal life insurance. Permanent life insurance is a great option but is on average more expensive than term life insurance.
Simplified Life Insurance
Simplified life insurance policies will ask a varying amount of health related questions, but they will not require any medical examination. Making the process of getting a life insurance policy a little quicker, although it tends to be more expensive than traditional life insurance policies. The maximum amount of coverage can range up to one million dollars, depending on the company.
Simplified life insurance policies are usually more relaxed on approving people with medical conditions and lifestyles, having no medical exam. Note that each company has their own underwriting guidelines on approving people for life insurance. So if for example, one insurance denied you for a specific medical condition, a different company could instantly approve you.
Guaranteed Issue life insurance will not ask any medical questions and will not require any medical examination. This type of policy tends to be the quickest to get, but they are the most expensive type of policy with the least amount of coverage available. Maximum amount of coverage can range from $25,000 to $50,000.
This type of coverage targets people who are typically denied traditional or simplified life insurance.
For deeper comparison of the three main types of life insurance, check out our blog comparing Underwritten vs. Simplified Issue vs. Guaranteed Issue life insurance policies. Also, see the table below for a comparison of these types of life insurance policies:
When creating a life insurance policy, there is lots of personal customizing when building your perfect insurance plan. There are options to add on additional protection to your life insurance policy, these are called riders. The purpose of riders is additional protection to increase coverage for different scenarios, like in case you are critically ill or become disabled and no longer are able to work, you will then receive living benefits to help you financially in your recovery or sickness. If your loss of income would make your family financially unstable, then these add-ons could be a great fit for your policy. Possible additions to your life insurance policy include:
1. Critical Illness Insurance
The purpose of critical illness insurance is that in the case that you are diagnosed with a critical illness, you will be given benefits to help replace the loss of income. If you are interested in learning more about critical illness insurance, read our blog Is Critical Illness Insurance For You.
2. Disability Insurance
The purpose of disability insurance is that in the case you are disabled and no longer able to work due to the disability, you will receive a portion of your income to help keep you and your family financially stable for a certain period of time. Disability insurance could be a great option if you have a family history of disabilities or you are looking for as much coverage as possible for your family. To figure out if you need disability insurance, read our blog Is Disability Insurance For You.
Both disability insurance and critical illness insurance are terrific add-ons to increase your coverage in case your family loses income through your death, disability, or a critical illness. If you are interested in understanding the difference between the two add-on plans read our blog Critical Illness vs Disability Insurance.
Sometimes the right company can make your experience much better, especially if you get rewards and discounts out of it too! For example, Canada’s largest insurance company, Manulife, created a program called Vitality allowing customers to earn rewards like a free Apple watch or Garmin watch and receive discounts to various known brands and subscriptions by completing tasks to promote healthy active living.
Each company can offer individual benefits to your life insurance policy. These benefits can include, but are not limited to:
- Add-on or built-in disability insurance or critical illness insurance
- Living benefits
- Discounts and rewarding systems like Vitality by Manulife
- Discounts to customers
- Optional riders
It can be hard to find the perfect life insurance policy for you with all the add-ons and different company benefits, contact us today to let us help you find the best life insurance policy for you!
When choosing the best type of life insurance, you want to save costs as well as get the best benefits and optimal coverage amount. For example, if you just started a financial obligation like a mortgage, maybe you want a term life insurance for about the duration of the mortgage. Or on the other hand, if you are looking for a more permanent plan with a growing cash value, you may want a permanent life insurance policy instead. If you do not qualify for traditional life insurance due to complications in your medical history or lifestyle, then simplified or no medical is a great option for you. If available for you, simplified life insurance tends to be less expensive compared to guaranteed issue life insurance.
Note that guaranteed issue life insurance should usually be the last resort as it provides the least amount of maximum coverage (between $25,000 – $50,000) and is considered the most expensive type of life insurance. For example, see quotes for a 45 year old male non smoker for $500,000 coverage for a 10 year term in the photo below – comparing underwritten, simplified, deferred, and guaranteed life insurance.
Why you should work with a life insurance broker
There are many reasons why working with a life insurance broker is a better choice than working with a captive life insurance agent. There is a list of things that make a life insurance broker stand out in comparison to a life insurance agent: brokers can give you insight into various options, fair and unbiased advice, free expert services, time saving service and more.
Access to a Range of Options
If you don’t work with a life insurance broker, shopping around for life insurance can be incredibly time-consuming. A life insurance broker who deals with numerous organizations will have access to the range of choices you have. A life insurance broker can give you all the information you need right away so you can decide which company is better, then the broker will help you determine what is the best deal for you. If you wanted to do this yourself, you would have to call each life insurance company and request a quote from each company.
Because a life insurance broker is paid on a commission basis and will not be paid if you decide to cancel your policy, they are not influenced by any particular company. As a result, they are very committed to assisting you in finding a life insurance policy that you will want to maintain. They are not solely motivated by the demands of one particular life insurance company because they are obligated by law to give you information that is in your best interests.
Free professional services
You can get free advice and services from licensed life insurance brokers who are knowledgeable about the various nuances of life insurance because life insurance agents typically offer their services to you without charge. At Protect Your Wealth, we do not charge anything for our services, and this includes the initial consultation as well as the final approval of your new life insurance policy.
Time saving service
As previously mentioned, life insurance brokers have access to a variety of life insurance policies from a variety of life insurance providers. Going with a life insurance broker can end up saving you precious time, as the process of looking for life insurance by yourself can be very time consuming if you have to call each insurance company one by one and sift through the various policies that life insurance companies offer.
You can feel at ease knowing that you are dealing with a real life insurance broker who has your best interests in mind when you work with a licensed professional. Working with a licensed life insurance broker will help you know that your personal information and important documents are being handled by a professional since there are many life insurance and insurance scams in Canada. The Financial Services Regulatory Authority of Ontario’s listing of licensed agents in Ontario is the best resource that is offered by this tool. All you need to know is the life insurance agent’s last name, their city or town, or their license number.
Captive life insurance agents may occasionally get in touch with you to review your policy, but it will typically only be a quick review. A life insurance broker, on the other hand, will be there for you throughout the years because it is typical for a life insurance broker to assist you if anything new arises in your life. You can rely on a life insurance broker to assist you with decision-making, and they can even assist you in determining how your life insurance can contribute to the achievement of each major life milestone, such as having a child, getting married, purchasing a home, or launching a business. Not only that, but our life insurance brokers are also well versed in giving you financial advice, so if you are interested in investing through a TFSA, RESP, RRSP or a LIRA, we have got you covered!
Frequently Asked Questions (FAQs) about Life Insurance
Yes! No matter what you are being denied or are worried about, everyone can have life insurance. The only thing is, the coverage you receive and the price you pay can fluctuate and change depending on your situation. Whether you have medical conditions, enjoy risky activities, work a dangerous occupation, driving or criminal record, or anything you’re worried about being denied for, there is a life insurance policy out there for you!
The amount of coverage you need is based on the amount of financial obligations you have, whether it’s a business, house, or family. You want enough coverage so that in the case that you pass away, your beneficiaries will not be financially burdened following your death – you want to be able to cover some costs such as: funeral costs, debts, business upkeep, child support, education cost, and more.
To learn more about finding the right amount of coverage for life insurance, read our blog How Much Life Insurance Do I Need?
Life insurance is worth it depending on what you have and what your needs are. If you were to pass away would there be anybody who could be financially burdened by funeral costs or debt in case you pass away? If you answered yes, then life insurance could be a very good option for you. Life insurance is very commonly used to help save your loved ones from financial burden in case you pass away. Getting a life insurance policy is great for you if you have financial obligations, including but not limited to: being a primary income earner, want education paid off for dependents, have any debts like a mortgage, or much more. While some won’t need life insurance, to others, life insurance can really make a big impact on a family in a time of need.
For deeper understanding on the purpose of life insurance, read our blog Is Life Insurance Worth It In Canada.
Two most common types of life insurance policies are both traditional life insurance policies, such as: term life insurance and permanent life insurance. Both types of life insurance policies can provide some of the best policy rates but they require a medical examination. Therefore judging the cost of your policy by your lifestyle and health condition, possibly denying you a life insurance policy.
- There are many factors that the underwriting of a life insurance company will look at when you apply for a life insurance policy. These factors can include:
As the underwriting considers your application, they will evaluate your risk to the company – the company will determine if you are worth doing business with them for the type of policy you applied for. So for example, if the company considers you to be high risk when you are applying for traditional life insurance policies (like term or permanent life insurance policies) then, it is very possible that you will be denied life insurance.
It is most common that traditional life insurance policies are not only harder to obtain, but also takes a longer process to get. Traditional life insurance policies include term life insurance and whole life insurance policies – give some of the least expensive prices for life insurance plans compared to other types of life insurance.
If you are worried about being denied life insurance, then read our blog about reasons you can be denied life insurance.
First, it is important to understand why you were denied life insurance, then you are able to access your next steps, such as: do you look for a different type of insurance plan or could you need to apply to a different company?
If you are looking for a deeper understanding of reasons why you could be denied life insurance, check out our blog about 6 Reasons Why You Were Denied Life Insurance.
Thinking of buying life insurance?
Finding the right type of life insurance policy depends on your needs and your lifestyle, there are multiple different types of life insurance policies for varying purposes. It can be tough to find a life insurance policy to suit your needs, at Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We have been providing expert life insurance solutions since 2007.
If finding life insurance is something you are interested in, contact Protect Your Wealth today for free advice on finding the right life insurance policy for your needs. We are proudly based out of Hamilton, servicing clients anywhere in Alberta, British Columbia, and Ontario, including areas such as Lethbridge, Maple Ridge, London, and Oakville.